COMPETITION TRIBUNAL OF SOUTH AFRICA
Case NO: 26/LM/Mar08
In the matter between
DairyBelle (Pty) Ltd Primary Acquiring firm
And
Dairy World (Pty) Ltd and
Dairy World Properties (Pty) Ltd Primary Target Firms
Panel : D Lewis (Tribunal member); M Mokuena (Tribunal member) and U
Bhoola (Tribunal member)
Heard on : 04 June 2008
Decided on : 04 June 2008
Reasons Issued : 08 July 2008
Reasons for decision
APPROVAL
[1] On 04 June 2008 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between DairyBelle (Pty) and Dairy World (Pty) Ltd and Dairy World
Properties (Pty) Ltd unconditionally. The reasons for the approval appear below.
PARTIES
[2] The primary acquiring firm is DairyBelle (Pty) Ltd (“DairyBelle”), a company
incorporated under the laws of the Republic of South Africa. DairyBelle is jointly controlled by
DairyBelle Holdings (Pty) Ltd, Standard Bank Private Equity and Standard Bank Group Ltd.
[3] The primary target firms are Dairy World (Pty) Ltd (“Dairy World”) and Dairy World Properties
(Pty) Ltd (“DWP”). Dairy World and DWP are jointly controlled by Charles Frank Meyerowitz and
1
Leonard Isaac Meyerowitz, each with 50% shareholding.
TRANSACTION
[4] DairyBelle intends to acquire 100% of the issued share capital in each of Dairy World
and DWP. On completion of the transaction, DairyBelle will have sole control over the
primary target firms.
PARTIES’ ACTIVITIES
[5] DairyBelle is involved in the manufacture, distribution and marketing of dairy, dairy
related products and shortlife fresh juice products. 1 DairyBelle sells its products under the
following brands: DairyBelle, Easy Slice, Fruits of the Forest, Rainbow, So Smooth and
Sippity, Sterovita, Real, Four Seasons, Fiesta, Guzzla and Striker.
[6] Dairy World is engaged in the manufacture, distribution and marketing of
dairy and dairy-related products. It processes fresh milk (full cream and low fat),
cream, yoghurt, maas, chunky feta and halloumi cheese, nectars and pure fruit
juices in various sizes. DWP refers to the property in which Dairy World
manufactures its products.
RATIONALE FOR THE TRANSACTION
[7] DairyBelle states that it does not have a processing presence in Gauteng and thus
does not sell any fresh milk in Gauteng and the northern regions of South Africa. DairyBelle
submits that by acquiring Dairy World, it would have a processing presence as well as an
established vehicle fleet for distribution in Gauteng and the northern regions of South Africa.
Further, DairyBelle hopes that the transaction will enable it to expedite the growth of its
range of products, extend its areas of distribution and increase its participation throughout all
segments of the dairy industry.
[8] For Dairy World, the transaction represents a highly attractive opportunity to invest
into the DairyBelle brand, product and service range as well as an opportunity for a wider
national footprint.
RELEVANT MARKET
1 DairyBelle is currently the third largest player in the South African dairy and related fresh produce
market.
2
Relevant product market
[9] Both merging parties are involved in the manufacture, distribution and marketing of
dairy and dairyrelated products. There is therefore an overlap in their activities, particularly
in respect of fresh milk, yoghurt, maas/buttermilk, cottage cheese and fruit juice. The
transaction also results in a vertical integration as Dairy World procures cheese, butter and
powder milk from DairyBelle.
[10] In defining the horizontal market, the Commission referred to a previous decision in a
merger involving Clover Fonterra and Clover SA/New Zealand Milk 2 were the Tribunal came
to the conclusion that firstly, the dairy market constitutes a separate market from the raw
milk market and secondly, that the dairy market has different submarkets. In line with this
decision, the Commission concluded that the parties’ activities overlap in respect of fresh
milk, yoghurt, maas/buttermilk, cottage cheese and fruit juice and that each of these
products constitutes a separate market.
Relevant geographic market
[11] The Commission’s geographic market investigation in respect of fresh milk revealed
that the product cannot be transported for a long time as it has a short life span. 3 As such,
the geographic market was defined by the Commission as regional. In this regard DairyBelle
sells its fresh milk in the Free State, Western Cape and Kwazulu Natal whilst Dairy World
sells fresh milk in Gauteng, Mpumalanga and Limpopo. We therefore agree with the
Commissions’ conclusion that there is no geographic overlap between the activities of the
merging parties in respect of the provision of fresh milk.
[12] Regarding the dairy products market, DairyBelle is active nationally whereas Dairy
World only sells in Gauteng, Mpumalanga and Limpopo. Therefore, the Commission’s
analysis in respect of yoghurt, maas/buttermilk, cottage cheese and fruit juice covered
Gauteng, Mpumalanga and Limpopo provinces.
COMPETITION ANALYSIS
Gauteng, Mpumalanga and Limpopo provinces.
COMPETITION ANALYSIS
Horizontal analysis
[13] The merging parties’ combined postmerger market shares are a follows: Fruit juices
3.4%, maas/buttermilk 7.5%, cottage cheese 17% and yoghurt 16.2%. The merging parties
2 Clover Fonterra Ingredients (Pty) Ltd and Clover SA (Pty) Ltd/New Zealand Milk Products SA (Pty)
Ltd, case no: 92/LM/Nov04.
3 The Commission was advised by Mr. Leonard Meyerowitz of Dairy World that
fresh milk takes up to 7 to 10 days to expire.
3
will continue to face competition from other major players in the market such as
Clover/Danone and Parmalat.
[14] In addition, there are a number of smaller players who will serve as an alternative to
the merging firms in the region comprising of Gauteng, Mpumalanga and Limpopo. These
smaller players include Montesque Dairy, Douglasdale Dairy, Globler Melkery, Smith Dairy
and Dew Fresh. This horizontal overlap is therefore unlikely to substantially prevent or
lessen competition in the dairy ingredients market.
Vertical analysis
[15] The transaction results in a vertical integration as Dairy World is a customer of
DairyBelle.4 In the previous financial year Dairy World procured cheese, butter and powder
milk from DairyBelle. This transaction represented 2.1%, 1.5%, and 2.5% for each of the
products respectively in DairyBelle’s total sales of the products in South Africa. We
accordingly agree with the Commission that this vertical relationship is insignificant and
therefore unlikely to give rise to any foreclosure concerns.
COLLUSION IN THE DAIRY INDUSTRY
[16] The Commission also made reference to the alleged cartel in the milk industry,
which, according to the Commission involves 8 milk processors, i.e. Clover SA, Clover
Industries Ltd, Parmalat, Ladismith Cheese, Woodlands Dairy, Lancewood, Nestle SA and
Milkwood Dairy. The alleged cartel has since been referred to the Tribunal for a hearing. The
merging parties were, however, not implicated in the alleged cartel.
PUBLIC INTEREST
[17] The transaction does not give rise to any public interest issues and is approved
without conditions.
___________________ 08 July 2008
D Lewis Date
Tribunal Member
Concurring: U Bhoola and M Mokuena
4 The parties submit that Dairy World has been a customer of DairyBelle for the last 12 years.
4
Tribunal Researcher : I Selaledi
For the merging parties : Cliffe Dekker Inc.
For the Commission : William Kganare (Mergers & Acquisitions)
5