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 . 
 EUROPEAN COMMISSION  
 
 
 
 
 
Brussels, 21.12.2018  
C(2018 ) 9220 final  
 
 
 
To the notifying party  
 
 
Subject : Case M. 9122 - TCCC / Costa  
Commission decision pursuant to Article 6(1)(b) of Council 
Regulation No  139/20041 and Article 57 of the Agreement on the 
European Economic Area2 
Dear Sir or Madam,  
(1) On 20 November 2018 , the European Commission received notification of a 
proposed concentration pursuant to Article 4 of the Merger Regulation by which 
The Coca -Cola Company ("TCCC"  or the "Notifying Party" , U.S.), acquires 
within the meaning of Article 3(1)(b) of the Merger R egulation control of the 
whole of Costa Limited ("Costa", UK ) by way of purchase of shares  ("the 
Transaction”) .3 TCCC and Costa  are together referred to as the "Parties".  
                                                 
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 C 429, 28.11.2018 , p. 7. PUBLIC VERSION  In the publish ed version of this decision, som e 
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omitted has been replaced by ranges of figures or a 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.  
2 1. THE PARTIES  
(2) TCCC is a US -based brand owner and licensor of various trademarks used to  
market and sell non -alcoholic commercial beverages.4 It produces soft drink 
concentrate and syrups that it supplies to bottling and canning operations 
("Bottlers"), as well as fountain retailers.5 TCCC also administers Coca -Cola 
Bottlers' Agreements enter ed into with the Bottlers to which it sells its 
concentrates and syrups , and is responsible for the consumer marketing of 
beverages sold under its trademarks. In certain instances, TCCC produces and 
sells finished beverages.   
(3) Costa operates coffee shops i n a limited number of EU Member States. Costa and 
its affiliated entities engage in this business in the EU through multichannel 
operations including equity stores and franchise stores. In addition, Costa has a 
wholesale operation s for the sale of packaged , roast and ground ("R&G") coffee 
and other ingredients. Costa also operates hot beverage vending machines 
("express machines") through self -serve Costa Express machines located at its 
partners' premises.  
2. THE OPERATION  AND THE CONCENTRATIO N 
(4) The transaction consists in the acquisition of the entire share capital of Costa by 
TCCC. The SPA was signed on 31 August 2018.  
(5) Therefore, the Transaction constitutes a concentration within the meaning of 
Article 3(1)(b) of the Merger Regulation.  
3. EU DIMEN SION  
(6) The undertakings concerned have a combined aggregate world -wide turnover of 
more than EUR 5 000 million  (TCCC: 31 345 million, Costa […]).6 Each of them 
has a Union-wide turnover in excess of EUR 250 million  (TCCC: […], Costa 
[…]), but neither underta king achieve s more than two -thirds of its aggregate 
Union-wide turnover within one and the same Member State.  
(7) The notified operation therefore has a U nion dimension  pursuant to Article 1(2) 
of the Merger Regulation . 
  
                                                 
4  Non-alcoholic commercial beverages is a broad category of non -alcoholic beverages, otherw ise known 
as "soft drinks", including packaged water, still drinks, iced teas, fruit juices, sports and energy drinks 
and other soft drinks (see e.g. Form CO, paragraph 107).  
5  Fountain retailers are outlets, such as restaurants and convenience stores, w hich use dispensing 
equipment to mix the syrups with sparkling or still water at the time of purchase to produce finished 
beverages that are served in cups or glasses for immediate consumption.  
6  Turnover calculated in accordance with Article 5 of the Mer ger Regulation .  
3 4. RELEVANT MARKETS  
4.1. Parties' activities  
(8) TCCC owns or licences and markets about 500 non -alcoholic ready -to-drink 
commercial beverage brands, which can be grouped into the following category 
clusters: sparkling soft drinks; water; enhanced water and sports drinks; juice, 
dairy and plant based bev erages; and ready -to-drink tea and coffee.7 8 
(9) TCCC also owns Chaqwa, a branded hot beverage vending business . TCCC's 
bottler, Coca -Cola European Partners plc ("CCEP"), owns and operates the 
machines using product and marketing support supplied by and brand  and 
trademarks licensed from TCCC. Chaqwa machines predominantly dispense hot 
coffee but also serve other hot beverages (tea and hot chocolate).  The Chaqwa 
machines are currently only supplied in Germany, Belgium, Norway, Sweden and 
Iceland.9 
(10) Through the proposed T ransaction, TCCC will be adding to its portfolio the 
following  products:  
– Costa's coffee shops, mainl y in the UK, Ireland and Poland.  
– Costa's Proud to Serve ("PtS") products , a suite of ingredients and branded 
accessories required for a customer t o recreate the Costa product s out -of-home , 
such as hospitals, universities, petrol  stations and leisure venues .10 PtS 
products are currently marketed only in the UK and Ireland.  
– Costa's R&G coffee and Tassimo  discs.11 Both products are targeted ultimately 
toward end customers for use at home.  These products are marketed only in the 
UK and Ireland.12 
– Costa Express machines, i.e. self -serve hot beverage vending machines located  
at Costa's  partners ' premises.  Costa operates [8,000  - 8,250]  Costa Express 
machines worldwide, including [7,750  - 8,000]  in the EEA, the overwhelming 
majority of which are in the UK.  
                                                 
