The European Commission has launched an investigation into the planned merger of D.E. Master Blenders 1753 and American food concern Mondelez International's coffee branch, which would create a new coffee giant in the name of Jacobs Douwe Egberts.
Together larger than Nestlé's coffee branch
The marriage between D.E. Master Blenders and Mondelez was announced in May 2014. The former, owned by German investor Joh.A. Benckiser and known for Senseo and Douwe Egberts is the current number 3 in the coffee market. It managed a 2.5 billion euro turnover in 2013, which is a 5.4 % market share.
Mondelez, with coffee brands like Jacobs, Carte Noir and Tassimo, is the world's number two at this point, with a 10.9 % market share and a 2.9 billion euro turnover. It is the former coffee and snack branch of American Kraft Foods, but split off in 2012. It not only commercializes coffee, but also chocolate (Côte d'Or, Milka) and cookies (LU, TUC).
Combined, the new combination (Jacobs Douwe Egberts) would push market leader Nestlé (Nescafé, Nespresso) off its coffee perch. The Swiss concern currently has a 22.7 % market share.
"Decrease in competition, increase in prices"
The European Commission questions the proposed merger: "The Commission has concerns that the proposed transaction may reduce competition for various coffee formats in Austria, France, Denmark and Latvia and for single-serve systems in multiple member states."
Europe also fears price hikes: "This concentration of key local brands in the hands of one company increases the likelihood of price increases for retailers and ultimately for consumers."
According to Bloomberg, both companies did not present sufficient information to the Commission to please the anti-trust authorities. That means it will now investigate the situation in depth, with the results revealed on 6 May at the latest.
Controlling interest for D.E. Master Blenders
Mondelez has told Bloomberg it will fully cooperate with the investigation and has expressed full faith in the merger's completion "sometime in 2015". If that is the case, the American will get 5 billion dollars and a 49 % stake in the new company.
D.E. Master Blenders, which split off American food concern Sara Lee before JAB bought it off the Amsterdam stock exchange for 7.5 billion euro, will get a controlling interest of 51 % and the majority in the board. Jacobs Douwe Egberts's main office will be in the Netherlands.