Commission Decision of 06/01/2010 declaring a concentration to be compatible with the common market (Case No COMP/M.5644 - KRAFT FOODS / CADBURY) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)
| Published date | 06 January 2010 |
| Subject Matter | Concentrations between undertakings,Competition |
Commission Decision of 06/01/2010 declaring a concentration to be compatible with the common market (Case No COMP/M.5644 - KRAFT FOODS / CADBURY) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)
Official Journal 29 , 05/02/2010 P. 0004 - 0004
|EUROPEAN COMMISSION |
Brussels , 06/01/2010
SG-Greffe(2010) D/49
PUBLIC VERSION In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. C (2010) 40
MERGER PROCEDURE ARTICLE 6(1)(b) DECISION IN CONJUNCTION WITH ARTICLE 6(2)
To the notifying party:
Dear Sir/Madam,
Subject: Case No COMP/M.5644 - Kraft Foods / Cadbury Notification of 9/11/2009 pursuant to Article 4 of Council Regulation No 139/2004 [1]
1. On 9 November 2009, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation No 139/2004 ("the EC Merger Regulation") by which Kraft Foods Inc. (“Kraft”, USA) would acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of Cadbury PLC ("Cadbury", United Kingdom) by way of a public tender offer for all issued shares.
I. THE PARTIES
2. Kraft is a world-wide food and beverage company active in more than 150 countries with its headquarters in the USA and listed at the New York Stock Exchange. Kraft Food is active in particular in snacks, dairy and cheese, grocery and convenient meals. In the EEA Kraft is primarily active in relation to coffee, cheese, convenient meals, dressings, biscuits and chocolate confectionery.
3. Cadbury is a world-wide producer and seller of chocolate and sugar confectionery products in over 60 countries with its headquarters in the UK and listed on the London and New York stock exchanges. In the EEA, in chocolate confectionery, Cadbury is principally present in the UK, Ireland, France, Poland, Romania and Portugal.
II. THE OPERATION
4. The transaction is an acquisition of sole control by Kraft of Cadbury through the acquisition of the whole of the issued and to be issued share capital of Cadbury by way of a public offer for those shares.
5. On 9 November 2009, Kraft announced the terms of an offer (the "Offer") under Rule 2.5 of the UK Takeover Code to acquire the whole share capital of Cadbury. The Offer is made on the basis of a mixture of cash and a percentage of Kraft's share for each Cadbury share. Based on the closing share price of $26.78 per Kraft's share at the date of the announcement of the offer, the offer values each Cadbury share at 717 pence.
6. At the date of the notification, the Offer did not have the support of the Board of Cadbury. Kraft sent the Offer document to Cadbury's shareholders on 4 December 2009 with a deadline for acceptance on 5 February 2010.
7. As after the completion of the notified transaction, Kraft directly or indirectly through one or more wholly-owned subsidiaries, will own all of the shares and assets of Cadbury, the proposed transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.
III. COMMUNITY DIMENSION
8. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion [2] [Kraft EUR […] million, Cadbury EUR […] million]. Each of them has a Community-wide turnover in excess of EUR 250 million [Kraft EUR […], Cadbury EUR […] million], but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension.
IV. COMPETITIVE ASSESSMENT
9. According to the notifying party, the proposed transaction affects primarily the market(s) for the manufacture and sale in the EEA of chocolate confectionery and to a lesser extent it will also have an impact on sugar confectionery, biscuits, soft cakes and chocolate drinks.
10. Within the EEA, the chocolate confectionery activities of Cadbury are focused on just a few countries. Its main chocolate brand is Cadbury Dairy Milk which is primarily sold in the UK and Ireland. In continental Europe, it also has some local brands including Wedel (Poland) and Poulain and 1848 (France). In the EEA, Kraft's main chocolate brands include Milka, Toblerone and Côte d'Or. It also has a number of brands that are available in a limited number of countries including Poiana, Suchard, LEO, Prince Polo and Alpen Gold.