7  Form CO, paragraph 70.  
8  TCCC's non-alcoholic ready -to-drink commercial beverages ( NAB s) portfolio  also includes a ready -
to-drink coffee , marketed under the Honest  brand  in the UK and Spain. Moreover, TCCC has a 
licensing agreement wit h Illy, […]. The main flavours are Illy Caffe Latte, Illy Caffe Vanilla Affogato, 
Illy Issimo Cafe Espresso, Illy Issimo Caffe Tiramisu  and Illy Issimo Latte Macchiato. These are only 
sold in Cyprus, Czech Republic, Greece, Romania, Slovakia and Slovenia. Given that these are non -
carbonated drinks, sold in aluminium cans and PET bottles at ambient or cold temperature, the 
Commission considers that these product s do not lead to a horizontal overlap with Costa products .   
9  Form CO, paragraphs 80 -86. 
10  PtS includes various coffee ingredients (beans, ground and filter coffee), takeaway cups and lids, 
porcelain cups, saucers and glasses, scoops, beakers, thermometers and other coffee -making 
equipment, snacks, and cleaning products.  
11  Tassimo  discs are designed for use within compatible espresso coffee machines. R&G coffee is also 
designed for consumption at home (but does not require an espresso machine) . […]. 
12  Costa also manufactures […] of R&G retail packs […], which it sells through its own stores in the UK 
and in a number of o ther EEA countries . 
4 4.2. Relevant p roduct market definitions  
(11) The T ransaction leads to : 
(a) Vertical links between the supply by TCCC of non-alcoholic ready -to-
drink commercial beverages ("NABs")  and Costa's coffee shops; and 
(b) Conglomerate links between TCCC's NABs and Costa's PtS products , 
R&G coffee and Tassimo discs  as well as Express machines  described at 
paragraph (10) above .  
(12) The Transaction may also give raise to l imited horizontal overlap s, which in any 
event do not result in horizontally affected market s.13 Therefore, these links will 
not further be discussed in the pre sent decision.  
4.2.1.  Supply of non -alcoholic ready -to-drink commercial beverages ("NABs")  
Brand ownership and bottling  
(13) Commission precedents14 described the supply of NABs  as consisting of two 
interrelated activitie s: namely brand ownership upstream and bottling 
downstream:  
(a) Brand ownership typically involves the creation and support of 
brands, the supply of beverage concentrate, and the authorisation of 
local bottlers to prepare, package, distribute and sell the beverages. 
Brand owners usually have primary responsibility for consumer 
marketing such as television, radio, cinema, and press advertising, as 
well as sponsorship of activities such as music and sports.   
(b) Bottling typically involves preparing, packaging, selling, marke ting, 
and distributing the final product in a territory assigned by the brand 
owner. Bottlers generally have operational responsibility for 
marketing closer to the retail level, including promotional discounts 
and trade marketing. Such efforts are closely coordinated with the 
brand owner's marketing and support activities. In case of TCCC, 
authorised bottlers either combine the concentrates with sweeteners 
(depending on the product), still water and/or sparkling water, or 
combine the syrups with sparkling w ater to produce finished 
beverages. The finished beverages are packaged in authorised 
containers bearing TCCC's trademarks  and are then sold mainly to 
retailers directly or, in some cases, through wholesalers and 
distributors.  
                                                 
13  Both TCCC and Costa overlap in  vending services for hot beverages at the national level  in Germany. 
However, this does not lead to affected markets  as TCCC share is ca. [5 -10]% and Costa has o nly [15-
20] Costa Express machines in Germany.  
14  See, e.g., Case IV/M.794 - Coca -Cola/Amalgamated Beverages G B, paragraph 23; Case IV/M.833 - 
TCCC/Carlsberg A/S , paragraphs 25 -30; Case COMP/M.1683 - The Coca -Cola Company/Kar -Tess 
Group (Hellenic Bottling) , paragraphs 11 -12; Case COMP/M.5632 - PepsiCo/Pepsi Americas , 
paragraph 9; Case COMP/M.5633 - PepsiCo/The PepsiCo Bottling Group , paragraph 8, Case M.7763 
– TCCC/COBEGA/CCEP .  
5 (14) Bottlers operate in differen t EEA countries on the basis of their agreements with 
TCCC, which confer them with an […] licence to market, distribute, bottle and 
sell TCCC branded beverages in their respective territories.  
(15) On the markets affected by the present transaction, TCCC […] and maintains that 
bottlers are operationally independent from TCCC. However, many aspects of the 
bottlers’ operations, such as marketing decisions, are influenced by TCCC. In 
addition, the prices at which concentrate is supplied to bottlers are set by 
reference to, and as a prescribed percentage of, each bottler's wholesale net sales 
prices set by the bottler to its customers , thus reducing the business risk a bottler 
needs to assume on its own.15  
(16) In addition, certain finished products ( […]) and large and  international accounts 
are directly managed by TCCC and not through the bottlers.  
(17) Therefore, the full independence of the bottlers’ businesses form TCCC’s cannot 
be established with certainty.  
(18) In view of the above and ,taking a precautionary approach, the Commission 
considers that TCCC's market position should be assessed also including the sales 
of its products through the bottlers.   
Segmentation by type  of NAB  
(19) In previous decisions, the Commission has considered that, within NABs, 
carbonated  soft drinks ( “CSDs ”) constitute a separate market from non-
carbonated soft drinks ( NCSDs ).16 In particular, the Commission has previously 
considered a narrower market segmentation for  cola-flavoured CSDs .17 In its past 
decisional practice the Commission als o indicated that NCSDs could be 
segmented into packaged water, fruit juices, ready -to-drink teas and energy and 
sports drinks, although ultimately left the question on such segmentation open.18  
(20) Given the absence of any material horizontal overlaps between the operations of 
the Parties, the Parties do not consider it necessary to reach a definitive view on 
the scope of the relevant product market.  
(21) The Commission considers that, for the purpose of this decision, the exact scope 
of the product market can be le ft open since the Transaction does not give rise to 
serious doubts about its compatibility with the internal market even under the 
strictest plausible definition of the product market ( i.e. the Coca Cola branded 
products ).  
  
