Case M.9827 - INTERNATIONAL FLAVORS & FRAGRANCES

EUROPEAN COMMISSION DG Competition

Case M.9827 - INTERNATIONAL FLAVORS &

FRAGRANCES / NUTRITION & BIOSCIENCES

Only the English text is available and authentic.

REGULATION (EC) No 139/2004

MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION

Date: 07/12/2020

In electronic form on the EUR-Lex website under

document number 32020M9827

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: [email protected].

EUROPEAN COMMISSION

Brussels, 07.12.2020

C(2020) 8915 final

PUBLIC VERSION

International Flavors and Fragrances Inc.

521 West 57th Street

New York City, NY 10019

United States of America

Subject: Case M.9827 - INTERNATIONAL FLAVORS & FRAGRANCES /

NUTRITION & BIOSCIENCES

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 30 October 2020, the European Commission received notification of a

concentration pursuant to Article 4 of Council Regulation (EC) 139/2004 (‘the

Merger Regulation’) which would result from a proposed transaction by which

International Flavors & Fragrances Inc (‘IFF’, USA) intends to acquire control,

within the meaning of Article 3(1)(b) of that Regulation, of the whole

Nutrition & Biosciences business (‘N&B’, USA) owned by DuPont de Nemours,

1 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between

undertakings, OJ L 24, 29.1.2004, p. 1. 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’).

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 Where possible the information omitted has been replaced by ranges of figures or a general description.

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Inc. (“DuPont”) by way of purchase of shares (‘the Transaction’).3 In this Decision,

IFF and N&B are referred to as ‘the Parties’. The undertaking that would result from

the Transaction is referred to as ‘the merged entity’.

1. THE PARTIES

(2) IFF (the United States) is a public company based in New York, listed on the New

York Stock Exchange, the Tel Aviv Stock Exchange and Euronext Paris. It is active

worldwide in the development, production and supply of flavours and fragrances

used in consumer goods industries, such as food and beverage, personal care, and

home care industries.

(3) N&B, headquartered in Delaware (the United States), is a business unit of DuPont. It

is active worldwide in the development, production and supply of food and

industrial ingredients and additives, including (i) natural and plant-based specialty

ingredients (e.g. proteins, emulsifiers, sweeteners), (ii) solutions for health and

bioscience applications (e.g. probiotics, fibres, cultures, enzymes, microbial control),

functional cellulosic polymers and seaweed derived excipients for pharma and

dietary supplements.

2. THE TRANSACTION

(4) The Transaction is to be achieved by means of the implementation of a separation

and distribution agreement and a merger agreement, both signed on 15 December

2019, by which IFF is to acquire 100% of the outstanding equity of a new company

(SpinCo) to which DuPont will transfer its N&B business, in the so-called Reverse

Morris Trust transaction.4 IFF will therefore acquire sole control of the N&B

business.

(5) The Transaction would henceforth result in a concentration within the meaning of

Article 3(1)(b) of the Merger Regulation.

3. UNION DIMENSION

(6) The Parties have a combined aggregate world-wide turnover of more than

EUR 5 000 million (IFF EUR 4 662 million; N&B EUR 5 667 million). The

aggregate Union-wide turnover of each of the Parties is more than EUR 250 million

(IFF EUR […]; N&B EUR […]) and neither of the Parties achieves more than two-

thirds of their aggregate Union-wide turnover within one and the same Member

State. Therefore, the notified concentration has a Union dimension within the

meaning of Article 1(3) of the Merger Regulation.

3 Publication in the Official Journal of the European Union No C 380, 11.11.2020, p. 8. 4 Reverse Morris Trust is a corporate transaction that includes a divisive reorganisation (spin-off or a

split-off) followed by an acquisitive reorganisation (merger) to allow a tax-free transfer of a

subsidiary under USA law.

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4. RELEVANT MARKETS

(7) The Parties’ activities overlap horizontally in the supply of cultures and plant-based

proteins. There are also a limited number of vertical links between the Parties’

activities in relation to locust bean gum, microcrystalline cellulose (MCC) and

emulsifiers. In addition, the Transaction entails the conglomerate integration of two

largely complementary product portfolios with significant individual market

positions involving, in particular, the supply by N&B of functional ingredients such

as soy-based proteins, locust bean gum, MCC, enzymes and probiotics for dietary

supplements.5

4.1. Cultures

(8) Cultures are living microorganisms, such as bacteria, yeast or mould used in food

and beverage manufacturing, animal and plant health, and animal feed. They provide

a beneficial impact when used in a production process or included in a final product.

Cultures ferment sugars and hence lower the pH value to protect the food, e.g., to

extend shelf life and inhibit specific contaminating flora. Food manufacturing

Cultures are used as bacterial starters or adjuncts and as protective Cultures in the

production process of a variety of products in the food and beverage industry -

including meat and dairy - to achieve greater production efficiency and specific

product characteristics (such as flavour, texture, consistency, colour, taste), and to

preserve perishable foods.

(9) The Parties’ activities only overlap in the manufacturing and supply of Dairy

Cultures and Cultures for Meat, as well as in a number of sub-segments. N&B also

has limited sales of Cultures for Plant-based food.

4.1.1. Relevant Product Markets

4.1.1.1. The Commission’s decisional practice

(10) The Commission has not previously defined a market for Cultures. In a previous

case, the Commission considered a market for dairy cultures in the area of ‘Cultures

for food production’, but ultimately left the exact market definition open.6

4.1.1.2. The Parties’ views

(11) The Parties submit that the product market definition with respect to Cultures can be

left open, as the Transaction does not give rise to competition concerns irrespective

of the exact market definition. In any event, the Parties argue that in any case no

distinction should be made between Cultures for Meat and Dairy Cultures. The

5 The Transaction gives rise to other de minimis horizontal overlaps and/or vertical links regarding the

following product categories: antioxidants, dietary fibres & prebiotics, cosmetic ingredients, essential

oils, functional system ingredients, sweeteners, food inclusions, flavours, colours, fragrances,

essential nutrients and phosphates. The Parties’ combined market shares in these areas are far below

20% and increments are very limited. As regards the vertical links, the supply market shares are also

far below 30%, and purchases represent less than 1% of total demand. Moreover, post-Transaction

there will remain several alternative sources of supply. It can therefore be reasonably excluded that

the Transaction may entail an impact on competition in the supply of these products. 6 Commission decision of 18 July 2005 in Case M.3845 – PAI/Chr. Hansen, paragraphs 10, 12 and 23.

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Parties add that no further distinctions should be defined for Dairy Cultures and

Cultures for Meat based, respectively, on type of culture or on type of end product.7

(12) More precisely, the Parties argue with respect to Dairy Cultures that a segmentation

between Cultures for Cheese and Fresh Dairy Cultures would not be appropriate.

First, the Parties claim that there is considerable supply-side substitutability since

both Cultures for Cheese and Fresh Dairy Cultures are typically produced on the

same production lines using the same equipment,. Second, the Parties argue that

while demand-side substitutability between different types of Dairy Cultures is

limited,8 all Dairy Cultures are interchangeable from a supply-side. According to the

Parties, with the exception of surface and ripening Cultures, the technology and

know-how used for the production of all types of Cultures are very similar and Dairy

Culture producers therefore generally offer all variations. The Parties further submit

that similar bacterial strains are regularly used for the different types of Dairy

Cultures.9

(13) The Parties further explain that if Dairy Cultures were to be further segmented,

a distinction could be made between acidifying Cultures and other Cultures such as

protective Cultures in Fresh Dairy Cultures and Cultures for Cheese, adjuncts in

cheese, surface, and ripening Cultures in cheese, or probiotic Cultures in Fresh Dairy

Cultures. Following such a segmentation, the Parties would only overlap in

acidifying Cultures.10

(14) Finally, the Parties submit that in any case and in view of the very small market

share increment the exact market definition with respect to Dairy Cultures can be left

open.11

(15) With respect to Cultures for Meat, the Parties submit that the definition of the

relevant product market can also be left open. According to the Parties, a possible

distinction could be drawn between acidifying Cultures, surface Cultures and

protective Cultures. However, the Parties argue that while demand-side

substitutability between these different types of Cultures for Meat is limited, the

Parties state that from a supply-side perspective, they are largely interchangeable.

The technology and know-how used for production of all types of Cultures are

largely similar. While not all suppliers of Cultures for Meat offer all three types of

Cultures for Meat, the Parties argue that they could easily expand their portfolio.12

(16) If Cultures for Meat were to be segmented by type of end product, according to the

Parties, a distinction between Cultures for Dried and Semi-Dried Sausages

(potentially further sub-segmented into Cultures for Northern European

ripening-style, Cultures for Southern European ripening-style and Cultures for US

ripening-style), Cultures for Dried Cured Ham, Cultures for Cooked Sausages,

7 Form CO. para 6.53. 8 Form CO. paras 6.38-6.39. 9 Form CO para. 6.41. 10 Form CO paras. 6.41-6.42. 11 Form CO para 6.42. 12 Form CO paras 6.43-6.46.

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Cultures for Cooked Ham and other Cultures, in particular for Parboiled / Fresh

Sausages could be considered.13

(17) The Parties acknowledge that when considering Cultures for Meat by type of end

product, demand-side substitutability would be limited, because different end

product production processes require different types of Cultures for Meat. However,

according to the Parties, supply-side substitutability is significant, as the technology

and know-how used for the production of all types of Cultures for Meat are largely

similar (with the exception of surface cultures which require different production

assets). While not all suppliers of Cultures for Meat offer Cultures for all end

products, the Parties argue that they could easily expand their portfolio.14

(18) Finally, the Parties submit that in any case and in view of the moderate combined

market shares of the Parties in such sub-segments, the exact market definition with

respect to Cultures for Meat can be left open.15

4.1.1.3. The Commission’s assessment

(19) The outcome of the market investigation provides strong indications that the market

for the manufacture and supply of Cultures should be segmented and that in

particular the manufacture and supply of Cultures for Meat, Dairy Cultures and

Cultures for Plant-based food each constitute a distinct product market.

(20) The majority of respondents to the market investigation consider that Cultures for

Meat, Dairy Cultures and Cultures for Plant-based food constitute three separate

markets due to their limited substitutability in terms of properties, modes of action,

applications and/or price. While the majority of customers answered with ‘I do not

know’, the majority of customers expressing their opinion indicated that a

consideration of three separate markets is appropriate.16 A majority of competitors

also considers this distinction appropriate.17

(21) While one customer indicated that ‘[c]ulture development is a competence that can

be applied to several areas of expertise’,18 another customer explained that ‘these

are really 3 different markets (dosage of application, technology, people…)’.19

Another customer explained that ‘[t]he respective cultures show other functionalities

and other requirements depending on the application’.20 A further customer

mentioned that ‘the cultures are mainly distinguished by their different application

technology and the need for advice. In part there are also significant differences in

regulatory/qualitative requirements […]’.21 While one competitor stated that

13 Form CO para 6.47. 14 Form CO para 6.48. 15 Form CO para. 6.52. 16 Q1 – Questionnaire to customers, replies to question C.A.1. 17 Q2a and Q2b – Questionnaires to competitors, replies to question C.A.1. 18 Q1 – Questionnaire to customers, reply to question C.A.1.1. 19 Q1 – Questionnaire to customers, reply to question C.A.1.1. 20 Q1 – Questionnaire to customers, reply to question C.A.1.1. 21 Q1 – Questionnaire to customers, reply to question C.A.1.1. Courtesy translation. The original

German text reads: ‘Die Kulturen unterscheiden sich hauptsächlich durch ihre unterschiedliche

Anwendungstechnik und den Beratungsbedarf. Teilweise gibt es auch große Unterschiede bei

regulatorischen/qualitativen Anforderungen‘.

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‘[s]uppliers of cultures can in principle produce both meat and dairy cultures even

though these two cultures are not interchangeable as regards their use in meat and

dairy products’,22 it also indicated that in its view, ‘cultures for meat, dairy cultures

and cultures for plant-based food constitute three different product segments. While

the culture-base may be related with ability to leverage scale and know-how across

the product segments, the underlying properties and modes of action of the cultures

in the various applications differ’.23

(22) Further, while a majority of customers answered with ‘I do not know’, a majority of

customers expressing their opinion do not consider suppliers of Cultures to be able

to switch production across Cultures for Meat, Dairy Cultures or Cultures for Plant-

based food, within a short period of time and without incurring significant additional

costs.24 While one customer explained that ‘[s]witching is possible in case required

know-how is available. Process/fermenters are similar’,25 other customers disagree.

One customer cautioned and explained that it is ‘[p]ossible, however, with limits of

sufficient cleaning. Also particular attention to labels respect such as vegan, halal,

kosher etc and image/reputations risks if manufactured within one plant’.26 Another

customer stated that ‘in part there are large differences in qualitative requirements

[…] which have a significant impact on the production’.27

(23) Competitors’ responses to this question are conflicting, with one competitor stating

that ‘[i]n general, we consider there to be a high degree of supply-side substitution

between said segments, mainly due to the above-mentioned ability to leverage scale

and know-how across the various product segments by key suppliers in the

market’.28 However, another competitor stated that the ‘[c]ost of requalification is

considered to be high’.29

(24) While responses to the market investigation are not conclusive, they suggest a lack

of demand-side substitutability and at best limited supply-side substitutability. It

therefore appears that a distinction between separate markets for the manufacture

and supply of Cultures for Meat, Dairy Cultures and Cultures for Plant-based food

could be appropriate.

(25) However, the outcome of the market investigation is less conclusive with respect to

whether a further distinction of the markets for the manufacture and supply of

Cultures for Meat and Dairy Cultures (where the Parties overlap) either by type of

culture or by end product would be appropriate.

(26) With respect to Cultures for Meat, while the majority of customers answered ‘I do

not know’, the majority of customers expressing their opinion submit that the

technology and know-how used in the production of acidifying, surface and

22 Minutes of a call with a competitor on 8 September 2020. 23 Q2a – Questionnaire to competitors, reply to question C.A.1.1. 24 Q1 – Questionnaire to customers, replies to question C.A.2. 25 Q1 – Questionnaire to customers, reply to question C.A.2.1. 26 Q1 – Questionnaire to customers, reply to question C.A.2.1. 27 Q1 – Questionnaire to customers, reply to question C.A.2.1. Courtesy translation. The original

German text reads: ‘Teilweise gibt es große Unterschiede bei qualitativen Anforderungen […] die

sich erheblich auf die Produktion auswirken‘. 28 Q2a – Questionnaire to competitors, reply to question C.A.2.1. 29 Q2b – Questionnaire to competitors, reply to question C.A.2.1.

