Hungary: Conclusions of the HoReCa sector inquiry

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 (2) of the Trade Act

GVH's proposal was based on the practical implementation of the amendment to the Trade Act and on the preferences of certain consumer groups and their satisfaction with the range of beverages offered by HoReCa units.

Proposal: GVH proposes to suspend the provision of the Trade Act requiring HoReCa units to stock at least two products from each producer per beverage category during the emergency situation (due to the war in Ukraine), to help HoReCa units and to maintain competition.

(ii) Section 7/B (1) of the Trade Act

The GVH has observed that exclusive distribution contracts in the HoReCa sector are becoming less frequent, likely resulting in easier market entry for smaller beverage distributors.

Proposal: GVH proposes to market players to ensure that their beverage purchasing agreements guarantee wholesalers' and HoReCa units’ pricing freedom and avoid any agreements that could lead to all purchases of a given beverage category being tied.

II. Similar state aids for craft beverages as craft beers

Consumer research indicates that Hungarian consumers are generally satisfied with the beverages available in the HoReCa units; however, they would welcome a larger variety of soft drinks and juices. Regarding beer products, the range of craft beers and other specialty beers in the HoReCa sector has seen an increase, likely due to state aid and support from professional stakeholders.

Proposal: GVH proposes to the legislator to provide tax reductions or other support schemes - similar to the ones provided already to bigger craft beer producers - for smaller craft (mainly domestic) producers in other beverage categories, such as fruit juices and other soft drinks.

III. Enhanced competition law compliance regarding information flow

The GVH emphasizes that, in some cases, data is not only shared in relation to the given distributor's own products, but also in relation to the total sales of HoReCa units or wholesalers, i.e. competitors’ sales data.

Proposal: GVH recommends that market participants take greater care to adhere to competition regulations when collecting, sharing, and utilizing data. As such, wholesalers should not provide information to individual distributors that could potentially increase market transparency and disrupt free competition.

It is clear that sector inquiries are of great significance, as evidenced by the fact that the GVH has already initiated an investigation into a soft drink manufacturer for the alleged fixing of minimum resale prices based on the data collected from the sector inquiry.

For more information, please contact Gábor Kutai, Dániel Arányi and Dorottya Nagy.


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