                                                 
15  TCCC calls this pricing model towards bottlers "incidence pricing".  
16  Case  M.5633 - Pepsico/The Pepsico Bottling Group , paragraphs 1 0-12; Case M.833 - The Coca -Cola 
Company/Carlsberg A/S , paragraph 42 ; Case M.2276 - The Coca -Cola Company/Nestle/JV , paragraph 
17; Case M.6924 - Refresco Group/ Pride Foods , paragraph 15 .  
17  Case IV/M.1065 – Nestle/San Pelegrino , paragraph 17;  Case IV/ M.794 – Coca -Cola/Amalgamated 
Beverages GB , paragraphs 26, 30 -94; M.2504 – Cadbury Schweppes/Pernod Ricard , paragraphs 10.  
18  Case M.2276 - The Coca -Cola Company/Nestle/JV , paragraph 17; Case M.6924 - Refresco 
Group/Pride Foods ,   paragraph 16 . 
6 Segmentation by distribution cha nnel 
(22) Previous Commission’s decisions considered  separate product markets according 
to the distribution channel of NABs distinguishing between the off-premises  
(retail)  and the on -premises consumption market  (including, for example, hotels, 
restaurants, and  cafes, known as the "HoReCa"  sector) .19 
(23) Respondents to the market investigation confirmed the Commission's findings in 
previous cases.20 Therefore, the Commission considers that the effects of the 
Transaction should be assessed on the two separate product markets for the off -
premises ch annel and the on -premises one.  
4.2.2.  Operation of coffee shops/informal restaurants  
(24) The Commission has not previously defined a relevant product market for the 
operation of coffee shops specifically , but previous c ases indicated that coffee 
shops are part of a market for informal restaurants.21 Precedents involving fast 
food restaurants investigated whether a further segmentation of informal 
restaurants into "informal restaurants", "informal eating -out restaurants"  or "eat -in 
quick -service restaurants" , "(chained) quick service restaurants" and  "take 
away/home delivery" was necessary.22 
(25) The Notifying Party submits that branded coffee shops, such as Costa, face 
competition also from independent coffee shops, fast food ( quick service) 
restaurants and other casual dining restaurants that serve hot beverages . 
Therefore, according to the Notifying Party, the market could be wider than 
coffee shops alone.  
  
                                                 
19  Case M.2504 – Cadbury Schweppes/Pernod Ricard , paragraphs 7 -14. 
20  See replies to Q5 of the Questionnaire to competitors and of the Questionnaire to customers.  
21  Case M.4220 – Food Service Project/Tele Pizz a, paragraphs 7 -13. Informal restaurants ” include 
quick -service restaurants, plus a wide selection of chained and independent informal restaurants, 
pizzerias, cafes, coffee shops, sandwich bars as well as take -away and home delivery outlets. .   
22  Cases COMP/M.2940 – TPG Advisors III/Goldman Sachs/Bain Capital Investors/Burger King , 
paragraphs 12 -23; COMP/M.4220 – Food Service Project/Tele Pizza , paragraphs 7 -13; and 
COMP/M.6895 – 3G Special Situations Fund III/ Berkshire Hathaway/ H J Heinz Company , 
paragraphs 21 -23. 
7 (26) The Commission's market investigation provided a number of indicatio ns that 
coffee shops do compete with informal restaurants23, while the answers as to 
whether branded coffee shops competed with the unbranded ones were less 
conclusive.24 
(27) The Commission considers that, for the purpose s of this decision, the exact scope 
of the relevant product market can be left open in this respect since the 
Transaction does not give rise to serious doubts as to  its compatibility with the 
internal market even under the strictest p lausible definition of the product market 
(i.e., branded coffee shops).  
4.2.3.  Provision of vending services (vending machines)  
(28) The Commission has previously considered the provision of vending services , but 
left open the question of whether the market should be further segmented by t he 
type of food dispensed  in (i) hot beverages, (ii) cold drinks and (iii) snacks and 
food.25 
(29) The Notifying Party considers that for the purposes of the present Transaction, the 
relevant market in respect of coffee vending machines should be that for the 
provision of vending services, i.e. the sale of products and services at an 
unattended point of sale, using some form of payment.26  
(30) Respondents to the market investigation confirmed the Commission's description 
of this product s in previous cases ,27 but were n ot definitive as to a segmentation 
of vending services by type of beverage/food as well as by type of distribution 
machine , such as, for example, vending machines, beverage machines used in 
hotels, restaurants or cafeterias  and small capacity machines with out payment 
system designed for office coffee supply .28 
(31) The Commission considers that, for the purpose of this decision, the exact scope 
of the product market can be left open since the Transaction does not give rise to 
serious doubts about its compatibility with the internal market even under the 
strictest p lausible definition of the product market ( i.e., vending services for hot 
beverages only ).  
4.2.4.  Manufacture  and sale of coffee and other ingredients  
(32) In previous decisions, the Commission has considered that  the manufacture and 
sale of coffee via the "in -home" and "out -of-home" channels form part of separate 
product markets. In -home encompasses the sale of coffee to consumers via 
retailers or directly to consumers. Out -of-home encompasses the sale of coffee to 
                                                 
23  See replies to Q8 of the Questionnaire to competitors and of the Questionnaire to customers.  
24  See replies to Q9 of the Questionnaire to competitors and of the Questionnaire to customers.  
25  Case M.8454 – KRR/Pelican Rouge ; Case M.6857 – Crace Co/MEI Group . 
26  Form CO, paragraph 116.  
27  See replies to Q6 of the Questionnaire to competitors and of the Questionnaire to customers.  
28  See replies to Q7 of the Questionnaire to competitors and of the Questionnaire to customers.  
8 hotels, restaurants  or cafes (ref erred to as "HoReCa") but also to offices, 
hospitals, educational establishments and other work places.29 
(33) The Commission has also considered that all out -of-home sales belong to the 
same product market.30 Conversely, t he Commission has segmented the in-home 
channel into (i) instant coffee, (ii) R&G coffee, (iii) filter pads, (iv) Nespresso 
compatible capsules, (v) other espresso capsules, and (vi) multi -drink capsules.31   
(34) The Commission also considered whether R&G coffee in-home was in the same 
market as whole coffee beans , but ultimately left open the p recise product  market  
definition  in this respect .32 
(35) The Notifying Part y does not disagree with the Commission's findings in previous 
cases.33 
(36) The Commission considers that, for the purpose of this decision, the exact scope 
of the relevant product market can be left open since the Transaction does not 
give rise to serious doubts as to  its compatibility with the internal market even 
under the strictest p lausible definition of the relevant product market 
(manufacture and sale of coffee and oth er ingredients in the out -of-home channel; 
manufacture and sale of R&G  coffee only and Tassimo discs  only34, both in the 
in-home channel ).  
4.3. Geographic  market definitions  
4.3.1.  Supply of non -alcoholic ready -to-drink commercial beverages ("NABs")  
(37) The Commission has  consistently found that the geographic scope of the supply 
of NABs is national due to, inter alia , differences in consumption patterns, 
logistics and distribution netw orks and marketing strategies.35 
(38) The Notifying Party agrees with this geographic scope.36  
(39) Respondents to the market investigation confirmed the Commission's findings in 
previous cases.37 
                                                 