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protective Cultures for Meat are similar.30 A customer explained this by referring to

the ‘[s]ame type of fermenters and know-how’.31 Another customer indicated that ‘all

are produce[d] by fermentation, the way[s] to c[h]aracterize them are quite

similar’.32 While competitors’ responses to this question are overall inconclusive,

one competitor stated that ‘[b]roadly speaking, the culture-base and related

know-how within the mentioned sub-segments of meat cultures are based on the

same technology platform’.33

(27) To the question whether a supplier of a certain sub-type of Cultures for Meat

(acidifying, surface or protective Cultures) can switch production to another sub-type

in the short term and without incurring significant additional costs, responses from

customers and competitors are inconclusive. While a customer explained that it

thinks ‘a [switch] is difficult’,34 a competitor indicated that the sub-types of Cultures

for Meat ‘are based on the same production and technology platforms’.35

(28) As regards the question whether a segmentation of the market for the manufacture

and supply of Cultures for Meat by end-product would be appropriate, responses

from customers and competitors are inconclusive. In response to the question of

whether a supplier of Cultures for Meat can switch production across end

applications, e.g. Dried and Semi-Dried Sausages, Dried Cured Ham or Cooked

Meat, without incurring significant additional costs, a customer explained that ‘to

find a new culture you have a long product development with expensive laboratory

costs’.36 A competitor however stated that such Cultures for specific end-products

‘are based on the same production and technology platforms’ and that in its view,

‘cultures for meat constitute an overall market segment’.37

(29) Therefore, while it cannot be excluded that a further distinction of the market for the

manufacture and supply of Cultures for Meat may be appropriate, the outcome of the

market investigation does not conclusively support such a further distinction.

(30) With respect to Dairy Cultures, while the majority of customers answered ‘I do not

know’, the majority of customers expressing their opinion submit that the technology

and know-how used in the production of Dairy Culture sub-types such as acidifying,

protective for fresh dairy, ripening for cheese and probiotic Cultures for fresh dairy

are similar.38 While one customer stated that there are ‘[d]ifferent consumer needs

and different manufacturing process[es]’,39 another customer explained that such

sub-types utilise the ‘[s]ame basic processes, obviously with specific requirements

for each area’ and that the ability to switch from Dairy Culture sub-types ‘depends

on generally available knowledge within company and available equipment’.40

Another customer also submitted a nuanced answer, stating that the sub-types of

30 Q1 – Questionnaire to customers, replies to question C.A.3. 31 Q1 – Questionnaire to customers, reply to question C.A.3.1. 32 Q1 – Questionnaire to customers, reply to question C.A.3.1. 33 Q2a – Questionnaire to competitors, reply to question C.A.3.1. 34 Q1 – Questionnaire to customers, reply to question C.A.4.1. 35 Q2a – Questionnaire to competitors, reply to question C.A.4.1. 36 Q1 – Questionnaire to customers, reply to question C.A.5.1. 37 Q2a – Questionnaire to competitors, reply to question C.A.5.1. and C.A.5.2. 38 Q1 – Questionnaire to customers, replies to question C.A.6. 39 Q1 – Questionnaire to customers, reply to question C.A.6.1. 40 Q1 – Questionnaire to customers, reply to question C.A.6.1.

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Dairy Cultures utilise the ‘[s]ame type of fermenters, but for other fermentation

process[es] and nutrients, specific knowledge [is] necessary’.41 Competitors’

responses to this question are overall inconclusive, yet one competitor stated that

‘[b]roadly speaking, the culture-base and related know-how within the mentioned

sub-segments of dairy cultures are based on the same technology platform’42 and

another remarked that it ‘[s]uppose[s] an unique technology and know-how is

used’.43

(31) When asked whether a supplier of a certain sub-type of Dairy Cultures (acidifying,

protective for fresh dairy, ripening for cheese, probiotic Cultures for fresh dairy) can

switch production to another sub-type in the short term and without incurring

significant additional costs, customers and competitors provide inconclusive

responses. One customer stated there are ‘[d]ifferent manufacturing process[es]’.44

Another customer stated that there are ‘specific requirements for each area’ and

further that in any case it is important for the manufacturer to pay ‘particular

attention to labels […] such as vegan, halal, kosher etc and image/reputations risks

if manufactured within one plant’.45 A competitor however pointed out that all these

sub-segments of Dairy Cultures ‘are based on the same technology platform’ and

that ‘[t]his is confirmed by the fact that all key suppliers in the industry have

offerings within all of these sub-types of cultures’.46

(32) Therefore, whereas it cannot be excluded that a more refined product market, leading

to a further segmentation of the market for the manufacture and supply of Dairy

Cultures, may be appropriate, the outcome of the market investigation does not

conclusively support such a further segmentation.

(33) In conclusion, the Commission considers that, for the purposes of this Decision, it is

appropriate to assess separately the markets for Dairy Cultures, Cultures for Meat

and Cultures for Plant-based food. In any event, the exact scope of product market

definition with respect to Cultures can be left open, since the Transaction would not

raise serious doubts as to its compatibility with the internal market under any

plausible alternative product market definition.

4.1.2. Relevant Geographic Market

(34) The Commission has not previously defined a geographic market for Cultures.

(35) The Parties submit that the market for Cultures should be defined as worldwide in

scope, because suppliers of Cultures have manufacturing plants in all regions of the

world and therefore can and do serve their customers on a worldwide basis.47

(36) The outcome of the market investigation on the question whether an EEA or

worldwide geographic market definition for Cultures is appropriate, is inconclusive.

41 Q1 – Questionnaire to customers, reply to question C.A.6.1. 42 Q2a – Questionnaire to competitors, reply to question C.A.6.1. 43 Q2b – Questionnaire to competitors, reply to question C.A.6.1. 44 Q1 – Questionnaire to customers, reply to question C.A.7.1. 45 Q1 – Questionnaire to customers, reply to question C.A.7.1. 46 Q2b – Questionnaire to competitors, reply to question C.A.7.1. 47 Form CO, para. 6.57.

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(37) Whereas the majority of customers answered ‘I do not know’, the majority of

customers expressing their opinion consider the conditions of competition (such as

same suppliers, quality and price) to be generally the same in the EEA with respect

to Dairy Cultures, Cultures for Meat and Cultures for Plant-based food.48 While one

customer states that ‘[w]ithin the area of cultures […] the global players are limited

an[d] thereby present in the entire world with more or less equal conditions’,49

another customer submits that from its point of view with respect to dairy cultures,

‘the conditions for healthy competition are given in the EEA’.50

(38) In contrast, while the majority of competitors answered ‘I do not know’, the majority

of competitors expressing their opinion consider the conditions of competition to be

generally the same worldwide with respect to Dairy Cultures, Cultures for Meat and

Cultures for Plant-based food.51

(39) Considering their own procurement of Diary Cultures, Cultures for Meat and

Cultures for Plant-based food, whereas a majority of customers answered ‘I do not

know’, a majority of customers expressing their opinion indicate the EEA as the

relevant geographic scope.52 One customer explicitly stated that it ‘buy[s] Cultures

via N&B and manufactured in Europe’.53 While the majority of competitors

answered ‘I do not know’, those that provided substantive answers submit that the

scope of their company’s sales for Dairy Cultures, Cultures for Meat and Cultures

for Plant-based food is worldwide.54 One competitor stated that it ‘operates globally

in more than 140 countries’.55

(40) In any event, for the purposes of this Decision, the exact scope of the geographic

market definition with respect to Cultures can be left open, as the Transaction would

not raise serious doubts as to its compatibility with the internal market under any

plausible alternative geographic market definition.

4.2. Plant-based Proteins

(41) Plant-based Proteins are ingredients derived from plant sources, such as soy, wheat,

pea, maize, corn, grains, canola, hemp, mung bean, rice, potato, algae, fungi, etc.

They are mainly offered as Isolates, Concentrates, or Textured types, which have

each varying percentages of protein content, forms (grain or powder), and

technologies applied in the manufacturing process. Plant-based Proteins are used

across a variety of applications, including food and beverage, health, infant nutrition,

pet food, and animal feed. In the food industry, Plant-based Proteins can be used

either as meat substitutes or as an additional bulking agent in meat products to

48 Q1 – Questionnaire to customers, replies to question B.1. 49 Q1 – Questionnaire to customers, reply to question B.1.1. 50 Q1 – Questionnaire to customers, reply to question B.1.1. Courtesy translation. The original French

reads: ‘les conditions d’une concurrence saine sont réunies au sein de l’espace économique

européen’. 51 Q2a and Q2b – Questionnaires to competitors, replies to question B.1. 52 Q1 – Questionnaire to customers, replies to question B.2. 53 Q1 – Questionnaire to customers, replies to question B.2.1. 54 Q2a and Q2b – Questionnaires to competitors, replies to question B.2. 55 Q2a – Questionnaire to competitors, reply to question B.2.1.

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reduce the overall cost.56 Further, Plant-based Protein is often used as an ingredient

for Active Nutrition, which includes protein fortified snack bars and protein

beverages (such as protein shakes) that are largely used for weight management

purposes and as sports and fitness nutrition.

(42) While both the N&B Business and IFF manufacture and sell Plant-based Proteins, in

particular Soy-based Proteins, their activities overlap only to a limited extent given

IFF’s minor activities in this area. IFF purchases Plant-Based Proteins, including SPI

[details on IFF’s purchases and supply sources], for use in its production of Food

Inclusions and Systems.

4.2.1. Relevant Product Market


(43) The Commission has previously considered a market for protein products obtained

from oilseed and other sources which would in particular include soy products. The

Commission noted that there is a degree of substitutability with other products, such

as milk products, fish products, eggs, peas, but also significant demand and supply-

side substitutability with other plant sources such as grains, maize, and corn.57

(44) More recently, the Commission left open whether protein products could also

encompass oilseed meals or if a more narrow market for soy protein products

including soy meal or maybe just for soy bean meal should be defined.58 The

Commission further considered whether each individual soy protein product,

namely, soy flour protein, textured soy protein (‘TSP’), soy protein concentrates

(‘SPC’), and soy protein isolates (‘SPI’), could form separate segments — while

noting that there was a considerable degree of demand-side substitutability between

the different types—but ultimately left the product market definition open.59


(45) The Parties submit that the Plant-based Protein market should not be segmented by

the source of the protein, and that, in particular, soy-based proteins should not be

considered a separate market product.

(46) From a demand-side perspective, the Parties argue that consumers’ demand for

vegetable protein is not specific to soy, that there is considerable interest in

novel Plant-based Protein sources, and that food manufacturers often label their

products therefore as “plant protein” or “vegetable protein” instead of “soy

protein”. Further, they contend that plant protein prices are generally correlated

with their protein content and product functionality and not only with the protein

source. They submit that most of these Plant-based Proteins are used in a similar

technical manner in the same applications as soy protein, such as meat alternatives,

processed meats, beverages, nutrition bars, dairy-alternatives, etc. In addition, the

Parties contend that pea protein in particular is attracting an increasing demand

56 Particularly in developing markets, Plant-based Proteins are blended with meat in order to reduce the

price for the end user. 57 Commission decision of 20 July 1998 in Case M.1126 – Cargill / Vandermoortele, paragraph 12. 58 Commission decision of 8 May 2015, COMP/M.7682 – Goldman Sachs / Altor / Hamlet, paras. 19-24. 59 Commission decision of 8 May 2015, COMP/M.7682 – Goldman Sachs / Altor / Hamlet, paras. 20-24.

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due to changing consumer preferences and is increasingly used as a source for

Plant-based Protein.

(47) From a supply-side perspective, the Parties argue that several large companies

are increasingly active in both soy and pea proteins. In addition, they contend

that soy protein production facilities can be used for the production of pea

proteins.

(48) Further, the Parties submit that segmentation by protein type (isolated, textured,

concentrated, flour) would not be appropriate, given the degree of demand-side

substitutability between the individual product types.

(49) They contend that this is particularly true for protein concentrates and protein

isolates such as SPC, SPI, pea protein concentrates (“PPC”), and pea protein

isolates (“PPI”) since these products are applied in a similar fashion and for similar

end uses. They argue that, as a result, the majority of SPI sold globally is sold in

direct competition with SPC and that therefore, SPC pricing dynamics impact

SPI.

(50) Finally, the Parties submit that the Plant-based Proteins market generally should not

be divided into segments by application due to the following considerations on

demand-side and supply-side substitutability.

(51) From a demand-side perspective, the Parties argue that Plant-based Proteins can

be used across several applications. For example, Plant-based Protein

concentrates and isolates can be used for meat and meat substitute applications,

for snacks and beverages for Active Nutrition, and for other applications such as

instant meals, bakery applications, etc.

(52) From a supply-side perspective, the Parties argue that many sophisticated

suppliers such as Archer Daniels Midland (“ADM”), Cosucra, and Roquette as

well as an increasing number of Chinese suppliers such as Gushen and Goldensea

already currently supply protein products across most or all major end

applications. In addition, they contend that many competitors in the SPC / SPI

segment have the capabilities to upgrade their portfolio and enter additional

segments such as Active Nutrition. If one were to consider separate segments

based on a distinction by end application, the Parties would consider, mainly because

of limited demand-side substitutability, a potential segmentation of the Plant-based

Protein market between: (i) animal feed, (ii) meat and meat substitute applications,

(iii) Active Nutrition, (iv) bakery, and (v) others.

(53) As regards Plant-based Proteins for Active Nutrition the Parties submit that, for

reasons of demand-side and supply-side substitutability they should not be further

segmented between products used in beverages and those used in snacks: there is

limited difference between the Plant-based Proteins used in beverage applications

and snack applications and customers of Plant-based Proteins for Active Nutrition

typically buy the same ingredient for use in protein bars and protein shakes.

(54) In any event, the Parties submit that the exact product market definition can be left

open on the ground that the Transaction does not give rise to any competitive

concerns under any plausible product market definition.

12


(55) The outcome of the market investigation suggests that the market for the supply of

Plant-based Proteins could be segmented by source of Plant-based Protein, by type

of Plant-based Protein, and by end application.

(56) As regards the source of Plant-based Protein, overall, a vast majority of respondents

expressing an opinion in the market investigation indicated that Plant-based Proteins

from soybean constituted a separate market due to limited demand and supply

substitutability.

