COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 33/LM/Apr06
In the matter between:
TIGER FOOD BRANDS LTD Acquiring Firm
and
BROMOR FOODS (PTY) LTD Target Firm
_______________________________________________________________
Panel : D Lewis (Presiding Member), N Manoim (Tribunal
Member), and U Bhoola (Tribunal Member)
Heard on : 12 July 2006
Delivered on : 17 July 2006
REASONS FOR DECISION
Approval
[1] The Competition Tribunal issued a Merger Clearance Certificate on 12
July 2006 approving without conditions the proposed merger between Tiger
Food Brands Ltd (“Tiger Food”) and Bromor Foods (Pty) Ltd (“Bromor Foods”).
The merger transaction
[2] The parties to this merger are Tiger Food 1 and Bromor Foods. 2 Tiger
Food is a South African incorporated company listed on the JSE, and is
controlled by Tiger Brands Limited (“Tiger”). Tiger owns 96% and the Black
Managers Trust, the General Staff Trust and Thusani Trust own 4% in the entire
issued share capital of Tiger Food. 3 Bromor Foods is controlled by Cadbury
Schweppes Investments B.V. (“Cadbury”), 4 a Netherlands company, which in
turn is controlled by Cadbury Schweppes plc (“Cadbury Schweppes”). 5
[3] Both Tiger Food and Cadbury have entered into a sale and purchase
agreement6 in terms of which Tiger Food will acquire the entire issued share
capital of Bromor Foods. 7
Rationale for the transaction
[4] From Tiger Food’s perspective, the proposed deal would enable Tiger
Food (which we are told has at present a very small presence in nonalcoholic
beverages market) to expand its presence in nonalcoholic beverages market.
1 Tiger Food controls two (2) firms, i.e., Langeberg & Ashton Foods (Pty) Ltd and Enterprise
Foods (Pty) Ltd.
2 Bromor Foods owns three (3) dormant companies (i.e., Bromor (Pty) Ltd, Maluti Foods (Pty)
Ltd, and Bromor Foods Swaziland (Pty) Ltd) and one (1) active property owning company,
Bromor Properties Transvaal (Pty) Ltd.
3 Tiger controls 20 other firms, which are not necessary to detail here. See page 1617 of the
merger record.
4 Cadbury has the following subsidiaries incorporated in South Africa: Cadbury South Africa
(Pty) Ltd (“CSA”); Bromor Foods; and Chapelat Humphries Investments (Pty) Ltd.
5 Cadbury Schweppes owns the following companies relating to South Africa: Vantas
International Ltd; Cadbury Schweppes Overseas Ltd, Cadbury Schweppes Investments (Jersey)
Ltd, Cadbury Schweppes Investments (Netherlands Antilles) BV, and Cadbury.
6 See page 72222 of the merger record.
6 See page 72222 of the merger record.
7 The sale excludes the Retained Assets, Retained Obligations, Retained Products and
Retained Brands (i.e., the Cadbury Bournvita, Cadbury ReadytoDrink Milk and Cadbury Hot
Chocolate and other brands).
2
[5] Cadbury, a Bromor Foods’ holding company, has made a strategic
decision to concentrate on its core business in South Africa, namely
confectionery. In order to achieve this objective, Cadbury decided to divest its
interests in Bromor Foods, which is primarily involved in the production of non
alcoholic beverages.
The relevant market
[6] The products manufactured and supplied by the Tiger Group are
numerous. These include domestic food (under brands names such as
Enterprise, Tastic, Fatti’s & Moni’s, Koo, Dairybelle, All Gold and Albany);
healthcare and hospital products (via Adcock Ingram Ltd); fish products; and a
variety of personal care products (i.e., Elizabeth Annes, Ingrams Camphor
Cream and the like), fabric cleaners, insect repellents and insecticides; and
lastly, a small range of nonalcoholic beverages and sweet bread toppings .
[7] Bromor Foods also manufacture nonalcoholic beverages , in particular,
noncarbonated soft drinks and juices as well as sweet bread toppings, jams
and pie fills. 8 Below are two tables which reflect, firstly, the brands under which
sweet bread toppings are produced and sold by each of Bromor Foods and the
Tiger Group and secondly, the subcategories of nonalcoholic beverages per
each of the merging parties’ brands.