29  Case  M.7292 - DEMB/Mondelez/Charger OPCO , paragraph 43.  
30  Case M.7292 - DEMB/Mondelez/Charger OPCO , paragraph 44 . 
31  Case M.7292 - DEMB/Mondelez/Charger OPCO , paragraph 103, paragraph 107, paragraph 112, 
paragraph 123, paragraph 136 and paragraph 151 . 
32  Case M.7292 - DEMB/Mondelez/Charger OPCO , paragraph 136 . 
33  Form CO, paragraph 122.  
34  Case M.7292 - DEMB/Mondelez/Charger OPCO , paragraph 92. In this case the Commission  
concluded that consumables for the various single -serve systems , such as the Tassimo  system,  belong 
to different  market s.  
35  Case M.2276 – The Coca -Cola Company/Nestlé/JV , paragraph 23  
36  Form CO, paragraph 111.  
37  See replies to Q10 of the Questionnaire to competitors and of the Questionnaire to customers.  
9 (40) Based on the above , the Commission will conduct its assessment of the markets 
for NABs on a national basis.  
4.3.2.  Operation of coffee shops/informal restaurants  
(41) As concerns the market for informal restaurants, Commission precedents 
considered its geographic scope to be at least national, leaving the precise market 
definition open.38 
(42) The Notifying P arty submits that also for coffee shops the relevant geographic 
market should be considered national, as in particular  price and product ranges of 
branded chains are typically determined on a national basis. This is also the case 
for Costa's equity stores.39   
(43) The mark et investigation was not conclusive as to the exact scope o f the 
geographic market.40 
(44) The Commission considers that, for the purpose of this decision, the exact scope 
of the geographic  market can be left open since the Transaction does not give rise 
to serious doubts about its compatibility with the internal market  even under the 
strictest p lausible definition of the geographic market ( national) .  
4.3.3.  Provision of vending services (vending machines)  
(45) The Commission has in the past found that the relevant geographic markets for 
the provision of vending services in general  are national in scope due to the 
absence of EU -wide legislation for the vending industry, the difference in lifestyle 
and culture between the various European countries and the need for having 
teams of staff (machine engineers, stockists, operators) av ailable in reasonable 
proximity.41 
(46) The Notifying P arty therefore submit s it would be appropriate to examine the 
Proposed Transaction by reference to national geographic markets.42 
(47) Respondents to the market investigation confirmed the Commission' s findings in 
previous cases  that the geographic scope of this market is national.43 
(48) The Commission considers that, for the purpose of this decision, the exact scope 
of the geographic  market can be left open since the Transaction does not give rise 
to serious doubts about its compatibility with the internal market even under the 
strictest p lausible definition of the geographic market (national).  
                                                 
38  Case M.4220 – Food Service  Project /Tele Pizza , para graph s 14-17; Case No COMP/M.6895 - 3G 
Special Situations Fund  III/Berkshire Hathaway /H J Heinz Company , para graph s 24-25. 
39  Form CO, paragraph 99.  
40  See replies to Q12 of the Questionnaire to competitors and of the Questionnaire  to customers.  
41  Case M.8454 – KRR/Pelican Rouge , paragraphs 17 -19.  
42  Form CO, paragraph 118.  
43  See replies to Q11 of the Questionnaire to competitors and of the Questionnaire to customers.  
10 4.3.4.  Manufacture  and sale of coffee and othe r ingredients  
(49) The Commission has determined in previous cases that the geographic scope for 
the market s for the supply of various types of coffee is national .44 This conclusion 
was reached on the basis of (i) the high importance of national brands; (ii) the 
presence of national differences in te rms of consumption by consumers; (iii)  the 
divergence in market shares of the relevant suppliers in the different Member 
States ; (iv) the fact that  negotiations with retailers regarding supply and pricing of 
coffee pr oducts ar e national; and (v) the presence of national and regional 
competitors.  
(50) The Commission has not found evidence to contradict its previous findings in this 
respect and will therefore conduct its assessment on a national basis.  
5. COMPETITIVE ASSESSME NT 
5.1. Framewo rk of analysi s 
(51) Article 2 of the Merger Regulation provides that the Commission has to appraise 
concentrations with a view to establishing whether or not they are compatible 
with the internal market. For that purpose, the Commission must assess, pur suant 
to Article 2(2) and (3), whether or not a concentration would significantly impede 
effective competition, in particular as a result of the creation or strengthening of a 
dominant position in the common market or a substantial part of it.  
(52) The Commissi on’s assessment of this Transaction focuses on (i) vertical non-
coordinated effects due to the creation of vertical links between the Parties as  well 
as (ii) conglomerate non -coordinated effects due to the combination of TCCC's 
products with Costa's.  
Vert ical non -coordinated effects  
(53) Vertical mergers involve companies operating at different levels of the same 
supply chain. For instance, a vertical merger occurs when a manufacturer of a 
certain product merges with one of its distributors.  
(54) Pursuant to the Com mission Guidelines on the assessment of non -horizontal 
mergers under the Merger Regulation (the “Non -Horizontal Merger 
Guidelines”)45, vertical mergers do not entail the loss  of direct competition 
between merging firms in the same relevant market and provid e scope for 
efficiencies.46 
(55) However, there are circumstances in which vertical mergers may significantly 
impede effective competition. This is in particular the case if they give rise to 
foreclosure .47 
                                                 