(57) A majority of customers expressing an opinion indicated that Soy-based Proteins are

not interchangeable with Plant-based Proteins from other sources in terms of their

characteristics, modes of action and intended use.60 The majority of competitors took

the same view.61

(58) One customer pointed out in this respect that “[e]ach specific protein source has its

specific nutritional profile, functionality as flavor.”62, while another explained that

“[t]he interchangeability is pretty much associated with final product application,

meaning that proteins from different sources will deliver different product

characteristics and characteristics will need to be modified in the rest of the

formulation.”63

(59) While one competitor commented that “[s]ome proteins are interchangeable but it

depends upon the application and properties required. Each protein has pros and

cons.”64, another explained that “[s]oy provides a broad range of functionalities at a

competitive price. While functionalities partly have been matched by other plant

proteins those usually have a weak point regarding price competitiveness. From a

purely technological reason it is therefore difficult to replace soy. Considering

additional aspects such as sustainability, labelling there are alternatives to soy.”65

(60) The majority of customers expressing an opinion indicated that suppliers of Plant-

based Proteins are not able to switch production between the different plant-protein

sources in a limited period of time and without incurring into significant additional

costs.66 The majority of competitors took the same view.67

(61) On this point, a customer replied: “Technically Yes but cross contamination

(Allergen control) is huge and therefore manufacturing sites are generally specific

and only manufacturing sites are generally specific and only manufacture one type

in a facility to avoid costly clean downs and testing to ensure no potential for cross

contamination.”68, while another commented that “the proteins have different

behaviour and thus typically require a fundamentally new recipe development with

60 Q1 – Questionnaire to customers, replies to question D.A.1. 61 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.1. 62 Q1 – Questionnaire to customers, reply to question D.A.1.1. 63 Q1 – Questionnaire to customers, reply to question D.A.1.1. 64 Q2a – Questionnaire to customers, reply to question D.A.1.1. 65 Q2b – Questionnaire to customers, reply to question D.A.1.1. 66 Q1 – Questionnaire to customers, replies to question D.A.2. 67 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.2. 68 Q1 – Questionnaire to customers, reply to question D.A.1.1.

13

all associated cost. Plus, prices of different plant-based proteins differ

significantly.”69

(62) For its part, a competitor commented: “To the best of my knowledge, suppliers are

usually focused on one protein so their equipment is usually set up to process that. In

addition, here may be issues with accessing raw materials to process”70, whereas

another competitor indicated that “[s]witching between the different proteins within a

short time is not feasible. While similar processes are applied significant

adjustments need to be made which requires time and money”, while acknowledging

that “[a]dapting an existing plant and fully switching to a different raw material is

possible. A direct switch may be considered for protein sources that are very closely

related (e.g. pea and faba bean)”.71

(63) As regards a segmentation by type of Plant-based Proteins (isolates, concentrates,

textured and flour), respondents to the market investigation generally submitted that

this was warranted, due to limited demand and supply substitutability.

(64) The majority of customers expressing an opinion stated that different types of

Plant-based Proteins are not interchangeable with one another, taking into

consideration their intended use.72 The majority of competitors took the same view.73

(65) A customer commented on this issue that “[a]ll the mentioned products have unique

properties and functionalities and perform very differently in application.”74, while

another explained that “[t]he protein content and purity levels are different between

these ingredients and will limit the interchangeability of each.”75

(66) One competitor explained that “[w]hile not fully interchangeable certain

replacement of one by the other is possible if the application is adapted

accordingly”76, while another commented: “Each protein type has its own specific

uses.”77 Another remarked: “In my view, they have different functionality and

applications”78.

(67) While a large majority of customers replied that they did not know the answer to this

question, the majority of those expressing an opinion indicated that suppliers of

Plant-based Proteins are not able to switch production between the different plant-

protein sources in a limited period of time and without incurring significant

additional costs.79 The majority of competitors took the same view.80

69 Q1 – Questionnaire to customers, reply to question D.A.1.1. 70 Q2a – Questionnaire to customers, reply to question D.A.2.1. 71 Q2b – Questionnaire to customers, reply to question D.A.2.1. 72 Q1 – Questionnaire to customers, replies to question D.A.5. 73 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.1. 74 Q1 – Questionnaire to customers, reply to question D.A.5.1. 75 Q1 – Questionnaire to customers, reply to question D.A.5.1. 76 Q2b – Questionnaire to competitors, reply to question D.A.5.1. 77 Q2a – Questionnaire to competitors, reply to question D.A.5.1. 78 Q2a – Questionnaire to competitors, reply to question D.A.5.1. 79 Q1 – Questionnaire to customers, replies to question D.A.6. 80 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.6.

14

(68) A customer commented on this point: “Set up costs will be significant to change”81.

A competitor explained: “Flours and concentrates are generally made together (a

dry process). Isolates (a wet process) are made on completely different equipment.

Either flours, concentrates or isolates (or combinations) can be used as the

feedstock for texturised proteins.”82, while another stated: “It can be expected that

the know-how is sufficient to enter a new category. Switching from one to the other

is not feasible as different technologies are involved”83.

(69) As regards a segmentation by application of Plant-based Proteins, such as meat

substitutes or active nutrition, the replies from respondents to the market

investigation generally indicated that this would be warranted.

(70) On the question whether the manufacturing processes and quality and safety

requirements differ across the various applications of Plant-based Proteins a majority

of customers replied that they did not know the answer, but a majority of those

expressing their opinions said that this was the case.84 A majority of competitors

took the same view.85

(71) A customer explained: “Cross contamination is a big issue and manufacturers have

to go to great length to ensure the product is free from "Contamination". Quality

and testing plays a big role. Manufacturing set ups could be similar for multiple raw

materials.”86, while another specified: “Quality and safety requirements are different

between food, feed and infant nutrition for example.”87 A competitor commented:

“Manufacturing process strongly impacts the performance in application. The

requirements on manufacturing and quality are stricter for critical applications

where technical performance is key or applications which target special target

groups”.88

(72) On the question whether a supplier could switch its production to serve a different

application in a short period of time and without incurring significant additional

costs, the majority of customers replied that they did not know the answer to the

question, but themajority of those expressing their opinion said that this was not

possible.89 The majority of competitors took the same view.90

(73) A customer explained: “It would never be advised. Food nutrition is and will always

have very strict parameters and manufacturing a food ingredient in the same

location as animal ingredients would not be or should not be allowed.”91 A

competitor commented: “Cost to change from feed protein to food-grade can be very

high - potentially a complete re-build.”92 , while another explained “Changing from

81 Q1 – Questionnaire to customers, reply to question D.A.6.1. 82 Q2a – Questionnaire to customers, reply to question D.A.6.1. 83 Q2a – Questionnaire to customers, reply to question D.A.6.1. 84 Q1 – Questionnaire to customers, replies to question D.A.4. 85 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.4. 86 Q1 – Questionnaire to customers, reply to question D.A.4.1. 87 Q1 – Questionnaire to customers, reply to question D.A.4.1. 88 Q2b – Questionnaire to competitors, reply to question D.A.4.1. [ 89 Q1 – Questionnaire to customers, replies to question D.A.4.2 90 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.4.2 91 Q1 – Questionnaire to customers, replies to question D.A.4.2 92 Q2a – Questionnaire to customers, replies to question D.A.4.2

15

feed to food production will require significant adaptations to process as well as

safety/quality requirements. Active nutrition will therefore be significantly more

difficult to target”.93

(74) The results of the market investigation suggest a degree of supply-side

substitutability among various applications based on the source of protein. On the

question whether each source of Plant-based Protein such as soy or peas can be used

in different applications such as meat/meat substitutes, active nutrition, bakery or

animal feed, the majority of customers indicated that this was the case.94 A majority

of competitors expressing their opinions took the same view.95

(75) A customer indicated that different Plant-based Protein sources may be used for the

same application but that Soy-based Proteins are not substitutable by other sources in

certain applications: “Soy Based proteins have unique properties both nutritionally

and functionally. it is possible that in certain applications they are not

interchangeable. But in certain applications they can be substituted.”96, while a

competitor commented “It is possible to use the different protein sources in all/most

applications. Differences may include taste - which can be helped with flavours /

taste modulators.”97

(76) It follows from the above, and in the light of the results of the market investigation,

that within the area of Plant-based Proteins it is appropriate to distinguish separate

markets for the supply of Plant-based Proteins, segmented by source, type, and

application.


appropriate to assess the market for Plant-based Proteins, distinguishing between

(i) separate markets for the supply of Plant-based Proteins, segmented by type, in

particular Soy-based and Pea-based Isolates and Concentrates; (ii) separate markets

for the supply of Soy-based Proteins, segmented by type, in particular SPI, SPC and

TSP; and (iii) separate markets for the supply of Plant-based Proteins, segmented by

application, in particular meat substitutes and active nutrition, including snacks and

beverages. In any event, for the purposes of this Decision, the exact scope of the

product market definition with respect to Plant-based Proteins can be left open, since

the Transaction would not raise serious doubts as to its compatibility with the

internal market under any plausible alternative product market definition.


(78) In previous decisions, the Commission found the market for Plant-based Proteins to

be at least EEA-wide in scope. While for certain products transport costs may limit

93 Q2b – Questionnaire to customers, replies to question D.A.4.2 94 Q1 – Questionnaire to customers, replies to question D.A.3. 95 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.3. 96 Q1 – Questionnaire to customers, replies to question D.A.3.1 97 Q2a – Questionnaire to competitors, replies to question D.A.3.1

16

the distance over which they can be transported at economically viable costs, they

are traded on international commodity markets and are not subject to trade barriers.98

(79) The Parties submit that these considerations remain valid today and that the markets

for Plant-based Protein may be global in scope. In any event, the Parties submit that

the exact geographic market definition can be left open as the Transaction does not

give rise to any competitive concerns irrespective of the exact market definition.


worldwide geographic market definition for Soy-based Proteins is appropriate, is not

entirely conclusive, but provides certain indications suggesting a global scope.

(81) As regards the geographic scope in which the conditions of competition (such as

suppliers, quality and price) are generally the same with regard to Soy-based

Proteins, a majority of customers replied that they did not know the answer to the

question. Among the customers who expressed an opinion an equal number

considered this to be EEA-wide and to be global.99 Similarly, while a majority of

competitors replied that they did not know the answer to the question, an equal

number of competitors expressing an opinion considered the geographic scope of

Soy-based Proteins markets to be EEA-wide and to be global.100

(82) With regard to Plant-based Protein overall one customer commented: “For all

ingredients (with the exception of Plant Proteins) there is competition available on a

worldwide basis. For plant based proteins, the suppliers tend to use a regional

specific portfolio and pricing strategy”101, while a competitor explained: “Plant

protein producers compete on global level with additional smaller local producers

in certain areas”102. However, another competitor considered Soy-based Proteins

markets to be global in contrast to Plant-based Protein markets in general, deemed

more regional: “Most markets are global with the exception of proteins which tend to

be more regional. Soy proteins, lecithin are global”.103

(83) As regards their own procurement of Soy-based Protein a majority of customers

replied that they did not know, but a majority of those expressing their opinion said

that they purchase such ingredients on a global scale.104 Similarly, as regards their

own sales of Soy-based Proteins, a majority of competitors replied that they did not

know, but a majority of those expressing an opinion stated that they sold those

ingredients on a worldwide basis.105 One competitor commented that it “markets

plant-based proteins (soy and pea) and lecithin globally”.106

98 Case COMP.7682 – Goldman Sachs / Altor / Hamlet, para. 29. See also Case COMP/M.941 – ADM /

Actos & Hutcheson – Soya Mainz, paras. 18 et seq.; Case COMP/M.1126 – Cargill / Vandermoortele,

para. 13. 99 Q1 – Questionnaire to customers, replies to question B.1. 100 Q2a and Q2b – Questionnaires to competitors, replies to question B.1. 101 Q1 – Questionnaire to customers, replies to question B.1. 102 Q2a – Questionnaire to customers, replies to question B.1. 103 Q2b – Questionnaire to customers, replies to question B.1. 104 Q1 – Questionnaire to customers, replies to question B.2. 105 Q2a and Q2b – Questionnaire to customers, replies to question B.2. 106 Q2a – Questionnaire to customers, replies to question B.2

17

(84) In the light of those responses, the outcome of the market investigation provides

certain indications suggesting that a worldwide rather than an EEA-wide geographic

market definition is appropriate as regards Soy-based Proteins.


market definition with respect to Soy-based Proteins can be left open, as the

Transaction would not raise serious doubts as to its compatibility with the internal

market under any plausible alternative geographic market definition.

4.3. Gums

(86) Gums are a type of hydrocolloids, which are additives that react with water to form

gels, pastes, and emulsions. They are used to impart creaminess, thickness, and

viscosity, in a variety of industries including food and beverage and personal care. In

particular, Gums are used to improve the texture and / or mouth feel of the end

product.

(87) N&B manufactures and sells guar gum, locust bean gum, xanthan gum and gellan

gum. IFF does not manufacture any gums but purchases […] locust bean gum

[details on IFF’s purchases and supply sources] for application in its Systems and

Food Inclusions.



(88) The Commission has not previously considered possible market definitions for

Gums.


(89) The Parties submit that all sources of gum should be included in the same market

and that a further segmentation of the gum market by different sources is not

warranted. In any case, they contend that the exact product market definition for

gums can be left open as the Transaction does not give rise to any competitive

concerns irrespective of the exact market definition.

(90) From a demand-side perspective, the Parties submit that Gums from different

sources serve the same function, i.e., to improve the texture and / or mouth feel of

the end product. While there may be certain differences in the price and specific

properties of Gums from different sources, they contend that customers can and do

substitute Gums from different sources for different applications. They submit that

while there are certain niche applications, e.g., non-regurgitation milk for babies

where only one source of Gum is used, generally Gums from different sources share

the same function. The Parties contend that even in these niche applications, gums

may compete with other texturants such as starches and gelatin.

(91) From a supply-side perspective, the Parties contend that suppliers of Gums are

typically active in Gums from several sources. They submit that multinational

suppliers with diversified portfolios such as the N&B Business, Tate & Lyle and

Cargill and even niche players such as LBG Sicilia, Polygal and CPKelco typically

supply Gums from various sources.

18


(92) The outcome of the market investigation suggests that the market for the supply of

Gums should be segmented by source of gum, in particular locust bean, and provides

some indications that a segmentation by end application, in particular infant

nutrition, could be warranted.

