COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 12/LM/Feb00
In the large merger between
Pioneer Foods (Pty) Ltd
and
The cereal breakfast division of National Brands Ltd
Reasons for the Competition Tribunal’s Decision
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 19 April 2000
approving the merger between Pioneer Foods (Pty) Ltd and the cereal breakfast
division of National Brands Ltd without conditions. The reasons for our decision
to approve the merger are set out below.
The merger transaction
Pioneer acquired the entire ready to eat, hot cereals and infants’ breakfast
cereals division of National Brands, which consisted of ProNutro, Maltabella and
Kreemy Meel.
Evaluating the merger
The Tribunal agrees with the Competition Commission that the relevant market
should be defined narrowly as the market for breakfast cereals, which can be
subdivided into three submarkets namely hot breakfast cereals, ready to eat
cereals and infant cereals in South Africa. Although one can argue that ready to
eat and hot cereal categories are one relevant product market if one considers
that cereals can be eaten with hot milk, the difference in price and taste suggest
that the two products do not compete.
In both the ready to eat cereal and the hot cereal markets the merged entity is,
according to AC Nielsen, the second largest market player. In the ready to eat
market the postmerger market share of Pioneer is 31,7%. Its main competitor in
this market is Kellogs’ with a market share of 53,2%, which is also the largest
player. In the hot cereal market Jungle Oats is the largest with a market share of
68,8% whereas the merged entity has 14,8% of the market. Pioneer has never
been involved in the production of infant cereals prior to the merger.
Although concentration in the ready to eat cereal market is high, the Tribunal is
satisfied that adequate countervailing power exist in the bargaining power of
supermarket stores such as Pick ’n Pay, Spar and other large buyers. These
companies are also in a position to import products and are already in some
cases doing so. Moreover, the customers informed the Competition Commission
that they have not noticed any changes or effects in terms of prices and sales of
any cereal products following the implementation of the merger in June 1999.
The Tribunal agrees with the Competition Commission that the merger does not
substantially affect competition in the hot cereal breakfast market.
The Tribunal is also satisfied that the merger does not raise any public interest
concerns listed in section 16(3).
4 May 2000
D.H. Lewis Date
Concurring: N.M. Manoim and S. Zilwa
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