CELEX: 31992M0289
Language: en
Date: 1992-12-21 00:00:00
Title: COMMISSION DECISION of 21.12.1992 declaring a concentration to be compatible with the common market (Case No IV/M.289 - PEPSICO / KAS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31992M0289

COMMISSION DECISION of 21.12.1992 declaring a concentration to be compatible with the common market (Case No IV/M.289 - PEPSICO / KAS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 008 , 13/01/1993 P. 0000

 COMMISSION DECISION of 21.12.1992 declaring a concentration to  be compatible with the common market (Case No IV/M.289 -  PEPSICO / KAS) according to Council Regulation (EEC) No 4064/89   (Only the English text is authentic)  The paper version of the decision is available through the  sales offices of the Office of Official Publications of the  European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying party Dear Sirs, Subject: <ind> Case No. IV/M.289 - PepsiCo/KAS  <ind>  <ind> Notification of 25.11.1992 pursuant to Article 4  of Council Regulation No. 4064/89  1. <ind> The agreement   <ind> On 25 November the Commission was notified of an  agreement whereby PepsiCo Inc. (PepsiCo), through its Spanish  subsidiary Pepsi-Cola de España (PdE), intends to acquire 100%  of the shares of KAS S.A. (Kas) and 70% of the shares of Knorr- Elorza S.A. (KESA).  100% of the shares of KAS and 70% of the  shares of KESA are owned by the Corporacion de Alimentacion y  Bebidas S.A. (CAB), a subsidiary of Banco Bilbao-Vizcaya S.A.  (BBV).  2. <ind> The parties  2.1 <ind> PepsiCo is a US multinational corporation whose  international business is soft drinks, snack foods and  restaurants.  In Spain, PepsiCo's soft drinks operations are  conducted through PdE, a wholly owned subsidiary of Pepsi Cola  International, and through KESA, a licensed independent bottler  and distributor of carbonated soft drinks and other beverages  in which PepsiCo  currently holds a 30% interest.  PepsiCo  intends to acquire the remaining 70% of KESA shares pursuant to  the proposed transaction.  PepsiCo also distributes its soft  drink products in Spain on a more limited basis through several  other independent bottlers.  2.2 <ind> KAS and KESA together comprise the Soft Drinks  Division of the Corporacion de Alimentacion y Bebidas S.A.  (Food and Drinks Corporation).  KAS is a manufacturer of  carbonated soft drink concentrates and non-carbonated fruit  juice products which are marketed in Spain exclusively through  KESA.  KESA is a bottler and distributor of carbonated soft  drinks.  KAS soft drinks and juices are marketed exclusively in  Spain and Portugal.  KESA's operations are limited to Spain.  2.3 <ind> CAB is a wholly owned subsidiary of BBV, whose  principal assets include shareholdings in KESA, KAS and Bodegas  y Bebidas.  CAB was formed in 1989 to hold the equity of KAS  and KESA, which previously had formed a single undertaking.  2.4 <ind> Banco  Bilbao-Vizcaya is one of the largest publicly  held banks in Spain.  3. <ind> Community dimension  3.1 <ind> The concentration has a Community dimension.   PepsiCo's total worldwide turnover in 1991 was 15,826 billion  ECU and the combined aggregate worldwide turnover of the  parties to the concentration (PepsiCo, KAS and KESA) was  approximately 16,423 billion ECU.  3.2 <ind> PepsiCo's aggregate Community-wide turnover in 1991  was 1.1 billion ECU.  The Community-wide turnover of KAS and  KESA in 1991 was 121 million ECU and 374 million ECU,  respectively, for an aggregate total of 495 million ECU.  While  each of KAS and KESA achieved more than two-thirds of its  turnover in Spain, PepsiCo did not achieve more than two-thirds  of its Community-wide turnover in Spain, and the "two-thirds"  exclusion contained in Article 1 of the Merger Regulation  therefore does not apply.  Under Article 5(2) of Council  Regulation (EEC) 4064/89, PepsiCo's acquisition of KAS and KESA  are treated as one and the same concentration.  4. <ind> Concentration   <ind> The notified operation gives rise to a concentration  within the meaning of the Merger Regulation.  PepsiCo will be  acquiring control of KAS and KESA through the acquisition of  100% of the shares of KAS and the remaining 70% of the shares  of KESA that it does not currently hold.  As a result of these  acquisitions, PepsiCo will acquire control of both KAS and  KESA.  5. <ind> Compatibility with the common market  5.1 <ind> Relevant product markets  5.1.1 <ind> KAS and KESA are engaged in the manufacture,  distribution and sale of soft drink products in Spain and  Portugal.  Their specific soft drink product offerings comprise  carbonated soft  drinks and fruit juices.  PepsiCo's carbonated  soft drink products are marketed in Spain and Portugal  primarily under the "Pepsi-Cola" and "7 Up" brand names.  KESA  acts as PepsiCo's primary bottler and distributor in Spain.  In  Portugal, KAS and PepsiCo each market their carbonated soft  drink products through separate bottler/distributors.  5.1.2 <ind> Carbonated soft drinks comprise the only business  where both parties are active in Spain and Portugal.  Even if:     <ind> - <ind> carbonated soft drinks are to a large extent  comparable in terms of price;   <ind> - <ind> all types and flavours of carbonated soft drinks  are sold to consumers through the same types of distribution  outlets, compete for shelf space at the retail level, and are  sometimes positioned to compete as a product group;   <ind> - <ind> there is a certain degree of product- substitutability in the manufacture of different types and  flavours of carbonated soft drinks;   <ind> it seems to be more appropriate to distinguish the  product market by reference to specific flavour groupings  (colas, lemon-lime, orange, tonics, bitters).  In fact, each  carbonated soft drink is usually perceived by customers as  being different from other products.  People who are used to  drinking cola drinks do not usually drink lemon-lime drinks and  vice versa.  