(93) As regards the source of gum, a majority of respondents expressing an opinion in the

market investigation submitted that gums from locust bean constituted a separate

market due to limited demand and supply substitutability.

(94) A majority of customers expressing an opinion indicated that Locust Bean Gums

(LBG) are not interchangeable with gums from other sources (e.g. guar gum,

xanthan gum and gellan gum) in terms of properties, intended use, mode of action

and/or price.107 A majority of competitors considered that Locust Bean Gum is

interchangeable, but only with certain other gums.108

(95) One customer pointed out that “[t]he functional characteristics of LBG are very

specific, also synergy possibilities with other hydrocolloids are very specific for this

product group” 109 while another explained that “LBG is not interchangeable due its

specific abilities in the stabilization process of a fruit preparation.”110

(96) A competitor stated: “In certain applications substitution is fully or partially

possible”111, while another explained: “The interchange is rarely 1 to 1. It is

application dependent. LBG can be replaced by a combination of other gums such as

Tara, if customer is willing to adjust their formulation and differences in texture and

stability are acceptable.”112

(97) A majority of customers expressing their opinion said that suppliers of hydrocolloids

gums are not able to switch production between Gums from different sources (locust

bean, guar, xanthan and gellan gums) within a short period of time and without

incurring significant additional costs.113 A majority of competitors took the same

view.114

(98) A customer replied: “Not necessarily, since extraction process can differ quite a lot

– from cleaning, separation to extraction itself. Also feedstocks origination differ,

and it’s an advantage to have to production closer to farming area.”115, while

another commented that “switching between guar and locust bean gum would be

possible to our best knowledge. Others are not possible due to other technology.”116

107 Q1 – Questionnaire to customers, replies to question E.A.1. 108 Q2a and Q2b – Questionnaires to competitors, replies to question E.A.1. 109 Q1 – Questionnaire to customers, reply to question E.A.1.1. 110 Q1 – Questionnaire to customers, reply to question E.A.1.1. 111 Q2a – Questionnaire to competitors, reply to question E.A.1.1. 112 Q2a – Questionnaire to competitors, reply to question E.A.1.1. 113 Q1 – Questionnaire to customers, replies to question D.A.2. 114 Q2a and Q2b – Questionnaires to competitors, replies to question D.A.2. 115 Q1 – Questionnaire to customers, reply to question D.A.1.1. 116 Q1 – Questionnaire to customers, reply to question D.A.1.1.

19

(99) A competitor commented: “Gums come from different sources. Manufacturing

plants and process lines are built and adapted to the specific hydrocolloid you are

trying to produce”. 117

(100) On the question whether other texturants such as starches and gelatin can be used

instead of Locust Bean Gum for certain applications, the results of the market

investigation are inconclusive. There was no majority among customers or

competitors expressing their opinion to confirm or reject this possibility, nor to

suggest that other substitutes may exist.118

(101) One customer indicated that [starch and gelatin are “very different raw material,

which does not give the same outcome of stability/consistency/desired outcome”119,

whereas another stated: “When LBG is combined with guar or xanthan gum for

gelling properties, it could be replaced by gelatin, for general thickening reasons.

The functionality of LBG could be substituted by using certain starches”.120

(102) As regards a further segmentation of Locust Bean Gum by end application, such as

infant nutrition, the results of the market investigation generally suggest that this is

warranted due to limited demand-side and supply-side substitutability.

(103) A majority of customers expressing their opinion said that the market for Locust

Bean Gum should be further segmented by end applications, such as infant nutrition,

either because not all Locust Bean Gum can be used for the same application or

because suppliers need specific technology and/or know-how and there are different

certification processes.121 Among the very few competitors who expressed an

opinion, there was no majority to confirm or reject such further segmentation.122

(104) A customer stated: “IFT [infant nutrition] application requires different handling

than non IFT”, while another commented: “Suppliers need specific technology

and/or know-how and there are different certification processes.”123

(105) A competitor explained: “There is refined lbg on the market as well that is different

than crude lbg targeting specific applications (e.g water gels that need clarity);

N&B manufacture lbg and refined lbg.”124

(106) In the light of the above considerations and taking account of the results of the

market investigation, it is appropriate to distinguish separate markets for the supply

of Gums, segmented by source and separate markets for the supply of Locust Bean

Gum, segmented by application.


appropriate to assess the market for Gums, distinguishing between separate markets

117 Q1 – Questionnaire to customers, reply to question D.A.1.1. 118 Q1 – Questionnaire to customers, replies to question E.A.3; Q2a and Q2b – Questionnaires to

competitors, replies to question E.A.3. 119 Q1 – Questionnaire to customers, replies to question E.A.3.1 120 Q1 – Questionnaire to customers, replies to question E.A.3.1 121 Q1 – Questionnaire to customers, replies to question E.A.4. 122 Q2a and Q2b – Questionnaires to competitors, replies to question E.A.4. 123 Q1 – Questionnaire to customers, replies to question E.A.4.1 124 Q2a– Questionnaires to competitors, replies to question E.A.4.1

20

for the supply of Gums, namely: (i) a separate market, segmented by source, in

particular for the supply of Locust Bean Gum; and (ii) a separate market for the

supply of Locust Bean Gum, segmented by application, in particular for the supply

of infant nutrition. In any event, for the purposes of this Decision, the exact scope of

the product market definition with respect to Gums can be left open, since the

Transaction would not raise serious doubts as to its compatibility with the internal

market under any plausible alternative product market definition.


(108) In previous cases where the Commission examined the possible market definition for

hydrocolloids, it found that the markets were at least EEA-wide, in some cases

worldwide in scope.125

(109) The Parties submit that the relevant geographic market for Hydrocolloids and any

potential sub-segments is at least EEA-wide, if not worldwide in scope.

(110) In any event, the Parties submit that the exact product market definition can be left

open as the Transaction does not give rise to any competitive concerns irrespective

of the exact market definition.


worldwide geographic market definition for Locust Bean Gum is appropriate is not

entirely conclusive, but provides indications suggesting a global scope.

(112) Asked about the geographic scope in which the conditions of competition (such as

same suppliers, quality and price) are generally the same with regard Locust Bean

Gum, while the majority of customers replied that they did not know the answer to

the question, a majority of customers expressing their opinion considered this to be

global.126 Similarly, the majority of competitors replied that they did not know the

answer to the question, while the majority of competitors expressing their opinion

considered the geographic scope of Locust Bean Gum markets to be global.127

(113) One customer commented on this point: “Within the area of cultures and enzymes

the global players are limited and thereby present in the entire world with more or

less equal conditions. Locust bean gum and emulsifiers are located in the same

manner as cultures and enzymes and are therefore also equal in setup”128.

(114) As regards their own procurement of Locust Bean Gum the majority of customers

replied that they did not know, but the vast majority of those expressing their

opinion said that they purchase such ingredients on a global scale.129 One customer

125 See Case COMP/M.4550 – Dow Chemical Company / Wolff Walsrode, para. 23; Case COMP/M.8440–

DuPont / FMC, paras. 43, 133, 147-148, 161-162; Case COMP/M.3975 – Cargill / Degussa Food

Ingredients, para. 92; Case COMP/M.3337 – Best Agrifund / Nordfleisch, paras. 118-119. 126 Q1 – Questionnaire to customers, replies to question B.1. 127 Q2a and Q2b – Questionnaires to competitors, replies to question B.1. 128 Q1 – Questionnaire to customers, replies to question B.1.1 129 Q1 – Questionnaire to customers, replies to question B.2.

21

commented on this point: “LBG, guar gum and enzymes are bought for all global

affiliates on all continents”.130

(115) As regards their own sales of Locust Bean Gum, a large majority of competitors

replied that they did not know, while a small majority of those expressing an opinion

stated that they sold those ingredients on a basis other than global or EEA-wide.131

(116) , In the light of the above responses, the Commission considers that the market

investigation has provided valid indications suggesting that a worldwide rather than

an EEA-wide geographic market definition is appropriate as regards the supply of

Locust Bean Gum.


market definition with respect to Gums can be left open, as the Transaction would



4.4. Microcrystalline Cellulose


(118) Microcrystalline cellulose (‘MCC’), also known as cellulose gel, is manufactured

from pure, depolymerized alpha cellulose. The gel is then dried to produce a powder.

MCC is used primarily in pharmaceuticals, as an excipient, but also in food

applications as a stabilizer, opacifier, to add viscosity and texture. N&B

manufactures and sells MCC for both pharmaceutical and food applications. IFF

only uses MCC for food applications in the manufacturing of its Functional

Ingredient Systems and Flavours.

(119) In a previous decision, the Commission considered that MCC was part of a

pharmaceutical excipients market.132 More recently, the Commission considered

whether there was a distinct product market for all different kinds of MCC but

ultimately left the product market definition open.133

(120) The Parties acknowledge that for food ingredient manufacturers colloidal and non-

colloidal are not interchangeable, as the later does perform the function that food

ingredient manufacturers look for. Non-colloidal MCC is mainly used in the

pharmaceutical applications and/or nutraceuticals.134 Based on supply substitutability

reasons, the Parties however submit that there is one single MCC product market

comprising both MCC for pharmaceutical and food applications.135

(121) The market investigation results are however not conclusive. While some customers

and competitors indicated that it is possible for suppliers to switch production

130 Q1 – Questionnaire to customers, replies to question B.2.1 131 Q2a and Q2b – Questionnaire to customers, replies to question B.2. 132 Commission decision of 13 July 1999, COMP/M.1517 – Rhodia/Donau Chemie/Albright & Wilson,

para. 32. 133 Commission decision of 27 July 2017, COMP/M.8440 – DuPont / FMC (Health and Nutrition

Business), paras. 158-160. 134 Form CO, para.6.509. 135 Form CO, paras. 6.510 and 6.511.

22

without incurring in significant additional costs and within a limit period of time,

others suggested that a switch from food to pharmaceutical applications is more

difficult than from pharmaceutical to food applications given the more stringent

regulatory requirements regarding MCC for pharmaceutical applications.136 More

importantly one customer stressed that “there is more competition in the supply of

MCC used in the food industry and prices are lower.”137

(122) In any event, for the purposes of this Decision, the exact scope of product market

definition with respect to MCC can be left open, since the Transaction would not




(123) In a previous decision, the Commission considered that the pharmaceutical

excipients market including MCC was essentially EEA-wide.138 Later, the

Commission considered that a MCC product market was at least EEA wide in scope,

if not worldwide, but ultimately left the exact geographic definition open.

(124) The Parties submit that the geographic market is worldwide. A small majority of

customers and competitors who expressed a view considered also the market to be

worldwide in scope. 139 In any event, for the purposes of this Decision, the exact

scope of the geographic market definition with respect to MCC can be left open, as

the Transaction would not raise serious doubts as to its compatibility with the

internal market under any plausible alternative geographic market definition.

4.5. Emulsifiers

(125) An emulsifier is a substance that prevents the separation of immiscible compounds

by increasing the kinetic stability of a mixture. Emulsifiers have the ability to

stabilise emulsions, i.e., a mix of hydrophilic (e.g., water) and hydrophobic (e.g., oil)

substances. Emulsifiers can be synthetic (e.g. sourced from vegetable oils, sugar

alcohols, organic acids and glycerol) or natural. The most common natural

Emulsifiers are Lecithin-derived.

(126) N&B manufactures and supplies Lecithin-derived and synthetic Emulsifiers,

primarily for food applications. IFF sources Emulsifiers including natural

Emulsifiers like Lecithin, but also synthetic Emulsifiers like Distilled

Monoglycerides (‘DISMO’) and Diacetyl Tartaric Esters of Monoglycerides

(‘DATEM’). IFF only sources food grade Emulsifiers.

136 Q1-Questionnaire to Customers, replies to question F.A.1. Q2a and Q2b - Questionnaire to

Competitors, replies to question F.A.2. 137 Q1-Questionnaire to Customers, replies to question F.A.1. 138 Commission decision of 13 July 1999, COMP/M.1517 – Rhodia/Donau Chemie/Albright & Wilson,

para. 46. 139 Q1-Questionnaire to Customers, replies to question B.1 and Q2a - Questionnaire to Competitors,

replies to question B.1.

23



(127) In a previous decision, the Commission considered synthetic Emulsifiers and

Lecithin-derived Emulsifiers to belong to separate product markets.140

(128) With respect to synthetic Emulsifiers, the Commission has in a previous decision

considered possible separate product markets for the following types of synthetic

Emulsifiers: DATEM, mono-diglycerides and DISMO.141 The product market

definition was however ultimately left open.

(129) With respect to Lecithin-derived Emulsifiers, the Commission has in a previous

decision considered a distinction between ‘Special’ Fluid Lecithin (destined for

specific applications), De-Oiled Lecithin (typically used in food applications (oil and

fat spreads, instant products, bakery) and the health and nutrition segments (food

additives, sports nutrition)), and Fractioned Lecithin (mainly used for sophisticated

non-food applications such as pharmaceuticals, cosmetics, and personal care

products). It has further distinguished between genetically modified (‘GM’) and non-

GM Lecithin-derived Emulsifiers.142


(130) Aside of the product market distinction’s discussed in the Commission’s precedent

decisions, the Parties explain that with respect to synthetic Emulsifiers a distinction

by chemical class could be considered: Esters Emulsifiers (including DATEM),

DISMO, Fatty acids Emulsifiers, Other Synthetic Emulsifiers (including mono-

diglycerides).143

(131) The Parties submit that the product market definition with respect to Emulsifiers can

be left open, as the Transaction does not give rise to competition concerns

irrespective of the exact market definition.144


(132) While a majority of customers responding to the market investigation answered with

‘I do not know’, a majority of customers expressing their view consider that

synthetic Emulsifiers and Lecithin-derived Emulsifiers belong to separate markets.145

A majority of competitors expressing their opinion also endorse this distinction.146 In

this context a customer dissents and states that ‘[b]oth product groups are used in

similar applications’.147 However another customer states that in its ‘experience the

two category[ies] are different for performance in our application and cannot be

140 Commission decision of 29 March 2006 in Case M.3975 – Cargill/Degussa Food Ingredients,

paragraphs 22-29. 141 Commission decision of 15 July 2008 in Case M.5109 – Danisco/Abitec, paragraphs 13-26. 142 Commission decision of 29 March 2006 in Case M.3975 – Cargill/Degussa Food Ingredients,

paragraphs 30-74. 143 Form CO para 6.407. 144 Form CO para 6.409. 145 Q1 – Questionnaire to customers, replies to question G.A.1. 146 Q2a and Q2b – Questionnaires to competitors, replies to question G.A.1. 147 Q1 – Questionnaire to customers, reply to question G.A.1.1.

