COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 52/LM/Jul02
In the large merger between:
Pick ‘n Pay Retailers (Pty) Ltd
and
Boxer Holdings (Pty) Ltd
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Reasons
_______________________________________________________________________
Approval
The Competition Tribunal issued a Merger Clearance certificate on 7 August 2002
approving the merger between Pick ‘n Pay Retailers (Pty) Ltd and Boxer Holdings (Pty)
Ltd. The reasons for our decision are set out below.
The Transaction
Structure
Pick n Pay Retailers will acquire all the issued share capital in Boxer Holdings and Boxer
Superstores. Both Boxer Holdings and Boxer Superstores will after the merger become
wholly owned subsidiaries of Pick ‘n Pay Retailers.
The parties
The primary acquiring firm is Pick ‘n Pay Retailers (Pty) Ltd which is controlled by Pick
‘n Pay Stores Limited. The Pick n Pay group owns 14 Pick ‘n Pay Hypermarkets, 113
Pick ‘n Pay Supermarkets, 1000 franchised Pick ‘n Pay Family Stores, 39 franchised Pick
‘n Pay Minimarkets and 116 Score Supermarkets.
The primary target firm is Boxer Holdings (Pty) Ltd and Boxer Superstores (Pty) Ltd.
Dumakude Investments (Pty) Ltd, I O E Holdings (Pty) Ltd, Ndumu Investments (Pty)
Ltd and Smithhold (Pty) Ltd each hold 25% of the shares in Boxer Holdings. Boxer
Holdings directly controls Boxer Superstores through its majority shareholding of
78.09% in the issued share capital of Boxer Superstores.
Both, Pick ‘n Pay Retailers and Boxer Superstores, are active in the retailing sector,
selling groceries and a range of other household products.
Rationale for the transaction
According to the merging parties the merger will increase Boxer’s competitiveness in the
retail market since Shoprite/Checkers, Boxer’s main competitor, is the only group that
has national coverage in the LSM 1 group in which Boxer operates. At the same time this
merger will assist Pick ‘n Pay to enter a market sector in which it is not currently
represented.
Pick ‘n Pay has advised that it intends to continue with the Boxer brand and will not
remove it from the market.
Evaluating the merger
The relevant market
Both Pick ‘n Pay and Boxer serve clients with a full range of supermarket products,
which includes bakeries, butcheries and delis. Since Boxer does not sell products such as
hardware, clothing and household appliances these products are not included in the
relevant market.
We are convinced by the Commission’s view that the profile and target market of the
different format stores are important factors that indicate in which market the merged
company will compete. We therefore agree that the LSM classification should be used in
this case to define the product market.
Boxer concentrates on the LSM 14 categories focusing on “nofrills”, low cost fixtures
and fittings with stores situated in rural areas. The only grocery outlets within the Pick ’n
Pay group that do not trade in the LSM 68 market are the Score Supermarkets. They too
focus on the LSM 15 categories although the concept, in terms of how each store looks
focus on the LSM 15 categories although the concept, in terms of how each store looks
and trades, differs. Boxer is set up much like a warehouse type operation selling in bulk
to the lower LSM groups selling a lot of 25 – 50kg bags of mealie meal, rice and other
basic commodities. Score supermarkets, on the other hand, tend to have a lower cost or
spend per consumer with customers shopping more regularly. It has a slightly more up
1 Living Standard Measurement (LSM) segmentation divides the population into 8 LSM groups, from 1
(the lowest) to 8 (the highest), using criteria such as degree of urbanisation and ownership of cars and
major appliances.
2
market vision that tends to attract customers from the middle LSM group. 2
We also agree with the Commission that the geographic market is local. The relevant
market accordingly is the retail grocery market, serving consumers in the LSM 15
categories, within a local geographic market, being the area immediately surrounding the
stores of the parties.
The towns in which both parties compete are Vryheid in KwaZulu Nata, Rustenburg in
North West, and Umtata, Lusikisiki, Mount Frere, Bizana, Engcobo, Idutywa, King
Williams Town and Butterworth in Eastern Cape.
Effect on competition
In this relevant market Spar and Shoprite/Checkers are regarded as the main competitors
since they cater for all the LSM categories. The Commission also presented evidence that
wholesalers/ cash & carry outlets also compete with the outlets of the parties due to
families or villages in and around town that buy in bulk from the wholesalers for own
consumption and not for resale.
Barriers to entry are not high with large groups such as Shoprite and Spar continually
opening new stores, such as Shoprite, which opened in Lusikisiki in May 2002.
The market shares of the merged entity and its main competitors in each town are:
TOWN OUTLET ESTIMATED MARKET
SHARE
Vryheid Merged entity
Shoprite
Metro Cash & Carry
Checkers
Spar
13.47
16.33
16.33
16.33
8.98
Burgersfort Merged entity
Spar
Lebowa Wholesalers
Metro Cash & Carry
14.36
11.88
14.85
14.85
2 The average amount spent per shopping basket in Boxer stores fluctuates between R25 – R30 and the
average Score basket R12.
3
Rustenburg Merged entity
Shoprite
Checkers
Trans Cash & Carry
21.30
12.03
15.04
10.03
Lusikisiki Merged entity
Shoprite
Metro Cash & Carry
Browns Cash & Carry
Lusiki Cash & Carry
23.05
9.38
14.06
12.50
15.63
Mt Frere Merged entity
Soli’s Spar
TG Wholesalers
Weirs Cash & Carry
22.73
12.63
18.18
15.15
Bizana Merged entity
Ingele Supermarket
Ingele Wholesalers
Browns
Bargain Wholesalers
14.20
14.79
14.79
17.75
28.40
Idutywa Merged Entity
Empumalanga
Metro Cash & Carry
Spar
Weirs Cash & Carry
13.80
25.10
12.55
5.02
7.53
Butterworth Merged Entity
Spargs
Emphumalanga
Weirs Cash & Carry
Spar
17.95
23.08
25.64
16.03
9.62
Market shares fluctuate between 13% and 23% in the markets where there are overlaps
between Boxer and Score stores. According to the parties calculations only the post
merger HHI’s in Bizana (1820 points) and Butterworth (1920 points) will exceed 1800
points, which the USA antitrust agencies regard as highly concentrated. However, Boxer
4
and Score operate in markets that are highly price sensitive and evidence was put before
us, which shows that if prices are increased sales drop. 3 We are therefore convinced that
the merged entity will not be able to gain market power in these areas where there are
other competitors.
Taking into account the number of competitors and their market shares, as set out in the
above table, as well as the slight difference in market focus between Boxer and Score the
Tribunal is satisfied that post the merger competition will not be substantially prevented
or lessened in any of the relevant markets.
Public Interest
The transaction does not raise any adverse public interest issues.
_____________ 26 August 2002
D.H. Lewis Date
Concurring: N. Manoim, U. Bhoola
For the merging parties: Mr R Wilson of Sonnenberg Hoffmann Galombik
3 See page 123 of the record where examples of price behaviour is discussed and the example of Boxer in
Umtata that sells a lot of cigarettes to hawkers increased its price of cigarettes and sales dropped..
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