44  Case M.7292 - DEMB/Mondelez/Charger OPCO , para graph  157. 
45  OJ C 265, 18.10.2008, p. 6.  
46  Non-Horizontal Merger Guidelines, paragraph 13.  
47  Non-Horizontal Merger Guidelines, paragraph 18.  
11 (56) The Non -Horizontal Merger Guidelines distinguish between  two forms of 
foreclosure: input foreclosure, which arises where the merger is likely to raise 
costs of downstream rivals by restricting their access to an important input, and 
customer foreclosure, which exists where the merger is likely to foreclose 
upstream rivals by restricting their access to a sufficient customer base .48 
(57) Pursuant to the Non -Horizontal Merger Guidelines, input foreclosure arises 
where, post -merger, the new entity would be likely to restrict access to the 
products or services that it wou ld have otherwise supplied absent the merger, 
thereby raising its downstream rivals' costs by making it harder for them to obtain 
supplies of the input under similar prices and conditions as ab sent the merger .49 
(58) For input foreclosure to be a concern, the merged entity should have a significant 
degree of market power in the upstream market. Only when the merged entity has 
such a significant degree of market power, can it be expected that it will 
significantly influence the conditions of competition in the ups tream market and 
thus, possibly, the prices and supply condit ions in the downstream market .50 
(59) Pursuant to the Non -Horizontal Merger Guidelines, customer foreclosure may 
occur when a supplier integrates with an important customer in the downstream 
market and  because of this downstream presence, the merged entity may foreclose 
access to a sufficient customer base to its actual or potential rivals in the upstream 
market (the input market) and reduce their ability or incentive to compete , which , 
in turn, may raise downstream rivals' costs by making it harder for them to obtain 
supplies of the input under similar prices and conditions as absent the merger. 
This may allow the merged entity to profitably establish higher pr ices on the 
downstream mar ket.51 
(60) For customer foreclosure to be a concern, a vertical merger must involve a 
company which is an important customer with a significant degree of market 
power in the downstream market. If, on the contrary, there is a sufficiently large 
customer base, at  present or in the future, that is likely to turn to independent 
suppliers, the Commission is unlikely to raise compet ition concerns on that 
ground .52 
Conglomerate non -coordinated effects  
(61) Conglomerate mergers consist of mergers between companies that are active in 
closely related markets, for instance suppliers of complementary  products or of 
products which belong to a range of products that is generally purchased by the 
same set of custome rs for the sa me end use .53 
                                                 
48  Non-Horizontal Merger Guidelines, paragraph 30.  
49  Non-Horizontal Merger Guidelines, paragraph 31.  
50  Non-Horizontal Mer ger Guidelines, paragraph 35.  
51  Non-Horizontal Merger Guidelines, paragraph 58.  
52  Non-Horizontal Merger Guidelines, paragraph 61.  
53  Non-Horizontal Merger Guidelines, paragraph 91.  
12 (62) Pursuant to the Non -Horizontal Merger Guidelines, in most circumstances, 
conglomerate mergers do not lead to any competition problems.54 However, 
foreclosure effects may arise when the combination of products in related markets 
may confer on the merged entity the ability and incentive to leverage a strong 
market position from one market to another closely related market by means of 
tying or bundling or  other exclusionary practices .55 
(63) The Non -Horizontal Merger Guidelines distinguish b etween bundling, which 
usually refers to the way products are offered and priced by the merged entity and 
tying, which usually refer s to situations where customers that purchase one good 
(the tying good) are required to also purchase another good from the producer 
(the tied good) .56 
(64) Within bundling practices, a distinction is also made between pure bundling and 
mixed bundling. In the case of pure bundling the products are only sold jointly in 
fixed proportions. With mixed bundling the products are also avail able separately, 
but the sum of the stand -alone prices is higher than the bundled price .57 
(65) Tying can take place on a technical or contractual basis. For instance, technical 
tying occurs when the tying product is designed in such a way that it only works 
with the tied product (and not with the alternatives offered by competitors).  
(66) While tying and bundling have often no anticompetitive consequences, in certain 
circumstances such practices may lead to a reduction in actual or potential 
competitors' ability or i ncentive to compete. This may reduce the competitive 
pressure on the merged entity allowing it to increase prices or deteriorate su pply 
conditions in other ways .58 
(67) In assessing the likelihood of such a scenario, the Commission examines, first, 
whether the m erged firm would have the ab ility to foreclose its rivals59, second, 
whether it would have th e economic incentive to do so60 and, third, whether a 
foreclosure strategy would have a significant detrimental effect on competition, 
thus causing harm to consumers .61 In practice, these factors are often examined 
together as they are closely intertwined.  
  
                                                 
54  Non-Horizontal Merger Guidelines, paragraph 92.  
55  Non-Horizontal Merg er Guidelines, paragraph 93.  
56  Non-Horizontal Merger Guidelines, paragraph 97.  
57  Non-Horizontal Merger Guidelines, paragraph 96.  
58  Non-Horizontal Merger Guidelines, paragraph 93.  
59  Non-Horizontal Merger Guidelines, paragraphs 95 to 104.  
60  Non-Horizontal Merger Guidelines, paragraphs 105 to 110.  
61  Non-Horizontal Merger Guidelines, paragraphs 111 to 118.  
13 5.2. Market shares  
(68) As regards TCCC’s market share in selling NAB s in the on-premise channel  
upstream , TCCC would have more than 40% of the CSD market in the UK, 
Ireland  and Poland  based on the Notifying Party's estimates, as illustrated by 
Table 1 below . The […] of these m arket shares is represented by Coca -Cola 
branded products.  
(69) In the off-premise market  TCCC's share in selling NABs is above 50% in the UK 
and Ireland a nd [40-50]% in Poland . As in the on -premise channel, the […] these 
market shares is represented by Coca -Cola branded products .  
(70) Table 1 also shows TCCC’s market share in juices as well as in vending services 
for cold drinks . The share of TCCC in juices is below 30% in both the on -premise 
and off -premise channels in each of the three countries considered. The share of 
TCCC cold drinks vending services  is estimated at less than [10-20]% in the UK 
and Poland and less than [30-40]% in Ireland.  
Table 1: TCCC's m arket shares in NABs /cold drinks  by channel, 2017  
 On-premise  Off-premise  Juices  
Cold drinks 
vending services  
(%)  
CSD 
(%)62 Of which 
Coca -
Cola 
branded 
products 
(%) CSD 
(%) Of which 
Coca -
Cola 
branded 
products 
(%) On-
premise  
(%) Off-
premise  
(%) 
UK [40-50] [30-40] [50-60] [30-40] [20-30] [10-20] < [10-20] 
Ireland  [60-70] [50-60] [50-60] [40-50] [20-30] [10-20] < [30-40] 
Poland  [40-50] [30-40] [30-40] [30-40] [5-10] [0-5] < [10-20] 
Source: Form CO  
(71) As regards Costa’s market share in operating coffee shops downstream , Table 2 
below shows the number and the share of Costa's branded coffee shops in the UK, 
Ireland a nd Poland, by number of shops for 2017 . If independent coffee shops 
where included in the relevant market, the Costa's share is would be reduce d 
sizeably.63 
(72) Table 2 also shows Costa's market shares for the other three  lines of Costa's 
products, namely Costa Express  vending machines , PtS and R&G and Tassimo 
discs  in 2017  in the  national markets where Costa is present.  
                                                 