24

interchange[d]’.148 A competitor explains that ‘synthetic emulsifiers and the lecithin-

driven emulsifiers have a completely different chemistry (chemical molecule classes)

with different functionalities, and thus related production processes and value

chains and scope of application are completely different’.149 A further competitor

states that ‘[c]ustomers don’t use them interchangeably’.150

(133) With respect to Lecithin-derived Emulsifiers, while majorities of customers and

competitors answered with ‘I do not know’, majorities of customers and competitors

expressing their opinion consider it appropriate to distinguish between Special Fluid

Lecithin, De-Oiled Lecithin and Fractioned Lecithin Emulsifiers.151 A customer in

this context submits that ‘[t]hey are indeed used for specific applications as

mentioned’.152

(134) With respect to synthetic Emulsifiers, while a majority of respondents answered ‘I

do not know’, small majorities of customers and competitors expressing their

opinion consider a further distinction by chemical class (e.g. Esters Emulsifiers,

DISMO, Fatty acids Emulsifiers) appropriate.153 In this context, one customer states

that ‘different type[s] of emulsifiers provide for different functionalities’.154

However, another customer explains that while ‘[t]he products are not

interchangeable (different functionalities) [they] are all used in the same and similar

market segments’.155

(135) While replies from customers are inconclusive, a majority of competitors expressing

their opinion consider that suppliers of a given chemical class of synthetic Emulsifier

are not able to switch their production to another chemical class without incurring

significant additional costs and to do so in a short period of time.156 In this context

one competitor explains that the ‘[p]roduction set-up for different emulsifiers can be

very different; e.g. related to corrosiveness of acids used in esterification;

distilliation temperatures etc’.157 Another customer states that ‘[i]n many cases the

manufacture of these ingredients utilise different equipment and chemistry making it

difficult to switch’.158

(136) Therefore, on the basis of the responses to the market investigation, it appears that a

distinction between different types of Lecithin-derived remains appropriate and

further that a distinction between different chemical classes of synthetic Emulsifiers

is likely appropriate.

148 Q1 – Questionnaire to customers, reply to question G.A.1.1. 149 Q2a – Questionnaire to competitors, reply to question G.A.1.1. 150 Q2a – Questionnaire to competitors, reply to question G.A.1.1. 151 Q1 – Questionnaire to customers, replies to question G.A.2., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.A.2. 152 Q1 – Questionnaire to customers, reply to question G.A.2.1. 153 Q1 – Questionnaire to customers, replies to question G.A.3., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.A.3. 154 Q1 – Questionnaire to customers, reply to question G.A.3.1. 155 Q1 – Questionnaire to customers, reply to question G.A.3.1. 156 Q1 – Questionnaire to customers, replies to question G.A.4., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.A.4. 157 Q2a – Questionnaire to competitors, reply to question G.A.4.1. 158 Q2a – Questionnaire to competitors, reply to question G.A.4.1.

25


definition with respect to Emulsifiers can be left open, since the Transaction would


plausible alternative product market definition


(138) In previous decisions, discussion synthetic Emulsifiers, the Commission found the

geographic market to be at least EEA-wide.159 With respect to GM ‘Special’ Fluid

Lecithin Emulsifiers and GM De-Oiled Lecithin Emulsifiers, the Commission

considered a worldwide market, while with respect to non-GM ‘Special’ Fluid

Lecithin Emulsifiers and non-GM De-Oiled Lecithin Emulsifiers it considered an

EEA-wide market.160

(139) While the Commission has not previously considered a geographic market for

Fractioned Lecithin, the Parties submit that it should similarly be at least EEA-wide

if not worldwide in scope. In any event, the Parties submit that the geographic

market definition with respect to Emulsifiers can be left open, as the Transaction

does not give rise to competition concerns irrespective of the exact market

definition.161


worldwide geographic market definition for Emulsifiers is appropriate, is

inconclusive.

(141) While a large majority of customers answered ‘I do not know’, the majority of

customers expressing their opinion submit that for synthetic Emulsifiers and for

Lecithin-derived Emulsifiers the geographic area where conditions of competition

are generally the same is worldwide. While a large majority of competitors answered

‘I do not know’, a majority of competitors expressing their opinion considers the

conditions for competition to be generally the same in the EEA for synthetic

Emulsifiers and worldwide for Lecithin-derived Emulsifiers.162

(142) Considering the scope of their own procurement of synthetic and Lecithin-derived

Emulsifiers, while a majority of customers answered ‘I do not know’, a majority of

customers expressing their opinion consider it to be worldwide. Those competitors

providing substantive answers also consider their sales to have a worldwide scope.163

(143) Therefore, on the basis of the responses to the market investigation, it appears that a

worldwide geographic market definition with respect to Emulsifiers may be most

appropriate.

159 Commission decision of 15 July 2008 in Case M.5109 – Danisco/Abitec, paragraphs 27-30. 160 Commission decision of 29 March 2006 in Case M.3975 – Cargill/Degussa Food Ingredients,

paragraphs 84-91. 161 Form CO para 6.410. 162 Q1 – Questionnaire to customers, replies to question B.1., and Q2a and Q2b – Questionnaires to

competitors, replies to question B.1. 163 Q1 – Questionnaire to customers, replies to question B.2., and Q2a and Q2b – Questionnaires to

competitors, replies to question B.2.

26


market definition with respect to Emulsifiers can be left open, as the Transaction

would not raise serious doubts as to its compatibility with the internal market under

any plausible alternative geographic market definition.

4.6. Enzymes


(145) Enzymes are biological catalysts that regulate the rate at which chemical reactions

proceed in living organisms. They can be used as ingredients and as processing aids

in a variety of applications.

(146) The Parties submit that Industrial Enzymes and naturally extracted enzymes (known

as Specialty Enzymes) belong to different product markets. According to the Parties,

these two types of enzymes are used by different types of customers: Industrial

Enzymes are used as ingredients and/or processing aids in the home and personal

care, food, beverage and animal feed industries; whereas Specialty Enzymes are used

in human health supplements. Unlike Industrial Enzymes, Specialty Enzymes have

effects during (and after) the consumption of the finished product to which they are

added. Generally, Specialty Enzymes are also sold at higher prices.164

(147) The Parties have also considered a segmentation of the Industrial Enzymes by end

application into industrial, food and beverage, home and personal care, and animal

nutrition applications. According to the Parties, while the same enzyme backbone

might be broadly applicable across a number of industries, the format of the enzyme

needs to be tailored to the needs of the relevant industry. In addition, different regulatory

and registration requirements apply depending on the end application. The Parties

however underlined that Industrial Enzymes suppliers are generally active across several

end applications, can leverage on their knowledge in one industry to another and the

equipment required is broadly the same across the different end applications.165

(148) The Parties also submitted that a further segmentation of the Industrial Enzymes for

food applications market is not warranted. According to the Parties, Enzymes for

food applications generally interchangeable and there is a significant supply-side

substitutability as already today suppliers are active across the various end

applications: bakery, bakery, dairy, brewing, carbohydrate processing, fish processing,

meat and culinary processing.166

(149) In the market investigation, a majority of customers and competitors who expressed a

view considered that indeed Industrial and Specialty Enzymes belong to separate

markets.167 A majority of respondents also agreed with the segmentation of Industrial

Enzymes by end application168 but, as the Parties, they said that no further segmentation

is warranted, either because they considered the Enzymes in the food industry to be

164 Form CO, para. 6.199 165 Form CO, paras 6.461 to 6.463 166 Form CO, paras 6.466 and 6.667. 167 Q1-Questionnaire to Customers, replies to questions H.A.1. and H.A.2; Q2a - Questionnaire to

Competitors, replies to questions H.A.1 and H.A.2. 168 Q1-Questionnaire to Customers, replies to question H.A.3; and Q2a - Questionnaire to Competitors,

replies to question H.A.3.

27

interchangeable, either because they considered that suppliers can easily switch between

the production of the different subtypes, or both.169


definition with respect to Enzymes can be left open, since the Transaction would not




(151) The Parties submit that the relevant geographic market for Enzymes (including for

each of the Industrial and Speciality Enzyme markets) is at least EEA-wide if not

worldwide in scope as raw materials are generally readily available, transportation

costs are low, and there are no trade barriers except for product registration

requirements for supplement ingredients, food, and feed enzymes.170

(152) The market investigation results were not conclusive, while a small majority of

customers who expressed a view considered the geographic market to be EEA wide

in scope, in particular for industrial enzymes for feed, a small majority of

competitors who expressed a view considered the geographic market to be

worldwide.171


market definition with respect to Enzymes can be left open, as the Transaction would



4.7. Probiotics


(154) Probiotics are live beneficial bacteria that are naturally created by the process of

fermentation in foods like yogurt, sauerkraut, miso soup, kimchi, and others.

Probiotics are consumed for their health benefits, especially gut health. Probiotics

are sold as nutritional dietary supplement products. They are also used as active

pharmaceutical ingredients and as functional ingredients in food and beverage

products.

(155) The Parties submit there is a high demand-side and supply-side substitutability

between Probiotics used in dietary supplements and in food and beverages

applications, and therefore the relevant product market should include all probiotics

used in human health. N&B argues that it sells the same Probiotics to both food and

dietary supplement manufacturers. Probiotics for both these application have the

same sources and follow the same development and formulation processes.

Moreover, according to the Parties, for the end customer there is no significant

difference with respect to the desired health effect between intake of probiotics from

169 Q1-Questionnaire to Customers, replies to question H.A.4; and Replies to Q2a - Questionnaire to

Competitors, replies question H.A.4 170 Form CO, para. 6.200. 171 Q1-Questionnaire to Customers, replies to question B.1. and Q2a - Questionnaire to Competitors,

replies to question B.1

28

food and/or beverages compared to dietary supplements. From the supply-side

perspective, the Parties submit that the manufacturing assets are the same and there

are a few differences in the regulatory requirements.172

(156) The results of the market investigation were however not conclusive. Whereas

a majority of competitors who expressed a view consider that Probiotics used by

dietary supplement and food and beverage manufacturers are the same, customers

were divided on whether or not these two products are interchangeable, although a

small majority of customers considered that suppliers can easily change production

from one to another use without incurring into significant costs.173


definition with respect to Probiotics can be left open, since the Transaction would




(158) The Parties submit that the geographic market should be worldwide in scope.

According to the Parties, manufacturers of probiotics supply customers worldwide,

they do not need a local presence, transportation costs do not represent a significant

fraction of overall costs, and there are no relevant trade barriers.174

(159) The market investigation results also point out for a worldwide scope, in particular

as regards the Probiotics for use in dietary supplements.175


market definition with respect to Probiotics can be left open, as the Transaction

would not raise serious doubts as to its compatibility with the internal market under

any plausible alternative geographic market definition.

5. COMPETITIVE ASSESSMENT

5.1. Legal Framework

(161) Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess

whether a proposed concentration would significantly impede effective competition

in the internal market or in a substantial part of it, in particular through the creation

or strengthening of a dominant position. Depending on the position of the Parties in

the supply chain, a concentration may entail horizontal and/or non-horizontal effects.

(162) Horizontal effects arise when the parties to a concentration are actual or potential

competitors in one or more of the relevant markets concerned. The Commission

172 Form CO paras. 6.492 and 6.493 173 Q1-Questionnaire to Customers, replies to questions I.A.1 and I.A.2; and Q2a - Questionnaire to

Competitors, replies to question I.A.1 and I.A.2. 174 Form CO, para.494. 175 Q1-Questionnaire to Customers, replies to questions B.1 and B.2; and Q2a - Questionnaire to

Competitors, replies to questions B.1 and B.2.

29

appraises horizontal effects in accordance with the guidance set out in the Horizontal

Merger Guidelines.176

(163) Non-horizontal effects arise when the parties to a concentration operate in different

levels of the supply chain in certain relevant markets (vertical effects) or when the

Parties operate in closely related markets (conglomerate effects). The Commission

appraises non-horizontal effects in accordance with the guidance set out in the

Non-Horizontal Merger Guidelines.177

(164) Both Horizontal and Non-Horizontal Merger Guidelines distinguish between two

main ways in which mergers between actual or potential competitors on the same

relevant market may significantly impede effective competition, namely

non-coordinated and coordinated effects.

(165) In horizontal mergers, non-coordinated effects may significantly impede effective

competition by eliminating the competitive constraint imposed by each merger party

on the other, as a result of which the merged entity would have increased market

power, without resorting to coordinated behaviour. In that regard, the Horizontal

Merger Guidelines consider not only the direct loss of competition between the

merging firms, but also the reduction in competitive pressure on non-merging firms

in the same market that could be brought about by the merger.178

(166) The Horizontal Merger Guidelines list a number of factors which may influence

whether or not significant non-coordinated effects are likely to result from a merger,

such as the large market shares of the merging firms, the fact that the merging firms

are close competitors, the limited possibilities for customers to switch suppliers or

the fact that the merger would eliminate an important competitive force.179

Furthermore, in accordance with the Horizontal Merger Guidelines, a merger with a

potential competitor can also have horizontal anti-competitive effects where the

potential competitor constrains the behaviour of firms active in the market.180 Not all

these factors need to be present for significant non-coordinated effects to be likely.

The list of factors is also not an exhaustive list.

