Brewing industry shake-up: Kegstar wants clearance to acquire Konvoy kegs, watchdog outlines key issues

The Commerce Commision says two main questions and four key issues are at stake as US-owned Kegstar proposes to take over troubled Konvoy. Photo/ John Rensten

Two keg companies, one in deep financial trouble, could get approval to merge as soon as next month.

Kegstar New Zealand wants to acquire Konvoy New Zealand but needs Commerce Commission approval.

The commission today outlined key issues it would consider before its September 19 decision.

Kegstar and Konvoy both rent beer kegs to breweries and provide logistics services.

They supply kegs on a pay-per-fill (PPF) basis and carry out some keg leasing.

But Konvoy was placed into receivership in March and into liquidation in late May.

Kegstar is owned by MicroStar Logistics, a United States company which operates a keg services business across Australia, New Zealand, Europe and the US.

According to the Commerce Commission, Kegstar has said without the acquisition, Konvoy would likely stop being an independent operator and brewers would acquire its assets.

“Kegstar considers it unlikely that there would be alternative buyers for Konvoy that would operate it as a going concern.”

The commission said it was especially keen for industry feedback on four issues.

The first was who would likely acquire Konvoy if Kegstar did not.

The second was what plans an alternative buyer would have for Konvoy.

The third related to what degree of competitive constraint Konvoy or its acquired assets would provide on Kegstar under new ownership.

And the fourth was about exploring whether relevant markets had the density or scale to support two providers of PPF keg services.

And the commission said it would also consider two main questions.

“Would the loss of competition between Kegstar and Konvoy enable Kegstar to profitably raise prices or reduce quality or innovation by itself?”

Secondly, it would ask if the proposed takeover would change conditions in relevant markets so that co-ordination between competitors was more likely, more complete or more sustainable.

“Kegstar and Konvoy overlap in the supply of kegs and keg logistics services,” the commission added.

It said Kegstar and Konvoy PPF keg services competed with steel and plastic keg rental and leasing providers, keg finance providers and third-party logistics providers.

Dylan Firth, Brewers Association executive director, said Kegstar and Konvoy both had a presence at the national beer awards last weekend.

“There are lots of different views.”

He said some people had concerns about market share being taken over by one player.

But others said a takeover of Konvoy by Kegstar was better than the alternative options.

Marisa Bidois, Restaurant Association chief executive, said members were keeping a close eye on the proposed merger.

“We know that many hospitality businesses rely on keg rental services like these, and we want to make sure any changes don’t lead to higher costs or reduced service.

“That said, Konvoy is in liquidation, so a buyout may be better than losing a player altogether,” she added.

“But we want to be sure it doesn’t hurt competition in the long run.”

She said the Restaurant Association had not yet made a submission, but was gathering feedback from members and might do so.

Submissions to the Commerce Commission must be made by close of business on August 19.

In June, BusinessDesk reported Konvoy had $8.37 million in debt.

Kegstar wants clearance to acquire kegs, beacons or trackers attached to those kegs, and the New Zealand keg records from Konvoy.

Across the Tasman, the Australian Competition & Consumer Commission (ACCC) is also considering the planned takeover.

The ACCC will release either a final decision or “statement of issues” next Thursday, August 14.