The Brazilian Competition Authority (CADE) has urged the regulatory authorities to block the sale of joint-venture assets in the country owned by Fonterra and Nestlé to dairy company Lactalis. The sale of Dairy Partners Americas (DPA) would lead to horizontal competition issues in Brazil’s dairy chilled products markets.
CADE states the sale of the DPA assets would reduce the number of competitors in the markets; specifically fermented milk, petit suisse and dairy desserts, as those markets are already operating with a low capacity to challenge the market power. The ‘extensive combined portfolio of brands’ from Lactalis and DPA, coupled with the ‘gains in scale and scope in marketing’, is said to worsen the situation.
Additionally, CADE requested a study from the Department of Economic Studies (DEE) that showed that there is a ‘positive pressure to increase prices in the three markets in question’. Fonterra holds a 51% stake in the venture, set up in 2003, with Nestlé owning 49%. DPA operates two plants located in Araras and Garanhuns. It supplies dairy products, including milk-based beverages and yogurts, under the Nestlé brand as well as Chamyto, Ninho, Chandelle, Chambinho, Neston, and Molico.
The sale of DPA was initially announced in December when Lactalis bought the company for 700m reais (then $131.5m). All the 1,300 staff are said to be retained by Lactalis.
Just Food has contacted Lactalis, Nestlé, and Fonterra to comment on the recommendation to block the deal.
Source: Just Food