(167) In non-horizontal mergers, non-coordinated affects may arise when the concentration

gives rise to foreclosure. In vertical mergers, foreclosure can take the form of input

foreclosure, where the merger is likely to raise costs of downstream rivals by

restricting their access to an important input; and/or of customer foreclosure, where

the merger is likely to foreclose upstream rivals by restricting their access to

a sufficient customer base.181

(168) In addition, the Non-Horizontal Merger Guidelines also state that a concentration

may entail conglomerate effects. Conglomerate effects may arise in a concentration

where the undertakings involved are active on closely related markets and may also

176 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of

concentrations between undertakings (“Horizontal Merger Guidelines”), OJ C 31, 05.02,2014 177 Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control

of concentrations between undertakings (“Non-Horizontal Merger Guidelines”) (2008/C 265/07). 178 Horizontal Merger Guidelines, paragraph 24 179 Horizontal Merger Guidelines, paragraph 26 180 Horizontal Merger Guidelines, paragraph 59. 181 Non-Horizontal Merger Guidelines, para 30

30

lead to the foreclosure of rivals, by allowing the merged entity to leverage a strong

market position from one market to another by means of tying, bundling or other

exclusionary practice.182

(169) In accordance with the above legal framework, the Commission has carried out an

extensive competitive assessment of the Transaction in order to assess whether the

Transaction would impede effective competition within the internal market on

accounts of:

(a) possible horizontal non-coordinated effects in the relevant markets for the

manufacture and supply of Cultures and Plant-based Proteins;

(b) possible vertical non-coordinated effects in the relevant markets for the

supply of Locust Bean Gum, Plant-based Proteins for Active Nutrition, SPI,

MCC for Food Applications, Synthetic Emulsifiers overall, Ester Emulsifiers,

DISMO, Fatty Acid Emulsifiers, Other Synthetic Emulsifiers, De-Oiled

Lecithin Emulsifiers overall, GM De-Oiled Lecithin, and Non-GM De-Oiled

Lecithin, in particular by assessing the likelihood of foreclosure scenarios

and, in particular, whether the merged entity would have the (i) ability and

(ii) the economic incentive to foreclose its rivals, as well as (iii) whether such

foreclosure strategy would have a detrimental effect on competition, causing

harm to consumers183; and

(c) possible conglomerate effects in closely related markets.

5.2. Horizontal non-coordinated effects

(170) Affected markets arise due to the horizontal overlap between the Parties’ activities in

the manufacture and sale of Cultures and Plant-based Proteins.184

5.2.1. Cultures

(171) The Parties only overlap in the manufacture and supply of Dairy Cultures and

Cultures for Meat. Therefore, horizontally affected markets with respect to Cultures

only arise in Dairy Cultures and Cultures for Meat, as well as in certain

sub-segments thereof. […]. Table 1 shows the horizontally affected markets in

Cultures.

182 Non-Horizontal Merger Guidelines, para 93. 183 Non-Horizontal Merger Guidelines, paras 32 and 94. 184 As mentioned above the Transaction gives rise to other de minimis overlaps that do not amount to

affected markets. In the market investigation, one company referred to one of these markets. The

company considered that the “[t]he size and scope of the business is very concerning as it will distort

competition, hinder innovation and create barriers to entry” in the natural antioxidants and

antimicrobial markets. While the Parties have a combined market share of [0-5]% worldwide and [5-

10]% in the EEA in the natural antioxidants market, N&B does not manufacture natural antioxidants,

it only resells them in blends or as stand-alone ingredients. Only in a very narrow market definition

by compound, the Parties would have a combined share of [20-30]% in the supply of rosemary extract

in the EEA. However, in this case the increment, brought by N&B, is below [0-5]%. The Parties also

do not overlap in the supply of natural microbial control agents, where only N&B is present. In the

view of these facts, the Commission considers that the concerns voiced by the Company are not

substantiated.

32

(around [0-5]%). While N&B has considerable activities in Dairy Cultures and

considers itself a significant innovator in that market, IFF is not a relevant player in

Dairy Cultures [details on IFF’s activities and production process]. Finally, there are

a number of strong competitors in Dairy Cultures overall as well as in the segment of

acidifying Cultures – most prominently the market leader Chr. Hansen.187

(174) The market investigation largely confirms the arguments brought forward by the

Parties. While N&B is named by many customers and competitors responding to the

market investigation as an important supplier of Dairy Cultures, IFF is only named

by two customers and no competitors.188 None of the replying customers or

competitors consider N&B and IFF to be among the top five of each other’s closest

competitors in Dairy Cultures.189 Further, customers and competitors generally

consider manufacturers such as N&B, Chr. Hansen, CSK and DSM to be the most

capable in Dairy Cultures when considering parameters such as quality, R&D

capabilities or portfolio. IFF by contrast is not ascribed any capabilities by the

majority of respondents.190

(175) All customers expressing their opinion consider that the Transaction will not have an

impact on their company with respect to the procurement of Dairy Cultures.191 While

the majority of competitors answered ‘I do not know’, a large majority of

competitors expressing their opinion also do not consider the Transaction to have an

impact on their company with respect to the supply of Dairy Cultures.192 Overall, no

customer or competitor expressed a substantiated concern with respect to the market

for the manufacture and supply of Dairy Cultures, or a segment thereof (in particular

acidifying Cultures or Cultures for Cheese).

(176) It follows from the foregoing that irrespective of whether an EEA or worldwide

market is considered, and whether Dairy Cultures overall or segments such as

acidifying Cultures or Cultures for Cheese are considered, the Transaction would

lead to the combination of a well-established supplier (N&B) with another supplier

with only a very minor market presence and limited capabilities (IFF).

(177) In the light of the above considerations, and, in particular, in the light of the

moderate combined market share and the very small increment brought about by the

Transaction (around [0-5]% by IFF) and taking account of the results of the market

investigation, the Commission considers that the horizontal overlap brought about by

the Transaction in the manufacture and supply of Dairy Cultures overall, acidifying

Cultures and Cultures for Cheese is not such as to raise serious doubts as to its

compatibility with the internal market.

187 Form CO paras 6.69, 6.71 and 6.77. 188 Q1 – Questionnaire to customers, replies to question C.B.1., and Q2a and Q2b – Questionnaires to

competitors, replies to question C.B.1. 189 Q1 – Questionnaire to customers, replies to questions C.B.2. and C.B.3, and Q2a and Q2b –

Questionnaires to competitors, replies to questions C.B.2. and C.B.3. 190 Q1 – Questionnaire to customers, replies to question C.B.4., and Q2a and Q2b – Questionnaires to

competitors, replies to question C.B.4. 191 Q1 – Questionnaire to customers, replies to question J.1. 192 Q2a and Q2b – Questionnaires to competitors, replies to question J.1.

33

5.2.1.2. Cultures for Meat

(178) With respect to the market for the manufacture and supply of Cultures for Meat as

well as segments thereof, the Parties submit that the combined shares of the Parties

remain moderate and that the merged entity trails significantly behind the clear

market leader in all relevant Culture for Meat Segments, Chr. Hansen. They further

state that the Parties are not close competitors, that the Transaction would not

eliminate an important competitive force, and would not combine two important or

competing innovators. Further, there are several strong competitors and barriers to

entry are insignificant, and customers can switch and have significant buyer

power.193

(179) Specifically, the merged entity’s combined share in Cultures for Meat overall would

remain below 20% ([10-20]% worldwide and [10-20]% in the EEA). Only when

considering certain sub-segments of Cultures for Meat, would combined market

shares exceed 20%, namely in acidifying Cultures ([20-30]% in the EEA), surface

Cultures ([20-30]% worldwide and [20-30]% in the EEA),194 Dried & Semi-Dried

Fermented Sausages Northern European style ([20-30]% worldwide) and Dried

Cured Ham ([20-30]% worldwide and [20-30]% in the EEA).

(180) The Parties further argue that within Cultures for Meat, both Parties currently only

have […] within their top 20 worldwide and EEA customers. In addition, the Parties

submit that the Parties have generally different customer basis in Cultures for Meat,

with N&B mainly supplying large food companies across multiple regions

worldwide, and IFF mainly small- and medium-sized companies mostly located in

the EEA.195 Overall, Chr. Hansen would remain the market leader in Cultures for

Meat, and while the merged entity would become the second largest supplier, there

would be a number of other competitors who at least globally have a competitive

position similar to that of the Parties (e.g. Kerry or Lallemand) and who could easily

expand their activities in the EEA.196

(181) The Commission notes that according to data submitted by the Parties and with

respect to acidifying Cultures for Meat, the merged entity would have an EEA

market share of [20-30]%, while Chr. Hansen would be the clear market leader with

[60-70]%. With respect to surface Cultures for Meat, the merged entity would have a

worldwide share of at most [20-30]% and an EEA share of at most [20-30]%, while

Chr. Hansen would have a worldwide share of [20-30]% and an EEA share of [30-

40]%. Lallemand would be another strong player in this segment with a [20-30]%

share worldwide and a [20-30]% share in the EEA. With respect to Cultures for

Dried & Semi-Dried Fermented Sausages Norther European style, the merged entity

would have a worldwide share of [20-30]%, while Chr. Hansen would be the clear

market leader with [60-70]%. With respect to Cultures for Dried Cured Ham, the

merged entity would have a worldwide share of [20-30]% and an EEA share of [20-

30]%, while Chr. Hansen would be the clear market leader with a worldwide share

of [50-60]% and an EEA share of [50-60]%. It therefore appears that first and

foremost Chr. Hansen would remain by far the market leading player across all

affected potential markets.

193 e.g. Form CO paras 6.67, 6.69, 6.71, 6.72-73, 6.76 and 6.90. 194 IFF sales in surface Cultures relate to [details on IFF’s activities]. 195 Form CO para 6.69. 196 Form CO para 6.71.

34

(182) Further, the market investigation largely confirms the arguments brought forward by

the Parties. While N&B is mentioned by a majority of customers responding to the

market investigation as an important supplier of Cultures for Meat, IFF is only

mentioned by one customer and by one competitor.197 The majority of respondents

to the market investigation expressing their opinion do not consider N&B and IFF to

be close competitors with respect to Cultures for Meat. While two customers

consider N&B to be the closest competitor of IFF in Cultures for Meat, overall, a

majority of respondents expressing their opinions consider Chr. Hansen to be the

closest competitor of both N&B and IFF in Cultures for Meat.198 When asked

whether IFF has a competitive advantage in the supply of Cultures for Meat, one

competitor remarks that ‘[a]cquiring Frutarom has increased IFF[‘s] competitive

position’.199 However, another competitor submits that IFF does not have a

competitive advantage ‘compared to other suppliers such as e.g. Kerry, N&B and

Chr. Hansen’.200

(183) While the majority of customers replied ‘I do not know’, all customers expressing

their opinions consider that the Transaction will not have an impact on their

company with respect to the procurement of Cultures for Meat.201 Further, while a

majority of competitors replied ‘I do not know’, a majority of competitors

expressing their opinions also consider that the Transaction will not have an impact

on their company with respect to the supply of Cultures for Meat. One competitor to

the Parties in Cultures for Meat submits that ‘[g]iven that N&B and IFF are some of

the main competitors of [the Company] within meat cultures, the transaction will

potentially have some negative influence on [the Company] and the market

dynamics more generally in this segment. However, it does not raise a material

concern for [the Company]’.202 This concern however does not relate to the market

for the manufacture and supply of Cultures for Meat specifically, but rather to the

circumstance that the Parties are active in meat-related ingredients also outside the

field of Cultures, whereas the competitor in question is only active in Cultures.203

(184) It therefore appears that irrespective of whether an EEA or worldwide market is

considered, and whether Cultures for Meat overall or segments such as acidifying

Cultures, surface Cultures, Dried & Semi-Dried Fermented Sausages Northern

European style or Dried Cured Ham are considered, the Transaction would combine

two not particularly close players in the market and create an entity with moderate

market shares, significantly lagging behind the clear market leader Chr. Hansen.

(185) In the light of the above considerations, and, in particular, in the light of the

moderate combined market shares and the presence of a clearly market leading

competitor, and taking account of the results of the market investigation, the

Commission considers that the horizontal overlap brought about by the Transaction

in the manufacture and supply of Cultures for Meat overall, acidifying Cultures,

197 Q1 – Questionnaire to customers, replies to question C.B.1., and Q2a and Q2b – Questionnaires to


Questionnaires to competitors, replies to questions C.B.2. and C.B.3. 199 Q2b – Questionnaire to competitors, reply to question C.B.11. 200 Q2a – Questionnaire to competitors, reply to question C.B.11. 201 Q1 – Questionnaire to customers, replies to question J.1. 202 Q1 – Questionnaire to customers, replies to question J.1.1. 203 Minutes of a call with a competitor, 8 September 2020.

35

surface Cultures, Dried & Semi-Dried Fermented Sausages Northern European style

and Dried Cured Ham is not such as to raise serious doubts as to its compatibility

with the internal market.

5.2.1.3. Cultures for Plant-based food

(186) The Parties […] do not overlap in the manufacture and supply of Cultures for Plant-

based food. N&B has a global market share of [10-20]% and an EEA market share

of [30-40]%. IFF is […] not active in the manufacture and supply of Cultures for

Plant-based food. […].

(187) The merged entity will in any case continue to be constrained worldwide and in the

EEA by other established competitors active in Cultures for Plant-based food, such

as Kerry, Chr. Hansen and Sabinsa. All customers and competitors expressing their

opinion consider that the Transaction will not have an impact on their company with

respect to the procurement or sale of Cultures for Plant-based food.204

(188) In the light of the foregoing and taking account of the results of the market

investigation, the Commission considers that the Transaction does not raise serious

doubts as to its compatibility with the internal market in relation to the manufacture

and supply of Cultures for Plant-based food.

5.2.1.4. Conclusion on Cultures

(189) Even if considering a market for the manufacture and supply of Cultures overall, the

merged entity would only have a market share of [20-30]% worldwide and [20-30]%

in the EEA, with small increments from IFF ([0-5]% and [0-5]% respectively). The

fact that IFF is not a significant presence in Cultures overall is confirmed by a major

competitor in Cultures stating that it ‘does not compete with IFF’.205

(190) In the market investigation, and in contrast to submissions by the Parties, customers

consider there to be significant barriers to enter the supply of cultures.206 Otherwise,

respondents to the market investigation largely confirm the submissions by the

Parties. In addition to the aspects specific to Dairy Cultures, Cultures for Meat and

Cultures for Plant-based food discussed above, respondents to the market

investigation submit that they are not aware of any particular culture only supplied

by N&B, IFF and possibly a limited number of competitors.207

(191) Overall, significant majorities of respondents to the market investigation expressing

their opinion consider that the Transaction will not have an impact on their Company

with respect to Dairy Cultures, Cultures for Meat and Cultures for Plant-based

204 Q1 – Questionnaire to customers, replies to question J.1., and Q2a and Q2b – Questionnaires to

competitors, replies to questions J.1. and J.1.1. While one competitor describes a ‘minor concern’ in

relation to Cultures for plant-based food’, this concern does not relate to the Parties’ position in the

market for the manufacture and supply of Cultures for plant-based food as such, but rather to the

Parties’ activities also in other plant-based food ingredient segments outside of the market for

Cultures. 205 Minutes of a call with a competitor on 8 September 2020. 206 Q1 – Questionnaire to customers, replies to question C.B.10. 207 Q1 – Questionnaire to customers, replies to question C.B.7., and Q2a and Q2b – Questionnaires to

competitors, replies to question C.B.7.