62  TCCC's share NCDS is [10-20]% in the UK and less than [5-10]% in Ireland and Poland.  
63  For example, including independents and non-specialist operators would increase the total market size 
to around 24,061 stores in the UK for 2017 (an increase from around 7,476 of branded coffee shops), 
resulting in Costa's share of all coffee shop s in the UK being approximately [10 -20]%. 
14 Table 2: Costa's coffee shops shares by store numbers, 2017  
 
Store 
numbers  Share 
(%) Costa 
Express 
machines  
(%) PtS (out -
of-home)  
(%) R&G (in -
home)  (%) Tassimo 
discs (in -
home)  
(%) 
UK [2,250 -2,500]  [30-40] [10-20] [20-30]* [0-5] [5-10] 
Ireland  [100-125] [10-20] [10-20] N/A** - - 
Poland  [125-150] [10-20] [10-20] - - - 
Notes: * Outlets selling Costa PtS products as a share of all “non -specialist” coffee outlets in the UK ;  
** sales of PtS in Ireland in 2017 -2018 amounted to £ […]. 
Source: Form CO  and Reply to RFI 4 of 13 November 2018 . 
5.3. Assessment of vertical non -coordinated effects  
(73) Vertically affected markets arise in the UK, Ireland and Poland between TCCC's 
upstream supply of CSDs  and juices for on -premises consumption and Costa's 
downstream operations of informal restau rants (coffee shops) in these countries.  
No input foreclosure effects  
(74) The Notifying P arty submits that : (1) TCCC does not have the ability to foreclose 
NAB products to Costa's competitors, as ( […]) the informal restaurants (including 
coffee shops) general ly purchase TCCC products from TCCC's Bottlers or from 
wholesalers/distributors , and (2) TCCC's Bottlers are operationally independent.64  
(75) The Notifying P arty also submits  that TCCC does not have an incentive to 
foreclose NAB products to Costa's competitors. In the UK, TCCC's sale of NABs 
to Costa account for […] of its revenues as opposed to TCCC's sales to Costa's 
competitors that could be lost through input foreclosure. Therefore, according to 
the Notifying P arty, an input foreclosure strategy by TCCC would not to be 
profitable.65  
(76) The Notifying P arty further explains that NABs are not an important input or core 
product for Costa that would drive demand, and they are not r equired for Costa to 
compete with other coffee shops. For instance, the sale of TCCC 's NABs 
contributes only to [0-5]% of Costa's sales .66  
(77) The market investigation provided broad support to the Parties' arguments. 
Although TCCC  is one of the leading suppli ers of CSD s, the Transaction would 
be unlikely to significant ly impact the market structure , since several suppliers of 
CSDs will remain available on the market such as: PepsiCo  ([30-40]%), A G Barr 
                                                 
64  Form  CO, paragraphs 130 -131. 
65  Form CO, paragraph 132. 
66  Form CO, paragraph 131.  
15 ([5-10]%) and Britvic ([5-10]%) in the UK; PepsiCo  ([20-30]%) and Britvic 
([5-10]%) in Ireland; and PepsiCo  ([30-40]%) in Poland.  
(78) In addition , a key competitor of Costa's coffee shops explained that , other than 
limited purchases from Innocent  juices , which is a TCCC affiliate, it does not buy 
any other TCCC  products (including Coca Cola).67 This suggests  that TCCC 
branded NABs may not be necessary for Costa's competitors in order to 
successfully compete. Therefore, even if TCCC foreclosed its branded NABs to 
other coffee shops, this would likely have no impac t on competition on the market 
for informal restaurants including coffee shops.  
(79) Moreover , the Commission's inve stigation also showed that a  possible input 
foreclosing strategy would potentially be unprofitable as Costa 's coffee shops 
account  for only a lim ited portion of TCCC total sales of NABs. Therefore, any 
losses incurred to TCCC by foreclosing NABs to Costa’s competitors would not 
be compensated by increased turnover at Costa’s.  
(80) Finally, in the course of the market investigation, n o substantiated con cerns were 
raised by market parti cipants as to the impact of the transaction on their 
businesses or on the market .68 
(81) In light of the above and the evidence available to the Commission and in view of 
the outcome of the market investigation, it appears unlikely that the Parties would 
have the ability and/or incentive  to engage in  an input  foreclosure strategy after 
the Tra nsaction.  
No customer foreclosure effects  
(82) The Notifying P arty explains that Costa would have neither the ability nor the 
incentive to foreclose TCCC's competitors in the upstream market for the supply 
of NABs. Although Costa is the largest branded coffee shop chain operator in the 
UK, Costa is a relatively minor distributio n channel for suppliers of NABs.69  
(83) The Notifying P arty also submits  that any such attempt to foreclose would not 
materially affect the upstream competitors' business, whereas it could ne gatively 
affect Costa , since  for the success of its own business it has an interest to choose 
its NAB s’ offering on the basis of their appeal to customers, regardless of their 
origin.70  
(84) The market investigation provided broad support to the Parties' argume nts. 
Although Costa is the largest branded coffee shop chain operator in the UK, with 
[2,250 – 2,500]  stores , including franchise shops (and [30-40]% market share), 
followed by Starbucks, [750-1,000]  shops ([10-20]%) and Caffè Nero, [250-500] 
shops  ([5-10]%), Costa still represents a minor distributio n channel for suppliers 
                                                 