Table 1
Category Subcategory Bromor Foods
Branded
Product
Tiger Branded
Product
Breadspreads Jams and Piefills Hall’s and Rose’s All Gold, Hugo’s, Koo
and Naturelite
Table 2
Beverage
Category
SubCategory Bromor Foods
Branded Product
Tiger Branded
Product
Concentrates Squashes & Cordials Oros, Rose’s,
Cocopine, Low Cal,
Oranjos, brooke’s
Mixers
N/A
Nectars Halls, Cedar N/A
Syrups/dairy fruit Hall’s Smooth, Super N/A
8 Bromor Foods’ products brands include Oros, Sweeto, and Brookes for squashes; Monis,
Polar Ice and Super Juice for longlife ready to drink carbonated fruit juices; and Game, Clifton,
Giant Joes and Hall’s for nectars.
3
blends 7, 11 in 1, Mixa
Drink, Giant Joe’s
Super concentrates Sweeto, Rodney’s
Fouro, Rodney’s
Sixo, Crush, Esto
N/A
Powered Soft Drinks Game, Clifton,
Sweeto
Shape
Sports & Energy
Drinks
Sports concentrates Energade
concentrates
N/A
Sports drinks Energade N/A
Energy Drinks N/A Fast Forward and
Bioplus
Fruit Juices Short Life Juices N/A DairyBelle
Excluding mixes N/A Real and Four
Seasons
Dairy mixes N/A Fiesta
Longlife ready to
drink carbonated
Monis, Polar Ice and
Super Juice
N/A
Longlife ready to
drink still
Hall’s Tomato
Cocktail
All Gold Tomato
drinks and VeggiFruit
Other Kids’ still ready to
drink
Oros ready to drink
[8] In its analysis, the Commission identified two (2) relevant markets. These
are a broad market for the production and sale of nonalcoholic beverages, and
the market for the production and sale of jams. The Commission, however,
pointed out that within the socalled ‘broad market’ for the production and sale
of nonalcoholic beverages there are categories which include the market for
concentrates, sports and energy drinks, fruit juices and others. 9
[9] As can be seen from table 2 above, there exists a product overlap in the
merging parties’ activities with respect to the production of concentrates and
fruit juices (longlife readytodrink still). This is the case because within the
market for concentrates Bromor Foods produces Clifton, Game and Sweeto
whilst Tiger Food produces Shape. Within the category of fruit juices Bromor
9 In defining the relevant market, the merging parties submitted that the market can be given a
broad meaning as the market for the manufacturing and distribution of nonalcoholic beverages,
which market is comprised of carbonated soft drinks, dairy based beverages, fruit juices, sports
drinks, mineral waters, concentrates, iced teas, and energy drinks. They also contended that
drinks, mineral waters, concentrates, iced teas, and energy drinks. They also contended that
should the Commission does not favour the broad market approach, therefore the relevant
market may be narrowly construed as the submarkets for concentrates, sports drinks, energy
drinks, fruit juices, meal replacement/meal supplement products, and kids’ still readytodrink.
See page 46 and 49 of the merger record .
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Foods produces All Gold Tomato drinks and VeggiFruit whereas Tiger Food
produces Hall’s Tomato Cocktail. We will analyse this later in our decision. In
conclusion the Commission refrained from defining the relevant market because
on both a narrow and broad version of the market it concluded that the relatively
low postmerger market shares did not portend competition problems.
[10] Our table 1 above reflects that the merging parties are both involved in
the market for the production and supply of sweet bread toppings. This includes
jams, honey, syrup, chocolate spreads, nut spreads, etc. Bromor Foods
manufactures and supplies jams and piefills under two (2) as mentioned above
whilst Tiger Food manufactures and supplies same under four (4) brands. 10
[11] With regards to the geographic market, we are advised that Bromor
Foods and Tiger Food sell all their affected products nationally. According to
the merging parties, transport costs are such that national distribution is cost
effective and the product attributes are such that distribution across our country
is completely feasible. In light of this we consider the geographic market to be
national in nature.
Competition analysis
[12] The merging parties estimates that Tiger Food and Bromor Foods enjoys
a premerger market shares of 1,67% and 2,14% (respectively) in the socalled
‘broad nonalcoholic beverages market’. If these estimated figures are correct,
the merged entity would have an aggregate postmerger market share of
10 With regard to the second market, the merging parties adopted a view that such market can
be defined broadly as the market for the manufacturing and supply of sweet bread toppings.
They also contend that this market can be narrowly construed as the market for the manufacture
and distribution of jams and piefills (according to the AC Nielsen classification). The
Commission seems to favour the second view which is that of the market for jams and piefills.
