EUROPEAN COMMISSION DG Competition

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION Date: 11/03/2022

In electronic form on the EUR-Lex website under document number 32022M10543

EUROPEAN COMMISSION

Brussels, 11.3.2022 C(2022) 1602 final

PUBLIC VERSION

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description.

Biscuit Holding S.A.S. Avenue de L’Opéra, 27 Paris 75001 France

Dear Sir or Madam,

(1) On 4 February 2022, the Commission received notification of a concentration pursuant to Article 4 of the Merger Regulation which would result from a proposed transaction by which Biscuit Holding S.A.S. (‘Biscuit International’ or ‘BI’, France) intends to acquire within the meaning of Article 3(1)(b) of the Merger Regulation sole control of Continental Bakeries Holding B.V. (‘Continental Bakeries’ or ‘CB’, 3The Netherlands), by way of purchase of shares (the Transaction’). In this Decision, Biscuit International is referred to as the ‘the Notifying Party’ and together with

1 OJ L 24, 29.1.2004, p. 1 (the ’Merger Regulation’). With effect from 1 December 2009, the Treaty on the Functioning of the European Union (‘TFEU’) has introduced certain changes, such as the replacement of ‘Community’ by ‘Union’ and ‘common market’ by ‘internal market’. The terminology of the TFEU will be used throughout this decision. 2 OJ L 1, 3.1.1994, p. 3 (the ‘EEA Agreement’). 3 Publication in the Official Journal of the European Union No C70, 11.02.2022, p. 4.

Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË

Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.

Continental Bakeries as ‘the Parties’. The entity that would result from the Transaction is referred to in this Decision as ‘the Combined Entity’.

1.THE PARTIES

2.(2) Biscuit International, headquartered in Paris, France, manufactures principally private label sweet biscuits, although it is also active in co-manufacturing of branded biscuits. It has 20 manufacturing facilities located across France, Germany, the Netherlands, Portugal, Spain and the UK. Biscuit International operates mainly in Europe and has limited sales in the US, Africa, Asia Pacific and Latin America. Biscuits International is controlled by Platinum Equity, a private equity investment 4firm.

3.(3) Continental Bakeries, headquartered in Dordrecht, the Netherlands, manufactures sweet biscuits, bread replacements and toast. It focuses on private label products, although it also has its own biscuit brands. It operates primarily in Europe from 13 production facilities across the Netherlands, Belgium, Germany, Poland and Sweden. CB has also limited sales in the US, Africa, and Asia Pacific. Continental Bakeries is currently controlled by Goldman Sachs.

2.THE OPERATION

4.(4) The Transaction is to be achieved through a sale and purchase agreement (the ‘SPA’) concluded on 7 December 2021 by which BI will acquire all the issued and outstanding equity interest of CB. Biscuit International will therefore acquire sole control over Continental Bakeries.

5.(5) Therefore, the Transaction would result in a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

3.UNION DIMENSION

6.(6) The undertakings concerned have a combined aggregate world-wide turnover of 5 more than EUR 5 000 million (Platinum Equity: EUR […] million; CB: EUR […] million). Each of them has a Union-wide turnover in excess of EUR […] million (Platinum Equity: EUR […] million; CB: EUR […] million), but neither of them achieves more than two-thirds of their aggregate Union-wide turnover within one and the same Member State.

7.(7) The notified operation therefore has a Union dimension pursuant to Article 1(2) of the Merger Regulation.

4 Biscuit International is the only portfolio company of Platinum Equity active in the supply of sweet biscuits.

5 Turnover calculated in accordance with Article 5 of the Merger Regulation.

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4.RELEVANT MARKETS

8.(8) The Parties’ activities overlap in the manufacture and supply of sweet biscuits in several EEA countries.