37

or competing innovators. Further, they contend that customers can switch easily and

have significant buyer power. Moreover, they argue that barriers to entry are

moderate and that several strong competitors will constrain the Parties post-

Transaction. They submit that competitors in soy producing regions such as China

are important and account for much of the global Plant-based Protein sales. In

addition, they submit that the degree of market concentration in Plant-based Proteins

is generally low. They argue that in addition to the larger international players such

as ADM, CJ Selecta and Goldensea, there are numerous smaller suppliers who

compete particularly strongly for regional small or medium-sized customers.

(195) As regards Plant-based Proteins overall, the market investigation confirms that IFF is

not viewed as a strong competitor. Customers and competitors generally consider

manufacturers N&B and ADM to be the most capable in Plant-based Proteins when

considering parameters such as quality, R&D capabilities or portfolio. IFF by

contrast is not awarded any capabilities by any respondents except one customer.210

(196) Market feedback confirms the presence of various competitors, including from Asia.

Several Chinese companies were cited among the top three suppliers of Plant-based

Proteins, including Gushen, Shansong and Goldensea.211 A competitor commented:

“According to the Company, the market for plant-based proteins, which are

primarily used as an alternative for meat, is competitive. The Company considers

that there are many players in the plant-based protein market who are able to

produce with high-quality standards. Indeed, the Company faces competition

worldwide, from Asia (Chinese players in particular), America and Europe”.212

5.2.2.1. Soy-based Proteins

(197) As regards Soy-based Proteins in particular, the Parties submit that they face

strong competition from various suppliers, in particular from competitors in soy

producing regions such as Asia, who are actively and effectively competing

globally and in the EEA. They contend that Chinese competitors have

significantly improved their product quality and consistency over recent years

and account for c. [30-40]% of the global market by value. In addition, they

contend that alternative protein sources such as pea and rice are gaining

increasing importance, which has led to the entry of new competitors, putting

significant pressure on traditional soy protein producers.


respect to Soy-based Proteins overall, the merged entity would have a worldwide

market share of [20-30]%, with ADM in second position at [10-20]%. With respect

to a market comprising SPI and SPC, the merged entity would have a worldwide

market share of [20-30]%, with ADM in second position at [10-20]%. As regards

SPI as a separate market, the combined entity would have a [40-50]% market share

in the EEA, with ADM in third position at [5-10]%, while on a worldwide basis it

would have a [30-40]% market share, with ADM in second position at [10-20]%.


competitors, replies to question C.B.4. 211 Q1 – Questionnaire to customers, replies to question D.B.2., and Q2a and Q2b – Questionnaires to

competitors, replies to question D.B.2. 212 Minutes of a call with a competitor on 20 August 2020

38

With respect to TSP, the merged entity would have an EEA share of [20-30]%, with

Sojaprotein as the market leader at [30-40]% and ADM the third supplier at [10-

20]%. In each of these markets IFF’s share does not exceed [0-5]%, except in SPI,

where it reaches [0-5]% on a global basis. It therefore appears that the combined

entity’s market shares would generally remain moderate, that the increment from IFF

is limited and that strong competitors, in particular ADM, would remain present

across all affected potential markets.

(199) Contrary to what the Parties claim, customers replying to the market investigation do

consider barriers to enter the supply of Soy-based Proteins to be moderately

significant.213 Otherwise, respondents to the market investigation largely confirm the

submissions by the Parties. While N&B is named by many customers and

competitors responding to the market investigation as an important supplier of

Soy-based Protein, including SPC, SPI and TSP, IFF is named by no customers or

competitors.214 Only one customer and one competitor replying to the market

investigation consider N&B and IFF to be among the top five of each other’s closest

competitors in SPC, SPI or TSP.215

(200) Market feedback and the results of the market investigation confirm the presence of

competitors from Asia. Both customers and competitors cited several Chinese

companies among the top three suppliers of SPC, SPI and TSP, including Gushen,

Shansong and Goldensea.216 A customer commented: “Other important suppliers are

ADM in the USA and the Chinese suppliers [Confidential] ADM and the Chinese

suppliers are primarily active in the supply of soy protein isolates.”217 According to

the same customer, as regards the Plant-based Proteins market “[…] there is no

difference in the quality offered by Chinese suppliers and western suppliers.

[Confidential]. The Company has concluded supply agreements with all these

[Confidential] suppliers”.218

(201) A large majority of respondents confirm that there is an increasing demand for non-

soy-based proteins, in particular for pea protein.219 A customer commented: “Soy is

seen as old technology and has over many years been tainted due to GMO issues.

The trends are for "other" protein sources and Pea is just one of them.”220

(202) No customers expressing their opinion consider that the Transaction will have a

negative impact on their company with respect to the procurement of Soy-based

Proteins.221 A large majority of customers expressing their opinion considered that

the Transaction would have no impact on price, quality and/or innovation of the

213 Q1 – Questionnaire to customers, replies to question C.B.10. 214 Q1 – Questionnaire to customers, replies to question C.B.1., and Q2a and Q2b – Questionnaires to


Questionnaires to competitors, replies to questions C.B.2. and C.B.3. 216 Q1 – Questionnaire to customers, replies to question D.B.2., and Q2a and Q2b – Questionnaires to

competitors, replies to question D.B.2. 217 Minutes of a call with a customer on 19 August 2020 218 Minutes of a call with a customer on 19 August 2020 219 Q1– Questionnaire to customers, replies to question D.B.7; Q2a and Q2b – Questionnaires to

competitors, replies to question D.B.7 220 Q1– Questionnaire to customers, replies to question D.B.7 221 Q1 – Questionnaire to customers, replies to question J.1.

39

supply of Soy-based Proteins.222 While the majority of competitors answered ‘I do

not know’, a majority of those expressing their opinion also do not consider the

Transaction to have an impact on their company with respect to the supply of

Soy-based Proteins.223 Overall, no customer or competitor expressed a substantiated

concern with respect to the market for the manufacture and supply of Soy-based

Protein, or any subsegment.


considered, and whether Soy-based Proteins overall or segments for SPC/SPI, SPI or

TSP are considered, the Transaction would lead to the combination of a well-

established supplier (N&B) with another supplier whose market presence and

capabilities are very limited (IFF).

(204) In view of the above, and, in particular the very small increments brought about by

the Transaction (not more than [0-5]% by IFF), the Commission considers that the

horizontal overlap brought about by the Transaction in the manufacture and supply

of Soy-based Protein overall, SPC/SPI, SPI and TSP is not such as to raise serious

doubts as to its compatibility with the internal market.

5.2.2.2. Plant-based Proteins for Meat Substitutes

(205) The Parties argue that many companies are active in the hypothetical sub-segment

for meat and meat substitutes, including the large multinational ADM, pea protein

producer Roquette, and low cost Chinese competitors such as Gushen, Goldensea,

and Yuwang. They contend that in the EEA, there are also strong regional players

such as the Belgian Cosucra and the Serbian Sojaprotein. In addition, they submit

that in this subsegment there are also a large number of other, smaller competitors

with higher shares than IFF.


respect Plant-based Proteins for Meat Substitutes, the merged entity would have an

EEA share of [20-30]%, with IFF bringing a small increment of [0-5]%. ADM

would remain the second supplier at [10-20]% and Sojaprotein the third supplier at

[10-20]%. It therefore appears that the combined entity’s combined market shares

would remain moderate, that the increment from IFF is limited, and that strong

competitors, in particular ADM, would remain present.

(207) Overall, no customer or competitor expressed a substantiated concern with respect to

the market for Plant-based Proteins, including any segment for Meat Substitutes.


considered, when a segment for Plant-based Proteins for Meat Substitutes is

considered, the Transaction would lead to the combination of a well-established

supplier (N&B) with another supplier whose market presence and capabilities are

very limited (IFF).

(209) In view of the above, and, in particular, in light of the moderate combined market

share and the very small increment brought about by the Transaction ([0-5]% by

222 Q1 – Questionnaire to customers, replies to question J.2.2. 223 Q2a and Q2b – Questionnaires to competitors, replies to question J.1.

40

IFF), the Commission considers that the horizontal overlap brought about by the

Transaction in the manufacture and supply of Plant-based Protein for Meat

Substitutes is not such as to raise serious doubts as to its compatibility with the

internal market.

5.2.2.3. Plant-based Proteins for Active Nutrition

(210) The Parties contend that IFF is barely active in Plant-based Proteins for Active

Nutrition, including snack and beverage applications, and is more focused on the

segment for meat and meat substitutes, [details on IFF’s business plans and strategy].

They contend that in this potential sub-segment for Active Nutrition, IFF is not

active at all in the EEA and only to a negligible extent at worldwide level. They

further submit that many strong competitors are also able to deliver the product

quality and consistency required for beverage and snack applications, such as the

multinational ADM, the Japanese Fuji Oil, European-based competitors such as the

Belgian Cosucra and the Serbian Sojaprotein, but also Chinese producers including

Gushen, Goldensea, and Yuwang, which they claim have improved their product

consistency over the last years and offer aggressive prices. They submit that there

are also a large number of other, smaller competitors with higher shares than IFF

present in this segment.

(211) The Parties further contend that the market for Protein beverages and protein

fortified snack bars is growing, and that all suppliers have spare capacity, which they

have an incentive to use for this segment in light of the higher prices compared to the

meat and meat substitutes segment. They submit by way of example that there have

been recent capacity increases for pea protein which were mostly targeted at Active

Nutrition. They further submit that pea protein was historically not used in beverage

applications due to its taste profile, but is now increasingly being used, to the

detriment of the growth of soy protein beverages.

(212) In addition, they submit that dairy protein (whey protein) is the traditional protein

source for Active Nutrition and exercises significant competitive pressure on plant-

proteins for this application. They contend that dairy protein sources are the

longstanding preferred protein due to their familiar taste and strong nutritional

profile.


respect Plant-based Proteins for Active Nutrition including snacks and beverages,

the merged entity would have a worldwide share of [40-50]%, with IFF bringing a

small increment of less than [0-5]%. ADM would remain the second supplier at [5-

10]% and Fuji Oil the third supplier at [0-5]%. It therefore appears that the increment

from IFF is limited, and that strong competitors, in particular ADM, would remain

present.


the market for Plant-based Proteins, including any segment for Active Nutrition.


considered, when a segment for Plant-based Proteins for Active Nutrition is

considered, the Transaction would lead to the combination of a well-established

supplier (N&B) with another supplier whose market presence and capabilities are

very limited (IFF).

41

(216) In view of the above, and, in particular, in light of the very small increments brought

about by the Transaction (not more than [0-5]% by IFF), the Commission considers

that the horizontal overlap brought about by the Transaction in the manufacture and

supply of Plant-based Protein for Active Nutrition is not such as to raise serious

doubts as to its compatibility with the internal market.

5.2.2.4. Plant-based Protein Isolates and Concentrates


respect to Plant-based Protein Isolates and Concentrates comprising SPC, SPI, PPC

and PPI, the merged entity would have a worldwide share of [20-30]%, with IFF

bringing a small increment of [0-5]%. ADM would remain the second supplier at

[10-20]% and CJ Selecta the third supplier at [5-10]%. It therefore appears that the

combined entity’s market shares would remain moderate, that the increment from

IFF is limited, and that strong competitors, in particular ADM, would remain

present.


the market for Protein Isolates and Concentrates.


considered, and whether Plant-based Proteins overall or a segment for Protein

Isolates and Concentrates is considered, the Transaction would lead to the

combination of a well-established supplier (N&B) with another supplier whose

market presence and capabilities are very limited (IFF).

(220) In view of the above, and, in particular, in light of the moderate combined market

share and the very small increment brought about by the Transaction ([0-5]% by

IFF), the Commission considers that the horizontal overlap brought about by the

Transaction in the manufacture and supply of Plant-based Protein Isolates and

Concentrates is not such as to raise serious doubts as to its compatibility with the

internal market.

5.2.2.5. Conclusion on Plant-based Proteins

(221) The results of the market investigation indicate that N&B is a leading competitor in

the markets for Plant-based Proteins, in particular Soy-based proteins, where IFF’s

presence is hardly mentioned by respondents. In the Plant-based Protein markets

where the Transaction gives rise an affected market, the increment from IFF is very

limited, ranging from <[0-5]% to [0-5]%. N&B’s market share does not exceed [50-

60]% in any of those markets: in Soy-based Proteins overall, the merged entity

would have a market share of [20-30]% worldwide, with a small increment from IFF

([0-5]%). In addition, the replies to the market investigation do not suggest that any

supplier of Plant-based Proteins offers a product that could not be supplied by

competitors.224

(222) Overall, significant majorities of respondents to the market investigation expressing

their opinions consider that the Transaction will not have an impact on their


competitors, replies to question D.B.6.

42

companies with respect to Soy-based Proteins.225 In addition, significant majorities

of respondents to the market investigation expressing an opinion submit that they do

not expect the Transaction to have an impact on the market for the supply of Soy-

based Protein in terms of price, quality, or innovation.226

(223) In conclusion, in the light of the foregoing and taking account of the results of the

market investigations the Commission considers that the Transaction does not raise

serious doubts as to its compatibility with the internal market in relation to the

manufacture and supply of Plant-based Proteins.

5.2.3. Overall R&D efforts/ innovation

(224) The Parties’ R&D efforts and strategies [details on the Parties’ R&D strategies].227

In addition, a majority of respondents to the market investigation considered that the

combination of the Parties’ R&D capabilities will allow the merged entity to

compete better with its rivals,228 and to bring new and/or better products into the

markets.229 Moreover, the majority of respondents is of the view that the

combination of the Parties’ R&D capabilities will not hamper innovation, including

by hindering the rivals ability or incentive to innovate.230

5.3. Vertical non-coordinated effects

(225) The Transaction gives rise to vertical links between N&B’s manufacture and supply

of Gums and Plant-based Proteins and IFF’s purchases of these ingredients as inputs

for its food inclusions and systems production and between N&B’s manufacture and

supply of MCC and Emulsifiers and IFF’s purchases of these ingredients as inputs

for its flavours and systems production. These actual vertical links give rise to the

following vertically affected markets: the markets for the supply of Locust Bean

Gum, Plant-based Proteins for Active Nutrition, SPI, MCC for Food Applications,

Synthetic Emulsifiers overall, Ester Emulsifiers, DISMO, Fatty Acid Emulsifiers,

Other Synthetic Emulsifiers, De-Oiled Lecithin Emulsifiers overall, GM De-Oiled

Lecithin, and Non-GM De-Oiled Lecithin.