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approximately 3,81%. 11 We are advised that TCCC is the leading player in this
market with an estimated share of the market in the region of 48%. 12 The
figures given to us by the merging parties show that the Tiger Group and
Bromor Foods enjoy a premerger market share of 58% and 2% respectively in
the market for jam and piefills. Rhodes has a 15% market share with others
estimated at 25%. The result is that postmerger, the merged entity would have
60% of the jam and piefills market – in our view, the minor increment of 2% on
Tigers already considerably 58% market share is unlikely to lead to a
substantial lessening of competition. 13
[13] Insofar as the jams and piefills market is concerned, we are advised that
the manufacturers of all the affected nonalcoholic beverages and food have to
comply with certain regulatory requirements. 14 The merging parties contend
that it would normally take three (3) to six (6) months for a new entrant to enter
11 According to the merging parties, these market share figures are based on their turnover of
2005.
12 The merging parties also provided us with market share figures relating to the fruit juice
market which reflect that Tiger Food has a 5,6% market share whilst Bromor Foods is at 1,06%.
Thus, postmerger the merged entity would have approximately 6,66% of the fruit juice market.
In the long life juice market Tiger Food has 8,1% market share with Bromor Foods only at 0,67%
postmerger, the merged entity would have approximately 9,67%. In addition, both Tiger Food
and Bromor Foods has approximately 0,67% and 8,18% respectively in the longlife juices (still
and carbonated market. The postmerger market share would be approximately 8,85%. Insofar
as the longlife RTD still juice category is concerned, the Tiger Group has a market share of
0,93% whereas Bromor Foods has a market share of 7,14%. This would result in a neglible
0,93% whereas Bromor Foods has a market share of 7,14%. This would result in a neglible
accretion of market share as a result of the merger.
13 Note that these market shares – which are calculated off AC Nielsen figures – do not include
the considerable cottage industry in jams.
14 These include the Food Stuffs Cosmetics and Disinfectants Act 54 of 1972 which regulates
product labelling and associated claims coupled with marketing driven communications from the
manufacturer to the consumer; the Department of Agriculture Products Standards Act 119 of
1990 which regulates the product contents; and the Trade Metrology Act 77 of 1973 which
regulates the pack size (weight and volume) of the product and to some extent the pack format
of the product.
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the market whilst using the services of contract packers. 15 During its
investigation, the Commission told us that it consulted with customers and
competitors of the merging parties who did not raise concerns with the proposed
merger.16 We are advised that there exist alternative sources of supply from
companies including, but not limited to, Hillcrest Berries (Pty) Ltd, Patleys and
Scandic Food. There are also imports although most imported product is in
premium priced niches of the market. The Commission – citing its discussions
with customers of the merging parties submitted that there was evidence of
strong countervailing power on the part of many of the large customers. 17 We
share the view that, on either definition of the relevant market, the merger is
unlikely to give rise to a substantial lessening of competition.
Public Interest
[14] The merging parties submitted that proposed transaction would have an
impact on employment as the merging parties anticipate job losses not
exceeding 60 employees out of 900 Bromor employees. However, we are
advised that this would not affect unskilled employees. It is only the semiskilled
and skilled employees (i.e., nonmanufacturing employees) would be affected
by postmerger redundancies. The merging parties also made an undertaking
that there will be no retrenchment for a period of at least nine (9) months, and
that no steps may be taken in preparation for any retrenchments for a period of
at least six (6) months from the implementation of the merger. 18
Conclusion
[15] We are satisfied that the proposed transaction is unlikely to result in a
15 The new entrants in this market include Rhodes Fruit Farms and Sugarbird (Pioneer) which
entered the bottled jam market in 2004 and 2005 respectively.
16 See page 600, 604606, and 627 of the merger record.
17 See page 9 of the Commission’s recommendations.
17 See page 9 of the Commission’s recommendations.
18 We note that a notice of set down for the hearing of this merger was sent to the majority
trade union, the Food and Allied Workers Union (FAWU) and ultimately chose to make no
submission in this regard. See also page 10 of the Commission’s recommendations.
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substantial lessening or prevention of competition in the relevant markets. The
public interest considerations do not justify the imposition of any conditions. We
accordingly approve the proposed transaction unconditionally.
______________
D Lewis
Presiding Member
N Manoim and U Bhoola concur in the judgment of D Lewis.
Tribunal Researcher: T Masithulela
For the merging parties : N Lopes ( Edward Nathan Corporate Law
Advisors)
For the Commission : L Khumalo (Mergers & Acquisitions) assisted
by M Mashaba (Legal Services)
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