4.1.Relevant Product Market

4.1.1.Previous decisions

9.6 (9) In previous decisions,the Commission considered -albeit leaving the product marked definition opened- that biscuits constitute a separate market from waffles and cakes. The Commission also considered the distinction between sweet and savoury biscuit markets. Within the sweet biscuits market, the Commission considered further segmentations (i) between products which are branded (‘B’) or have a private label (‘PL’); (ii) by customer (retailers vs food-service channel – restaurants, hotels, fast-food outlets, schools, hospitals) by category (form – sandwiched/plain; and taste – chocolate coated, filled). The Commission has however left in these previous decisions the precise product market definition open. For instance, the Commission considered a further segmentation by category (form – sandwiched/plain; and taste – chocolate coated, filled) in Case M.4828 - Kraft/Danone Biscuits but eventually 7came to the conclusion that in that case such a segmentation was not warranted.

4.1.2.The Notifying Party’s view

10.(10) The Notifying Party argues that sweet biscuits, waffles and cakes should be considered part of the same product market. However, as the Parties’ activities do not overlap in the production of waffles or cakes, it considers that the exact product market definition can be left open. As the Parties’ activities do not overlap on savoury biscuits, the Notifying Party does not give its opinion on this plausible segmentation of the savoury biscuits market. However, the Notifying Party considers that any further segmentation of the sweet biscuit market is not warranted for the following reasons. First, consumers view the various sweet biscuits types, including branded and non-branded, interchangeably. Second, there is no “must-stock” product category from the retailers’ perspective. Third, sweet biscuit manufacturers can easily enter new biscuit segments and several already supply both branded and non- 8branded products.

4.1.3.The Commission’s assessment

11.(11) In this Section, the Commission will analyse in turn the segmentations referred to in paragraph (10).

12.(12) First, as regards the distinction between B and PL sweet biscuits, the market investigation has shown that retailers and competitors do not consider branded and private label sweet biscuits interchangeably. For retailers there is a considerable

6 See, e.g., Case M.6430 – Oaktree / Panrico, (2011), paras 14-17; Case M.5644 – Kraft Foods/Cadbury, (2010), paras. 30 – 31; and Case M.4828 - Kraft/Danone Biscuits, (2007), paras 13. Case M.1920 – Nabisco / United Biscuits, (2000), para. 8.

7 Case M.4828 - Kraft/Danone Biscuits, (2007), paras 14.

8 Form CO, paragraphs 75-95.

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9 difference in the margins made with one or the other productand confronted with a price increase in a private label product, the majority of respondents said they 10would not switch to a branded product . Although some sweet biscuit suppliers are active in both private label and branded products, they usually focus on one of these activities and not seldom, their presence in the branded products is via co-manufacturing arrangements with the brand holder. The majority of respondents to our market investigation that supply both private label and branded products, consider that it is difficult to switch from private label to branded products as this requires significant investments in the product lines but also in advertising (if they 11were to build a new brand and not enter into a co-manufacturing arrangement).

13.(13) Second, as regards the distinction between the retailer channel and the food-service channel, the majority of competitors consider that different capabilities are required to serve each channel, namely different packaging capabilities and different sales 12teams.

14.(14) Third, as regards a further segmentation by sweet biscuit categories, the results of the market investigation were not conclusive, or at least not uniform for all potential sweet biscuits categories. In particular, the delineation of the categories themselves (per format, size, texture, taste) is fluid and as a retailer explained ‘the market for sweet biscuits is diverse and can be segregated into a number of categories and sub - 13categories’.

15.(15) From the demand perspective, retailers need to have an assortment of sweet biscuits on offer, which does not cover every category of sweet biscuits. However, some categories are considered “must-stock” products. For a retailer a “must-stock” category of biscuits is not substitutable or interchangeable with other categories of sweet biscuits or other sweet products, as they must have this product on their 14 shelves and cannot delist them.Based on the results of the market investigation, the following categories of sweet biscuits were consistently considered ‘must-stock’: 15sandwich biscuits, plain biscuits and cookies by the majority of retailers . Other categories were generally considered ‘must-stock’ but only in certain countries, such as barquettes in France, sprits in Belgium or stroopwafel in The Netherlands, or coffee assortments in Spain. On the other hand, there are categories of sweet biscuits, such as chocolate kisses, that are characteristic of a certain tradition/season. They are procured for promotional and/or seasonal activities, retailers do not necessarily stock them, have delisted them in the past, and can substitute them by 16other products.

