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Pioneer Foods (Pty) Ltd and National Brands Ltd (Cereal Breakfast Division) (12/LM/Feb00) [2000] ZACT 18 (4 May 2000)
.RTF of original document
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 sub-markets 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 post-merger 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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