COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 50/LM/Jun09
In the matter between:
Tiger Consumer Brands (Pty) Ltd Acquiring Firm
and
The Mayonnaise Business of Nestle (SA) (Pty) Ltd Target Firm
Panel : N Manoim (Presiding Member), Y Carrim (Tribunal
Member) and A Wessels (Tribunal Member)
Heard on : 07 September 2009
Order issued on : 07 September 2009
Reasons issued on : 17 September 2009
Reasons for Decision
Introduction
1]On 07 September 2009 the Tribunal unconditionally approved the merger
between the aforementioned parties. The reasons follow below.
Parties
2]The primary acquiring firms are Tiger Consumer Brands (“Tiger CB”), and its
subsidiary Tiger Food Brands Intellectual Property Holding Company (“Tiger
Food IP”). Tiger CB is controlled by Tiger Brands Limited (“Tiger”). The
primary target firm is the mayonnaise business of Nestle (South Africa) which
is controlled by Nestle (South Africa), which in turn is controlled by Societe
Des Produits Nestle SA (“SDPN”).
Parties’ Activities
3]Tiger CB is active in a diverse portfolio of business including among other
things, the production of food, and particularly relevant to this transaction, is
its activity in the production and sale of mayonnaise based dressing branded
1
as All Gold 1000 Island Sauce.
4]Nestle South Africa’s mayonnaise business is active in the market for
production and sale of a range of mayonnaise and mayonnaise based
dressings branded as Crosse and Blackwell.1
The transaction
5] In terms of the proposed transaction, the merging parties signed a sale of
business agreement, a sale of property agreement, and trademark sale
agreement, in terms of which Tiger CB intends to acquire the mayonnaise
business of Nestle SA as a going concern, including certain property of Nestle
South Africa which is the land and buildings on which Nestle SA’s
mayonnaise factory is based, as well as all associated registered trademarks
(including Crosse and Blackwell and Crosse and Blackwell Trim) held by
SDPN (i.e. among other things; know-how, recipes, designs and goodwill in
relation to the goods and services).
Rationale
6]Tiger CB regards the proposed transaction as an opportunity to grow its
participation in the mayonnaise and mayonnaise based sauces market, and it
intends to keep the Crosse and Blackwell brand intact as a mayonnaise
brand, and distinct from its All Gold range. For Nestle SA, the proposed
transaction will allow its mayonnaise business to divest itself of the products
sold under the Crosse and Blackwell brand since it no longer fits its strategy
to focus on the manufacture of value added nutrition health and wellness
products.
Relevant Market and Competition Analysis
7]The Commission correctly identified the relevant market as the broad market
for the production and sale of mayonnaise and mayonnaise based dressings,
which is where the activities of the merging parties overlap. Tiger CB
produces All Gold 1000 island sauce, which is a mayonnaise based dressing,
1 At the hearing Ms Gobler from Nestle clarified that neither Tiger CB, nor Nestle mayonnaise
business are active in the production of chutney in South Africa.
2
and Nestle produces a variety of Crosse and Blackwell mayonnaise based
dressings.
8]The relevant geographic market is considered national given the fact that
Crosse and Blackwell products are sold nationally.
9]The Commission recorded the market shares of the major players in the
relevant market for the period 2008 (sourced from the merging parties and
competitors) as follows:
Table: Major Players’ Brands and market shares for 2008
MANUFACTURER BRAND MARKET SHARE
Tiger All Gold Less than 1%
Nestle Crosse and Blackwell 56%
Foodcorp and Dealers
own brand
Nola, Pick ‘n Pay,
Shoprite Checkers,
Spar, Woolworths
33%
Kraft Kraft 5%
Continental Oil Conti Oil 5%
Total 100%
[10] The table shows that Nestle SA’s Crosse and Blackwell is the largest
competitor in the market with a market share of 56%, and its closest
competitor is Foodcorp with a market share of 33%, then Kraft with 5% and
Continental Oil also with 5% market share. Tiger CB’s All Gold brand is the
smallest player, with a small market share of less than 1%, which means that
the market share accretion post merger is very minimal.
[11] In its analysis, the Commission also recorded HHI levels and found the
change in HHI to be 112, which invariably raises competition concerns.
However, it appears that even pre-merger, the relevant market is highly
concentrated, given that there are few large players in the market, two of
which (i.e. Nestle and Foodcorp) together hold an estimated 90% market
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share. Nevertheless, it is clear that the proposed merger will not increase
concentration in the market given the low market share accretion post
merger.
[12] In its investigation the Commission found that there has been new entry, and
consequently that barriers to entry are low in the relevant market. The
Commission also found that notwithstanding high concentration levels in the
relevant market, it remains a competitive market with different product
offerings, and that the competitive landscape is unlikely to change post
merger given the low market share accretion post merger.
[13] With regards to any potential effects of the proposed merger on pricing of the
relevant products, the Commission said that prices fluctuate with the oil seed
price and that consumers are known to shift consumption based on their
current preferences and change of season. In addition, customers of the
merging parties are large players with countervailing power. Hence, the
proposed transaction is unlikely to have any negative impact on price.
[14] The Commission interviewed competitors and customers of the merging
parties, and no concerns were raised regarding the proposed transaction.
Public Interest
[15] The transaction does not raise any significant public interest concerns and the
merging parties stated that it will not result in job losses. Accordingly the
transaction is approved unconditionally
___________________ 17 September 2009
Y Carrim Date
N Manoim and A Wessels concurring.
Tribunal Researcher : L Xaba
For the merging parties : Edward Nathan Sonnenbergs
For the Commission : L Khumalo
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