9 Responses to Q1 – Questionnaire to customers, questions 5 and 6. 10 Responses to Q1 – Questionnaire to customers, question 4. 11 Responses to Q2 – Questionnaire to competitors, question 6, question 6.2, question 7 and question 7.1. 12 Responses to Q2 – Questionnaire to competitors, question 8.2. 13 Agreed Minutes of a call with a retailer on 14 January. 14 Faced with a 5% price increase the retailers that participated in the market investigation explain that would not be sufficient to delist a product, other factors affecting the demand for that product would need to be considered before making such decision -Responses to Q1 – Questionnaire to customers, question 31. 15 Responses to Q1 – Questionnaire to customers, question 29 and 29.1. 16 Response to RFI I-5; Response to Q1 – Questionnaire to customers, question 29.1 and retailer’s response to a few follow-up questions on 24.02.2022.

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16.(16) From the suppliers’ perspective, biscuit manufacturers generally offer several categories of biscuits. Whereas a majority of respondents said switching production 17 to a new category of biscuits would imply significant investments,there was no clear majority on the need to have a dedicated production line for each category of biscuits. Some categories of biscuits can be manufactured on the same production 18 line.In addition, suppliers also seem to distinguish the categories perceived by 19 retailers as must-stock biscuitsfrom what they perceive as ‘a residual’ category named as ‘specialties’ where they include those biscuits that are specific to a certain tradition/season and are only procured for promotional and/or seasonal activities. This category usually includes the biscuits with lower sales, for which there is a 20 21relatively small demand.For BI, this category includes [details of sales].

4.1.4.Conclusion

17.(17) For the purpose of assessing the present Transaction, the precise product market definition can be left open as even under the narrowest possible market definition for the manufacture and supply of sweet biscuits no serious concerns arise as to the compatibility of the concentration with internal market as regards the overlapping activities of the Parties. For the purposes of this Decision and under a conservative approach, the Commission will factor into its assessment of the Transaction possible distinctions based on (i) retail channel (ii) private label products, (iii) categories of biscuits.

4.2.Relevant Geographic Market

4.2.1.Previous decisions

18.(18) In its prior decisional practice, the Commission concluded that the biscuit markets 22are national in view of the consumption patterns and established local brands.

4.2.2.The Notifying Party’s view

19.(19) The Notifying Party agrees with the Commission’s precedent; it however points to the ability of suppliers to address demand in neighbouring countries and suggests these constraints should be taking into account in the competitive assessment of the 23Transaction.

4.2.3.The Commission’s assessment

20.(20) In the market investigation, retailers in general consider that consumer preferences and purchasing habits are different between countries however for some category of biscuits the consumer preferences and purchasing habits seem to be common among

17 Responses to Q2 – Questionnaire to competitors, questions 5 and 5.1. 18 Responses to Q2 – Questionnaire to competitors, questions 4 and 4.1. 19 Responses to Q2 – Questionnaire to competitors, question 28. 20 Response to RFI no 7, question 1. 21 Idem. 22 Case M.6430 – Oaktree / Panrico, (2011), para 22; Case M.4828 - Kraft/Danone Biscuits, (2007), para.15; Case M.1920 – Nabisco / United Biscuits, (2000), para. 12. 23 Form CO, paragraph 107.

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53 Responses to Q1 – Questionnaire to customers, question 12 and 21.1. 54 Response to Q1- Questionnaire to customers, question 21.1.1. 55 Responses to Q2- Questionnaire to customers, question 18 and 19 and Form CO, paragraph 175 and footnote 135. 56 Form CO, para. 139. 57 Responses to Q2 – Questionnaire to competitors, question 22.1 and 22.1.1. 58 Responses to Q1- Questionnaire to customers, question and Q2 – Questionnaire to competitors, question 19. 59 Responses to Q1 – Questionnaire to customers, question 18 and 19. 60 Responses to Q1 – Questionnaire to customers, question 12.2, question 18 and question 21. 61 Responses to Q2- Questionnaire to customers, question 18 and 19. 62 Form CO, para 139. 63 Responses to Q1 – Questionnaire to customers, question 24.1. 64 Responses to Q1 – Questionnaire to customers, question 24.