67  See replies to Q3.1 of the Questionnaire to competitors.  
68  See replies to Q28 -Q30 of the Questionnaire to competitors and replies to Q23 -Q25 of the 
Questionnaire to competi tors.  
69  Form CO, paragraph 134-135. 
70  Form CO, paragraph 137.  
16 of NABs.71 This suggests that , should TCCC decide to foreclose its competitors 
from Costa, TCCC's competitors will retain access to the vast majority of the 
downstream market.  
(85) Moreover, in the course of the market investigation, n o substantiated concerns 
were raised by market partipants as to the impact of the transaction on their 
businesses or on the market .72  
(86) In light of the above and the evidence available to the Commission and in view  of 
the outcome of the market investigation, it appears unlikely that the Parties would 
have the ability and/or incentive  to engage in  a customer foreclosure strategy after 
the Transaction.  
5.4. Assessment of conglomerate non -coordinated effects  
(87) The Transactio n leads to conglomerate links between :  
(a) TCCC's NABs (and Coca -Cola products specifically ) and Costa’s PtS 
products which are sold to customers for on -premise /out-of-home  
consumption ,  
(b) TCCC's NABs (and Coca -Cola products specifically ) and Costa ’s Tassimo  
discs and R &G products which are sold to retailers for off -premise /in-
home  consumption , and  
(c) TCCC's cold drinks vending services  (including  Coca -Cola  products  
specifically ) and Costa ’s Express machines  which are sold to customers 
who have vending machines  on their premises, such as large supermarkets, 
hotel chains, restaurants and large corporate organizations.73 
(88) The Commission’s assessment of conglomerate non -coordinated effects therefore 
focusses on:   
(a) the potential leveraging of TCCC’s position in NABs/Co ca-Cola for on 
premise /out-of-home  consumption in the UK and Ireland to foreclose 
Costa’s on-premise/ out-of-home coffee competitors in the same 
countries ;74 
                                                 
71  In this regard, t he Notifying  Party submits that in any case the off -premises sales of NABs are almost 
10 times as high as all on -premises sales channels together in the UK.  
72  See replies  to Q28 -Q30 of the Questionnaire to competitors and replies to Q23 -Q25 of the 
Questionnaire to competitors.  
73  See reply to Request for Information of 27 November 2018.  
74  In relation to a possible leveraging from Costa to TCCC, Costa does not seem to have  the ability to 
leverage its position in PtS for lack of market power as illustrated by its low market shares as set out in 
Table 2. 
17 (b) the potential leveraging of TCCC ’s position in NABs/Coca -Cola off 
premise/retail in the UK and Ireland to foreclose in-home coffe e 
competitors in the same countries ;75 and 
(c) the potential leveraging of TCCC ’s position in cold drinks vending 
services /Coca -Cola in the UK , Ireland and Poland to foreclose competitors 
in vending services (vend ing machines ) in the same countries .76  
Leveraging of TCCC’s position in NABs/Coca -Cola on premise s (out-of-
home)  in the UK and Ireland to foreclose out-of-home coffe e competitors in 
the same countries  
(89) The Notifying P arty submits that TCCC does not have the ability to bundle or tie 
or otherwise condition its sale of Coca -Cola products in the on -premise /out-of-
home  sales channel on the purchase of Costa's products, as customers, if they 
purchase both, purchase NABs and coffee products separately.77  
(90) The Notifying P arty further argues that both businesses (TCCC’s and Costa’s) are 
operated by independent companies : the sale of TCCCs products is carried out 
through […] bottlers and a bundling strategy could jeopardise their NAB sales.78  
(91) In addition, the N otifying Party submits that many large TCCC on -premises 
customers (e.g. fast food chains) have a clear preference for unbranded coffee and 
have sufficient bargaining power to resist any bundling strategy.79   
(92) The Notifying P arty also submits that TCCC does not have the incentive to 
engage in a bundling or tying strategy, as the turnover that can be achieved 
through the sales of PtS products  is far inferior compared to the significance of 
the TCCC NAB business.80    
(93) In any event,  the N otifying Party is of the view  that such a bundling strategy 
would not have an effect on the market.81  
(94) The market investigation provided broad support to the Notifying Party's  
arguments. While acknowledging that TCCC holds a strong market position in 
NABs  with brands  that are considered to be particularly important , the maj ority of 
customers who responded to  the Commission's market investigation  indicated that 
NABs and coffee products , such as C osta’s PtS,  are generally purchased 
separately by on -premises/out -of-home customers and are typically not part of the 
                                                 
75  In relation to a possible lever aging from Costa to TCCC, Costa does not seem to have the ability to 
leverage its position in R&G and Tassimo discs for lack of market power as illustrated by its low 
market shares as set out in Table 2. 
76 In relation to a possible leveraging from Costa to TCCC, Costa does not seem to have the ability to 
leverage its position in vending services (Costa Express) for lack of market power as illustrated by its 
low market shares as set out in Table 2. 
77  Form CO, paragraph 140. 
78  Form CO, paragraph 140. 
79  Form CO, paragraph 140(c) . 
80  Form CO, paragraph 142. 
81  Form CO, paragraph 143. 
18 same buying decision .82 To this end one customer noted  that "For hot coffee then 
there is no cross over of decision making and the decision is entirely separate 
from NAB ".83 
(95) When asked ho w customers would react to a hypothical tie/bundle of TCCC's 
NABs with Costa's PtS products , some customers answered that they would not 
accept such link between the products/purchasing decisions, that such strategy 
would even be counter productive and  that it would have very limited effects .84 
To this end, one customer observed  that "As of today the two markets are 
considered not linked and remain separate, maybe we will not see any relevant 
effect in these markets ".85 
(96) More generally, TCCC/Costa ’s customers raised no substantiated concerns as to 
the impact of the transaction on the ir businesses  or on the market.86  
(97) In light of the above and the evidence available to the Commission and in view of 
the outcome of the market investigation, it appears unlikely that the Transaction 
would significantly impede effective competition in the market for the 
manufacture and sale of coffee and other ingredients in the out-of-home channel  
in the UK and Ireland as a result of conglomerate non -coordinated effects 
deriving from the leveraging of TCCC ’s position in NABs/Coca -Cola in the on-
premises /out-of-home  channel  in the same countr ies.  
Leveraging of TCCC’s position in NABs/Coca -Cola in the off-premise/retail  
channel  in the UK and Ireland to foreclose in-home coffe e competitors in the 
same countries  
(98) The Notifying P arty submits that TCCC does not have the ability to bundle or tie 
or otherwise condition its sale of Coca -Cola products on the purchase of Costa's 
products, as  off-premises /retail  customers, such as supermarkets, purchase NABs 
and coffee products separately, in the context of separate purchasing decisions.87 
(99) The Notifying P arty adds that many of the Parties' competitors are also in a 
position to offer such bundles, either through their existing product portfolios or 
through teaming up, if they wanted to, and that therefore competition can also 
take place at the level of the bundle.88 
(100)  The N otifying Party argues that off -premises customers are large, with significant 
bargaining power and could counter any bundling strategy by TCCC.89  
                                                 