11. On the remaining markets, the parties' activities overlap only to a small extent, with Kraft being active primarily in relation to biscuits and Cadbury being active in sugar confectionery and (mainly) gum.
1. Relevant product markets
12. According to the notifying party, chocolate confectionery is part of an overall market for snacking products, including also sugar confectionery, gum, cakes, cereal bars, biscuits and other sweet snacks as well as salted snacks.
13. In previous decisions, the Commission has considered that chocolate confectionery, sweet biscuits, sugar confectionery and gum might constitute separate markets within the snacking market. [3] However, the Commission ultimately left the market definition open.
A. Chocolate confectionery
14. Within the chocolate confectionery category, various product formats exist such as chocolate bites (small portion pieces, packed in a bag or box, for example M&M’s), chocolate tablets, candy bars/countlines, pralines (for example Ferrero Rocher), specialities (for example. Kinder Surprise Egg) and seasonal items (products sold only for Christmas or Easter). The parties 'activities overlap mainly in the tablets segment and to a lesser extent in the countlines and pralines segments.
15. Tablets are chocolate blocks of more than 59g, which usually have a traditional rectangular or square shape and are moulded so as to enable the block to be broken into regularly shaped bite size pieces. Some are filled with nuts and raisins. They are made of different types of chocolate such as milk, dark and white.
16. Countlines are individually-wrapped bars with filling ingredients which are then usually completely covered with chocolate coating or a bar of solid chocolate which has the same rectangular shape as a typical countline. Countlines are usually eaten as a personal snack.
17. Pralines are often indulgent chocolate that is rich and of higher quality, higher price and often of more complex construction than tablets or countlines. Pralines are usually sold in relatively elaborate packaging, typically boxes, but may also be sold in other presentations, such as bags.
18. The notifying party considers that from a demand-side perspective, the various types of chocolate confectionery are generally consumed to satisfy the same needs (hunger satisfaction, treats, intimate sharing, gifting etc) and customers select among these different formats to satisfy their requirements. However, in Kraft/Danone Biscuits [4] , the Commission found that countlines form a separate market from other types of chocolate confectionery on the basis of differences in consumption patterns.
19. The notifying party considers that from a demand-side perspective, tablets, countlines and pralines should be viewed as belonging to an overall market for chocolate confectionery. In particular Kraft explains that:
(a) Customers choose between these different formats to satisfy the same needs, such as hunger satisfaction, treats, intimate sharing, or gifting. Even though there are certain needs that are more frequently associated with certain formats (for example a box of pralines is more closely associated with gifting), no format will be exclusively associated with a particular need. Customers will select among all formats to satisfy their requirements and the final choice of the product will be the result of personal preferences, the availability of a purchasing opportunity and price.
(b) Within the same format, chocolate confectionery products assume different forms, variants, flavours and sizes. Therefore the same format can be used to meet different needs (for example some tablets are available in a 30g size designed primarily for treat, a 150g size for sharing and in a 400g format primarily for gifting).
(c) Customers do not stick to a single format of chocolate confectionery products and buy the whole range of chocolate products which shows, according to Kraft, that they are clearly making choices between formats. This is facilitated by the fact that at points of sales the different formats are generally shelved contiguously and in comparable sizes (for example countlines are now being offered in multi-pack, which have the same total weight as average tablets).
20. In Kraft/Danone Biscuits, the Commission found that countlines form a separate market from other types of chocolate confectionery products in certain countries [5] on the basis of differences in consumption and purchasing patterns. Countlines were viewed as on-the-go indulgent products typically bought on a piece-by-piece basis, whereas tablets and other chocolate forms were procured in bigger quantities and usually shared at home or during family events.
21. In general, the market investigation did not confirm the notifying party's view but rather point to separate product markets based on the product formats, i.e. tablets, countlines and pralines, although in the UK and Ireland the line of distinction between these three products might be more blurred than in others Member States [6] .
22. Most of the respondents consider that tablets, pralines and countlines fulfil different needs and therefore have different purchasing and...
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