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(50)Competitors that participated in the market investigation generally agree that 65 suppliers can and do switch suppliers faced with a price increase.One competitor explained, “[t]his happens frequently. Each tender holds the chance or risk of 66getting or losing volumes.”

5.2.4.3.Plain biscuits in Germany

(51)In Germany, the Transaction would lead to a combined market share of [30-40]% with an increment of [0-5]% in the plain biscuits segment. The Combined Entity would still face competition from the market leader Griesson (with a market share of [50-60]%) and from a smaller competitor the Balsen Family (with a market share of 67[0-5]%).

(52)In the market investigation, the majority of retailers consider that Griesson is a closer 68 competitor to either of the Parties than the Parties are to one another.The majority 69of competitors consider that the Parties do not compete closely with one another. Moreover, the majority of retailers consider that the Transaction will not have an 70 impact on this market segment.Half of the competitors that participate in the market investigation did not express a view; those who have considered that the Transaction will have a negative impact on competition in this segment but they 71have not substantiated their concerns.

(53)In light of the results of the market investigation and of all the evidence available to it, the Commission considers that, while the combined market shares of the Parties give rise to an affected market with regard to the plain biscuit category in Germany, it seems unlikely that the Transaction would give rise to anticompetitive horizontal non-coordinated effects. Firstly, the changes brought by the Transaction are small, as Biscuit International was hardly present in this segment with a [0-5]% market share and, secondly, there are alternative suppliers, in particular the market leader Griesson.

(54)In light of the above, the Commission considers that the Transaction does not raise serious doubts as to its compatibility with the internal market in relation to horizontal non-coordinated effects in the plain biscuits segment in Germany.

5.2.5.Conclusion

(55)In light of the above considerations and taking account of the results of the market investigation and of all the evidence available to it, in particular the existence of sufficient alternative suppliers, the Commission concludes that the Transaction does not raise serious doubts as to its compatibility with the internal market in relation to the overall sweet biscuits market in France, as well as in the segment markets of sandwich biscuits in France, Belgium and in The Netherlands, and in the plain biscuits in Germany.

65 Responses to Q2 – Questionnaire to competitors, question 30 and question 22. 66 Responses to Q2 – Questionnaire to competitors, question 22. 67 Form CO, Annex 13. 68 Responses to Q1- Questionnaire to customers, question 18 and 19. 69 Responses to Q2 – Questionnaire to competitors, question 25. 70 Responses to Q1 – Questionnaire to customers, question 34. 71 Responses to Q2 – Questionnaire to competitors, question 35 and 35.1.

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5.3.Conglomerate Effects

(56)In view of the complementary of the Parties’ product portfolios, the Commission has also analysed possible conglomerate effects of the Transaction, particularly in those segments where at least one of the Parties has already pre-Transaction a market share of at least 30%.

(57)The Combined Entity would have a uniquely large portfolio of sweet biscuits, 72 compared to its competitors.In their internal documents, the Parties [details of 73 commercial or investment strategy].In addition, each of the Parties has pre- Transaction very high market shares in some sweet biscuit categories (e.g. BI has [80-90]% market shares in barquettes biscuits in France and CB has [80-90]% 74market share in sprit cookies in Belgium); or is single supplier (e.g. CB is the only supplier of Swedish cookies in France). Moreover post-Transaction the Combined Entity would also acquire an increased market share (above 30% in the Sandwich biscuit segment in France and The Netherlands, as well as plain biscuits in Germany).

(58)Moreover, some retailers expressed concerns that due to the Parties’ portfolio size, 75 they will lose bargaining power and may face higher prices.Competitors on the other hand, consider that it would be more difficult to compete with the Combined 76 Entity, as the larger portfolio would give it a competitive advantage.One competitor explained, “[t]he combined portfolio may allow the Parties to better compete and make more comprehensive and expansive offers to the retail trade in tenders, both in respect to product/category and regional/market scope. They may 77 also be able to realize economies of scale due to logistics benefits.”The same competitor later added, “in view of the broader range of products in the expanded portfolio, the Parties may likely be able to utilize bundling strategies to a greater 78extent than is currently the case.”