82  See replies to Q23 of the Questionnaire to customers.  
83  See replies to Q23.1 of the Questionnaire to customers.  
84  See replies to Q29 of the Questionnaire to customers.  
85  See replies to Q29.2 of the Questionnaire to customers.  
86  See replies to Q28 -Q30  of the Questionnaire to customers.  
87  Form CO, paragraph 144 (c) . 
88  Form CO, paragraph 144 (a) . 
89  Form CO, paragraph 144(b) . 
19 (101)  The Notifying P arty also reasons that TCCC does not have an incentive to pursue 
a commercially h azardous strategy in the off -premises channel, as it represents a 
critically important sales channel, […] times larger than the on -premises 
channel.90   
(102)  The Notifying P arty is of the view  that, in any event,  such a bundling strategy 
would not have an effect  on the market.91  
(103)  The market investigation provided broad support to the Parties' arguments. While 
acknowledging that TCCC holds a strong market position in NABs  with brands 
that are considered to be particularly important , the ma jority of customers who 
answered the Commission's questionnaire indicated that NABs and coffee 
products are generally purchased separately and are typically not part of the same 
buying decision .92 To this end one leading retail chain noted  that "we purchase 
NAB and hot drinks separa tely from each  other ".93 
(104)  When asked how customers would react to a hypothical tie/bundle of TCCC's 
NABs with Costa's coffee, some customers answered that such strategy would 
have  very limited effects.94 To this end, one leading retail chain noted that "There  
would be no or very few impacts ".95 
(105)  More generally, TCCC/Costa ’s customers raised no substantiated concerns as to 
the impact of the transaction on the ir businesses  or on the market.96  
(106)  In light of the above and the evidence available to the Commission and in view of 
the outcome of the market investigation, it appears unlikely that the Transaction 
would significantly impede effective competition in the market(s) for the 
manufacture and sa le of R&G  coffee and Tassimo discs in the in -home channel in 
the UK  and Ireland as a result of conglomerate non -coordinated effects deriving 
from the leveraging of TCCC ’s position in NABs/Coca -Cola in the off premise 
channel in the same countries . 
Leveragi ng of TCCC’s position in cold drinks vending services /Coca -Cola  or 
supplies of NABs/Coca -Cola  in the UK, Ireland and Poland to foreclose 
competitors in vending services (vending machines) in the same countries   
(107)  The Notifying P arty argues that TCCC would not have the ability to bundle or tie 
Costa’s vending machines  (the Costa Express ) with its own vending machines or 
more in general with its supplies of NABs/Coca -Cola , for the following reasons:  
                                                 
90  Form CO, paragraph 145(a) . 
91  Form CO, paragraph 146.  
92  See replies to Q23 of the Questionnaire to customers.  
93  See replies to Q30 of the Questionnaire to customers.  
94  See replies to Q29 of the Questionnaire to customers.  
95  See replies to Q29.2 of the Questionnaire to customers.  
96  See replies to Q28 -Q30 of the Questionnaire to customers.  
20 (108)  First, the Notifying P arty explains that customers usually take purchasing 
decisions concerning vending machines for NAB and vending machines  for 
coffee separately.97  
(109)  Second, the Notifying P arty notes the presence of a large number of competitors 
(e.g. PepsiCo, Britvic, Nespresso, Dolce Gusto, Starbucks, Lavazza a nd others) 
which would not have any capacity or other constraints preventing them from 
undermining any hypothetical bundling strategy, whether alone or in 
combination.98 
(110)  Third, TCCC already operates vending machines for coffee, Chaqwa. Therefore, 
the Costa Express vending machines are not a new addition to TCCC's portfolio 
of products.99  
(111)  Fourth, the N otifying Party argues that the practical ability of TCCC to 
implement any bundling/tying strategy for Costa Express and chilled NAB 
vending machines  is limited,  as it would require coordination across multiple 
commercially and operationally independent entities.100  
(112)  The market investigation provided broad support to the Notifying Party's  
arguments. First, the results of the Commission's market investigation show that 
in all the countries where Chaq wa is present, namely Germany, Belgium, 
Norway, Sweden and Iceland, the number of customers that have on their 
premises both TCCC chille d NAB vending machines and Chaqw a machines are 
very limited.101  
(113)  As a result of this, Chaqwa's share of supply is less than [0-5]% in Germany , and 
is similarly low in the other countries where it is present.102 This suggests that (1) 
TCCC has not been successfull to leverage any potential strength in NABs to 
increase thei r Chaqwa's share , and (2) TCCC would possibly not have the ability 
to do so with Costa Express. Any hypothetical bundling strategy of Costa Express 
and TCCC 's cold drinks vending services/Coca -Cola is therefore unlikely to result 
in foreclosure of TCCC's o r Costa's rivals.  
(114)  More  generally, TCCC/Costa ’s customers raised no substantiated concerns as to 
the impact of the transaction on the ir businesses or on the market.103  
(115)  In light of the above and the evidence available to the Commission and in view of 
the outcome of the market investigation, it appears unlikely that the Transaction 
would significantly impede effective competition in vending services (vending 
machines) in the UK, Ireland and Poland as a result of conglomerate non -
                                                 
97  See response to Request for Information of 2 3 November 2018 , paragraph 3 . 
98  See response to Request for Information of 2 3 November 2018 , paragraph 2 . 
99  See response to Request for Information of 2 3 November 2018 , paragraph 5 . 
100  See response to Request for Information o f 23 November 2018 , paragraph 3(b) . 
101  See response to Request for Information of 27 November 2018.  
102  Form CO, paragraph 120. 
103  See replies to Q28 -Q30  of the Questionnaire to customers.  
21 coordinated effects deriving from the leveraging of TCCC ’s position in cold 
drinks vending services/Coca -Cola in the same countries . 
6. CONCLUSION  
(116)  For the above reasons, the European Commission has dec ided 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 Com mission  
(Signed)  
 
Margrethe VESTAGER  
Member of the Commission