In addition, some drinks are mainly purchased by  one class of customer (eg orange flavoured drinks are mainly  sold to children who usually do not drink cola products.  The  same is true for tonics and bitters.).  5.1.3 <ind> Nevertheless, the precise delimitation of the  relevant product market need not be resolved in the present  case because even on the basis of a narrower set of market  definitions, the operation does not raise serious doubts as to  its compatibility with the common market.  5.2 <ind> It could be argued that the bottling and distribution  businesses involved in the present case are to be qualified as  another affected market.  However, even if carbonated soft  drinks bottling and distribution are viewed as a distinct  economic market, the proposed transaction still could result in  no competitive effects.  In fact, PepsiCo has no bottling  operations in Spain, the only area in which KESA has a bottling  presence.  More significantly, however, KESA already bottles  exclusively for PepsiCo and KAS and so the transaction can have  no structural effects in Spain.  5.3 <ind> Geographic reference market  5.3.1 <ind> KAS soft drink products are marketed exclusively in  Spain and Portugal.  Competitive overlap between KAS and  PepsiCo carbonated soft drink products is correspondingly  limited to these two countries.  5.3.2 <ind> It can be left open, however, whether the relevant  geographic markets are Spain and Portugal or the Community as a  whole  since under either analysis, the proposed concentration  does not raise serious doubts as to its compatibility with the  common market.  6. <ind> Competition assessment  6.1 <ind> Direct product overlap between PepsiCo and KAS only  occurs in the carbonated soft drinks segment of the soft drinks  market.  In Spain, PepsiCo and KAS have a combined share of  13.2% of the carbonated soft drinks segment.  The concentration  will produce a combined PepsiCo/KAS share of 19.2% of the  Portuguese carbonated soft drink segment.  6.2 <ind> Further segmentation of the carbonated soft drink  segment by reference to specific product groups of flavourings  limits competitive overlap between the parties to the cola and  orange flavoured categories in Spain, and to cola and lemon- lime products in Portugal.  6.3 <ind> On these narrowly defined markets, the parties'  combined market shares are below 25% in the Community as a  whole and in Spain and Portugal in each of the cola and orange  flavoured segments.  6.3.1 <ind> As to the cola segment, the parties' shares in  these geographic areas are only 11.5% in the Community as a  whole, 11.7% in Spain, and 23.5% in Portugal.  Moreover, this  market is characterised by intense competition between PepsiCo,  Coca-Cola (the market leader) and other cola brands.  6.3.2 <ind> In the orange flavoured segment, the parties'  combined shares will be below 10% in the Community as a whole.   There is no product overlap in this segment in Portugal since  PepsiCo does not market any orange flavoured products in  Portugal.  In Spain, KAS sells 15.8% of the output in the  orange flavoured segment, whereas PepsiCo's share is  approximately 0.8%.  Like the cola market, the orange flavoured  market is highly competitive, with Coca-Cola again the market  leader by a considerable margin, followed by La Casera.  6.4 <ind> There is no competitive overlap in the lemon-lime  market in Spain since KAS does not offer a lemon-lime flavoured  product in Spain.  Both parties do offer a lemon-lime flavoured  product in Portugal.  Their combined share in Portugal is  significant (69%).  6.5 <ind> However, the transaction is not expected to create or  strengthen a dominant position in Portugal such that effective  competition will be significantly impeded therein.  KAS has  only a marginal presence in lemon-lime products in Portugal  (1%), and the transaction will produce only a slight increase  in PepsiCo's existing share of sales in that segment (68%).   Thus, the competitive conditions on the Portuguese lemon-lime  market are not expected to change as a result of the notified  operation.  Moreover, PepsiCo will also continue to face  substantial competition in the Portuguese lemon-lime segment  from its international competitive adversary, Coca-Cola.  6.6 <ind> Not only does Coca-Cola have a significant presence  in the lemon-lime market in Portugal (with a share in that  segment of  approximately 14%), but it is the firmly  established leader in carbonated soft drinks in Portugal as a  whole.  Coca-Cola is also the market leader by a wide margin in  various significant product segments, including colas and  certain fruit flavoured carbonated soft drinks.  Thus, Coca- Cola's presence is expected to ensure that competitive  conditions will continue to exist with respect to all  carbonated soft drinks, including the lemon-lime segment.  6.6.1 <ind> Pepsico's relatively high market share in the  lemon-lime market in Portugal substantially overstates the  competitive signficance of the notified acquisition.  In fact,  lemon-lime drinks are not totally exempt from competition from  alternative carbonated products available on the market;  moreover, taking into account the existence of a certain degree  of supply side substitutability, other carbonated soft drink  producers currently active in the Spanish and Portuguese area  could enter the lemon-lime market, in this way preventing  PepsiCo from impeding effective competition.   <ind> Thus, the proposed concentration will not create or  strengthen a dominant position in any affected markets in  Spain, Portugal or the Community as a whole.  7. <ind> Conclusion   <ind> For all of the foregoing reasons, the proposed  concentration does not raise serious doubts as to its  compatibility with the common market.   <ind> For the above reasons, the Commission has decided not to  oppose the notified operation and to declare it compatible with  the common market.  This decision is adopted in application of  Article 6(1)(b) of Council Regulation No. 4064/89.  For the Commission