(59)Against this background, the Commission has assessed whether the Combined Entity would have the ability and the incentive to adopt an input foreclosure strategy by bundling or tying its products.

(60)As regards the ability to foreclose, in spite of its large or very large market share in some categories of sweet biscuits, the Combined Entity is unlikely to have the ability to foreclose its competitors through bundling strategies for the following reasons.

(61)First, the market investigation confirmed that retailers typically negotiate prices for each stock keeping unit (‘SKU’), albeit they may conclude a contract for several 79 SKUs.A biscuit category may include several SKUs. This prevents the suppliers

from creating any commercial tying situation or pure bundling. To participate in the tender, the supplier has to make that specific SKU available on its own and offer a (competitive) price in order to win.

(62)The fact that prices are typically negotiated for each SKU has however not prevented 80 the Parties, nor their competitors, to offer discounts when retailers purchase different categories of biscuits together (as explained by some retailers). Sometimes 81 retailers themselves request this type of discounts.The Combined entity would however not have the ability to adopt a foreclosure strategy by offering this type of discounts. As retailers have different commercial strategies and opt for different 82 assortment of biscuits,suppliers do not necessarily offer the same bundles (discounts) to all retailers. There would not necessarily be a sufficient large common pool of retailers for the individual products concerned (in each bundle) to be able to specifically foreclose competitors from certain market segments.

(63)Second, the majority of retailers that participated in the market investigation said they do not negotiate prices for all categories of biscuits at the same time, which makes it more difficult for the Combined Entity to offer bundles, even in the form of 83 volume discounts.In fact, the majority of retailers that participated in the market investigation said they have not experienced bundling practices whereby the acquisition of one category of biscuit would be conditional on the acquisition of 84another.

(64)Third, already pre-Transaction each of the Parties have a wide portfolio including with leading position in must-stock categories of biscuits and they have not adopted such anticompetitive strategy. The proposed Transaction does not increase their ability to do so.

(65)Since the Combined Entity does not have ability, it would most likely not have the incentives to foreclose. The incentives to enter in such strategy depends on the profitability of the strategy. If a significant number of retailers are not willing to buy the bundle but only the leveraging product, and have alternative suppliers, sales of this product may also significantly fall if offered in a bundle. It is unlikely that the Combined Entity would forgo sales in a profitable (e.g. must-stock category) to gain market share on a market where it has lower volumes.

(66)Given that the Combined Entity would not have the ability and the incentives to engage in a bundling foreclosure strategy, it is not necessary for the Commission to assess the potential impact of such a strategy on effective competition. Nevertheless, the Commission notes that some competitors did express concerns as regards the ability of the parties to offer lower prices thereby making it more difficult for them to compete. However, the mix bundles that the Combined Entity may continue to offer in the future would not necessarily lead to a foreclosure effect, as suppliers have other alternatives of supply and are therefore not bound to accept such bundles.

80 The majority of competitors that responded to the questionnaire acknowledged that they have offered bundles of different categories of biscuits – Responses to Q2- Questionnaire to competitors, question 18. 81 Form CO, paragraph 177. 82 Form CO, footnote 5, and Responses to Q2- Questionnaire to customers, question 3. 83 Responses to Q1 – Questionnaire to customers, question 13.2. 84 Responses to Q1 – Questionnaire to customers, question 27.

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(67)For the above reasons and in light of the results of the market investigation and of all the evidence available to it, the Commission considers that the Transaction would not give rise to serious doubts about its compatibility with the internal market in relation to potential conglomerate effects in sweet biscuits, more specifically in those segments where at least one of the Parties has pre-transaction a market share of at least 30% at national level.

6.CONCLUSION

(68)For the above reasons, the Commission has decided not to oppose the notified operation and to declare it compatible with the internal market and with the EEA Agreement. This Decision is adopted in application of Article 6(1)(b) of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed) Margrethe VESTAGER Executive Vice-President

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