Conclusions Of The HoReCa Sector Inquiry

• Law Firm: Bird & Bird
• Subject Matter: Antitrust/Competition Law, Consumer Protection, Antitrust, EU Competition , Consumer Law
• Author: Mr G'bor Kutai and D'niel Aranyi
• Published date: 30 March 2023

The Hungarian Competition Authority ("GVH") has invited market participants for the public consultation of its draft report regarding the sector inquiry into the distribution of alcoholic and non-alcoholic beverages in the HoReCa (hotels, restaurants and bars) sector launched in 2020 ("Draft Report"). Market players have 30 days to submit their comments.

In the sector inquiry, the GVH analysed in detail the business practices, market conditions and sector specifics related to the procurement of beverages, as well as consumer preferences and the sector experience of other EU Member States. The Draft Report contains recommendations to the industry and proposes legislative changes supporting the HoReCa sector.

Findings of the Draft Report:

(i) Structure and operation of the market

Most beverage categories can be divided into two main groups: the large multinationals that HoReCa units trust for their reliability and popularity, and craft producers and small-scale producers that offer new flavours and specialty drinks.

(ii) Difficulties of market entry - intense competition

GVH determined that the Hungarian HoReCa market for beverage products is already very dense and that any new market entrants must compete with products with strong brand recognition and consumer inclination towards them. The fiercest competition for new entrants is within the mineral water, carbonated and non-carbonated soft drink categories.

(iii) Consumer preferences - HoReCa units are not chosen based on the range of beverages offered

GVH research shows that customers commonly enjoy the variety of beverage products available and perceive their range as expanding. Consumers demonstrate higher level of brand loyalty for certain types of drinks; however, it is unlikely that a customer would choose to visit a HoReCa unit solely because it offers a specific brand, or not to visit a unit because that brand is not available. Consumers are familiar with and like popular brands, but they are also open to trying new ones.

(iv) Beverage supply and purchasing practices - low consumer prices

The Draft Report suggests that low consumer prices may result from various market practices where large beverage distributors offer discounts to HoReCa units which have long-term or large-volume contracts with them. The GVH has concluded that these discounts should not impede competition in the market.

Proposals of the Draft Report:

I. Temporary suspension of certain provisions of the Trade Act

(i) Section 7/B...