Nestlé may have to sell several of its brands by October to get approval from Brazil’s Antitrust Authority for the purchase of confectionery company Garoto.
Sources close to the negotiations told Brazilian daily O Estado de Sao Paulo that Nestlé will have to divest chocolate brands such as Serenata de Amor, Chokito, Lollo and Sensação.
In view of the ban imposed on the sale of brands to a large competitor, Brazil’s second largest chocolate producer Lacta (part of the Mondelez group) will not be able to acquire these businesses.
The expectation is that the assets will be bought by smaller competitors such as Arcor and Hershey's. The buyer must be presented to Brazil's economic defence council, Conselho Administrativo de Defesa Econômica (CADE), and be approved by the board before the transaction can be completed.
Merger Process
The merger between Nestlé and Brazilian chocolate manufacturer Garoto was signed in 2002. Two years later, it was vetoed by CADE and suspended by the courts. Nestlé had to keep Garoto's assets separate and was prevented from fully incorporating the brand.
Last year, Nestlé approached CADE with a proposal to finally end the process. The board was of the opinion that the solutions presented by Nestlé addressed all the competition issues arising from the merger, and approved the agreement in October 2016, setting a one-year deadline for sale.
Nestlé currently has a 34% share of Brazil’s chocolate market, however, with the acquisition of Garoto its share would reach 58%, compared to Lacta’s 33%.
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Branislav Pekic. Click subscribe to sign up to ESM: The European Supermarket Magazine