5.3.1. Gums

(226) As mentioned above in paragraph (126), N&B manufactures and supplies Locust

Bean Gum. Vertically affected markets arise due to IFF’s purchases of c. EUR […]

of Locust Bean Gum in 2019, [details on IFF’s purchases].

225 Q1 – Questionnaire to customers, replies to question J.1., and Q2a and Q2b – Questionnaires to

competitors, replies to questions J.1. 226 Q1 – Questionnaire to customers, replies to question J.2., and Q2a and Q2b – Questionnaires to

competitors, replies to questions J.2. 227 Form CO, Section V and Parties’ internal documents submitted as Annexes to Section V. 228 Q1 – Questionnaire to customers, replies to question L.5; and Q2a and Q2b – Questionnaires to

competitors, replies to questions L.5. 229 Q1 – Questionnaire to customers, replies to question L.6; and Q2a and Q2b – Questionnaires to

competitors, replies to questions L.6. 230 Q1 – Questionnaire to customers, replies to question L.4; and Q2a and Q2b – Questionnaires to

competitors, replies to questions L.4.

44

product compared to guar gum, in particular for certain grades and applications such

as baby food/infant nutrition.233

(233) A majority customers replying to the market investigation do consider barriers to

enter the supply of Locust Bean Gum to be moderately significant. However, several

comments confirm that this mainly relates to the sourcing of locust bean kernels.234

Customers do not report any recent entry or expect forthcoming entry in Locust Bean

Gum but several do mention that there has been expansion of production capacity by

N&B competitors in recent years.235

(234) A majority of customers submit that the merged entity would not have the ability or

incentive to deteriorate supply conditions of Locust Bean Gum or guar gum to

certain customers.236 On the question whether there would be sufficient alternative

sources of supply available to customers, should the merged entity deteriorate supply

conditions for Locust Bean Gum and/or guar gum, the results of the market

investigation were inconclusive.237 The replies from customers indicate that they

would have enough alternative sources for supply of standard grades of both

products but a number of respondents stated that they would have difficulties

replacing N&B’s supply of cold-soluble Locust Bean Gum for infant nutrition.

(235) As regards any vertical concerns relating to N&B’s supply of Locust Bean Gum for

infant nutrition in particular, the Parties submit that IFF does not purchase any LBG

for infant nutrition applications from N&B, or any other suppliers. On that basis,

there is no vertical link between the Parties in this putative sub-segment.

(236) No customers expressing their opinion in the market investigation consider that the

Transaction will have an impact on their company with respect to the procurement of

Locust Bean Gum.238 Similarly, no competitors expressing their opinion consider

that the Transaction will have an impact on their company as regards the supply of

Locust Bean Gum.239 A large majority of customers and competitors expressing their

opinions considered that the Transaction would have no impact on price, quality

and/or innovation of the supply of Locust Bean Gum.240

(237) As regards the risk of customer foreclosure, the Commission considers that the

merged entity would not have the ability to restrict access to a significant customer

base due to the limited size of IFF’s purchases. Even if IFF were to purchase all of

its demand for Locust Bean Gum from the N&B Business, rival suppliers would not

be foreclosed from supplying these ingredients to downstream manufacturers of

Systems, nor from supplying them to downstream food manufacturers or

233 Q1 – Questionnaire to customers, replies to question E.B.1.1. and Q2a and Q2b – Questionnaires to

competitors, replies to question E.B.1.1 234 Q1 – Questionnaire to customers, replies to question E.B.4. 235 Q1 – Questionnaire to customers, replies to question E.B.5. 236 Q1 – Questionnaire to customers, replies to question G.B.5., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.B.2. 237 Q1 – Questionnaire to customers, replies to question G.B.6., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.B.3. 238 Q1 – Questionnaire to customers, replies to question J.1. 239 Q2a and Q2b – Questionnaires to competitors, replies to question J.1. 240 Q1 – Questionnaire to customers, replies to question J.2 - and Q2a and Q2b – Questionnaires to

competitors, replies to question J.2.

46

generally multi-source, and enjoy a considerable amount of buyer power. In

addition, they argue that N&B does not have the incentive to deteriorate its supply of

SPI to IFF’s rivals as IFF’s demand for SPI only accounts for a fraction of the SPI

sales of the N&B Business.

(245) They further submit that the Transaction does not give rise to any risk of customer

foreclosure as the merged entity will not have the ability nor the incentive to

foreclose other ingredients manufacturers from supplying IFF’s competitors with

SPI, since IFF’s demand for SPI represents only a de minimis portion of the total

global demand.

(246) The Commission notes that there are a number of established competitors active in

SPI, which will continue to compete with N&B also after the Transaction. The data

provided by the Parties indicate that N&B is the market leader in the supply of SPI

on an EEA basis, with a [40-50]% market share, while the next three competitors,

including ADM and two Chinese players, have shares between [5-10] and [10-20]%.

On a worldwide basis, N&B is the market leader with [30-40]%, while the next three

competitors, including ADM and two Chinese players, have market shares around

[10-20]%.

(247) Given IFF’s very limited purchases of SPI, IFF’s worldwide and EEA-wide share of

demand is estimated by the Parties to be below [0-5]%.

(248) With regard to SPI, ADM and N&B are mentioned among the top three suppliers by

the same number of both customers and competitors replying to the market

investigation, while Cargill and Wilmar are also cited by several respondents.241 This

indicates that there would be sufficient alternative sources of supply available to

customers, should the merged entity deteriorate supply of SPI.242

(249) No customer having expressed an opinion in response to the market investigation

considers that the Transaction will have a negative impact on their company with

respect to the procurement of Soy-based Proteins.243 Conversely, a large majority of

customers expressing their opinion considered that the Transaction would have no

impact on price, quality and/or innovation of the supply of Soy-based Proteins.244

While the majority of competitors answered ‘I do not know’, a majority of those

expressing their opinion do not consider that the Transaction will have an impact on

their company with respect to the supply of Soy-based Proteins.245 Overall, no

customer or competitor expressed a substantiated concern with respect to the market

for the manufacture and supply of Soy-based Protein, or any sub-segment thereof.


merged entity would not have the ability to restrict access to a significant customer

base due to the limited size of IFF’s purchases. Even if IFF were to purchase all of

its demand for SPI from the N&B Business, rival suppliers would not be foreclosed

from supplying these ingredients to downstream manufacturers of Systems, nor from

241 Q2a and Q2b – Questionnaires to competitors, replies to question C.B.1. 242 Q1 – Questionnaire to customers, replies to question G.B.6., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.B.3. 243 Q1 – Questionnaire to customers, replies to question J.1. 244 Q1 – Questionnaire to customers, replies to question J.2.2. 245 Q2a and Q2b – Questionnaires to competitors, replies to question J.1.

47

supplying them to downstream food manufacturers or manufacturers in other

industries. A customer foreclosure strategy is therefore not likely.


merged entity would also not have the ability or the incentive to stop or worsen

supplies to downstream competitors. Given IFF’s low share of demand for SPI the

N&B Business has no incentive to deteriorate its supplies of SPI to IFF’s

competitors and other downstream food manufacturers. In any case, several

alternative suppliers of SPI will remain available to IFF’s competitors post-

Transaction.

(252) Based thereupon, the Commission considers that the notified concentration does not

entail risks of either customer foreclosure or input foreclosure in any of the potential

markets for Plant-based Protein.

(253) In light of above and in view of the results of the market investigation, the

Commission concludes that the notified concentration does not raise serious doubts

as to its compatibility with the internal market in relation to the vertical link between

the supply of Plant-based Protein, in particular Plant-based Protein for Active

Nutrition and SPI (upstream) and the manufacture of Systems and Food Inclusions

(downstream).

5.3.3. MCC

(254) N&B manufactures and supplies MCC for both pharmaceutical and food

applications. IFF only purchases MCC for food applications, in particular for its

Systems and Flavours. IFF does not purchase MCC for pharmaceutical applications.

IFF purchases its MCC needs [details on IFF’s purchases and sources of supply].

(255) According to the Parties’ estimates, in 2019 N&B had a [30-40]% market share

worldwide regarding the supply of MCC and of [40-50]% regarding specifically the

supply of MCC for food applications. N&B could not present data for the EEA but

for the EMEA where it has market share of [20-30]% in the supply of MCC and [30-

40]% in the supply of MCC for food applications. N&B however submitted that […]

of its EMEA sales of MCC for food applications sales take place in the EEA and that

similarly […] of the EMEA sales take place in the EEA.246

(256) N&B faces competition from a few other suppliers worldwide and in the EEA,

including for MCC for food applications. In the EEA and specifically for MMC for

food, the market leader according to the Parties is JRS (with a share of around [50-

60]%); other suppliers are Mingtai and Roquette (Blanver).

(257) IFF purchases of colloidal MCC are limited (less than EUR […] worldwide and less

than EUR […] in the EEA). IFF’s share of the demand for MCC for food

applications (colloidal MCC) is therefore negligible (below [0-5]% both worldwide

and in the EEA).

246 Form CO, Annex 7.9. Within EMEA, N&B supplies MCC for food applications in […] in addition to

the EEA countries.

48

(258) Due to the size of IFF limited purchases, the merged entity would not have the

ability to restrict access to a significant customer base. A customer foreclosure

strategy is therefore not likely.

(259) The merged entity would also not have the ability or the incentive to adopt an input

foreclosure strategy. In addition to the alternative suppliers of colloidal MCC, this

product is not a critical input for IFF’s business, or for its competitors. The small

quantities purchased by IFF also reflect the fact that IFF and other flavour and

fragrance houses are not the main customers of colloidal MCC products. These are

generally purchased by food manufacturers, which do not compete with IFF (or its

rivals) downstream.

(260) The fact that the proposed Transaction does not have a material impact on N&B’s

ability and incentives in the supply of MCC came also across in the market

investigation. The few customers that expressed a view, considered that post-

Transaction the merged entity would not have the ability or incentive to deteriorate

the supply conditions of MCC for food applications.247

(261) In light of above, and in view of the results of the market investigation, the



the supply of MCC for food applications (upstream) and the manufacture of

Functional Ingredients Systems and Flavours (downstream).

5.3.4. Emulsifiers

(262) As mentioned above in paragraph (126), N&B manufactures and supplies Lecithin-

derived and synthetic Emulsifiers, primarily for food applications. IFF sources only

food-grade Emulsifiers, both synthetic and Lecithin-derived. Therefore, no actual or

potential vertical links exist with respect to non-food grade Emulsifiers.

(263) IFF purchased around EUR […] of Emulsifiers in 2019. Of this, EUR [details on

IFF’s purchases] of Lecithin-derived Emulsifiers and around EUR […] of synthetic

Emulsifiers [details on IFF’s purchases].248

(264) Table 5 shows the vertically affected markets in Emulsifiers.249 N&B has a market

share of 30% or more both in Synthetic Emulsifiers and the potential distinct

markets therein by chemical class (both worldwide and in EMEA). With respect to

Lecithin-derived Emulsifiers, N&B’s share only exceeds 30% in De-Oiled Lecithin

Emulsifiers worldwide. N&B could not present data for the EEA but for the EMEA.

N&B however submitted that for all potential markets concerned, the split of N&B’s

sales between the EEA and the rest of the EMEA would be similar to the one for the

respective potential market overall.250

247 Q1-Questionnaire to Customers, replies to question F.B.5. 248 Form CO para 6.411. 249 Within Fractionated Lecithin Emulsifiers, the Notifying Parties estimate N&B to have a market share

of less than [0-5]% worldwide and in the EEA. 250 Share of N&B sales and of the overall potential market that relates to the EEA: synthetic Emulsifiers

overall approx. […]%, Ester Emulsifiers approx. […]%, DISMO approx. […]%, Fatty Acid

Emulsifiers approx. […]%, Other Synthetic Emulsifiers approx. […]%, Lecithin-derived Emulsifiers

50

of Emulsifiers from N&B specifically mentions that these would be easy to

replace.254

(269) Further, while a majority of customers and competitors answered ‘I do not know’,

a majority of customers and competitors expressing their opinions submit that the

merged entity would not have the ability and incentive to deteriorate supply

conditions of synthetic Emulsifiers or De-Oiled Lecithin Emulsifiers to certain

customers.255 Majorities of customers and competitors expressing their views further

submit that in any case, there would be sufficient alternative sources of supply

available to customers, should the merged entity deteriorate supply conditions for

synthetic Emulsifiers or De-Oiled Lecithin Emulsifiers.256

(270) Overall, a large majority of market respondents expressing their opinions do not

expect the Transaction to have an impact on their business in relation to

Emulsifiers.257

(271) Based thereupon, the Commission considers that the notified concentration does not

entail risks of either customer foreclosure or input foreclosure in any of the potential

markets for Emulsifiers.




the supply of Emulsifiers (upstream) and the manufacture of Functional Ingredients

Systems (downstream).

5.4. Conglomerate effects

5.4.1. General considerations of the conglomerate effects of the Transaction

(273) In the present case, the possibility of conglomerate effects arises from the

complementary of the Parties’ product portfolios, N&B’s significant market position

in certain product segments, and the fact that already today both Parties cross-sell

and offer technical and commercial bundles. One of the rationale of the Transaction

also seems to be the combination of portfolios to offer “full-set solutions” to respond

to consumer preferences.258 However, based on the information gathered and on the

outcome of the market investigation, it is unlikely that post-Transaction the merged

entity will be able to engage in anticompetitive foreclosure of rivals by offering

technical or commercial bundles or integrated solutions for food applications or for

the personal and home care industries, for the following reasons.

(274) First, while the majority of respondents to the market investigation considers that the

merged entity will have the largest product portfolio and the ability and incentive to

254 Minutes of a call with a customer on 10 September 2020. 255 Q1 – Questionnaire to customers, replies to question G.B.5., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.B.2. 256 Q1 – Questionnaire to customers, replies to question G.B.6., and Q2a and Q2b – Questionnaires to

competitors, replies to question G.B.3. 257 Q1 – Questionnaire to customers, replies to question J.1., and Q2a and Q2b – Questionnaires to

competitors, replies to question J.1. 258 Form CO, paras.3.14.

51

cross-sell and offer technical bundles (blends/systems, integrated solutions),259 the

majority of respondents to the market investigation also considers that

post-Transaction there will remain several alternative sources of supply for the

products in question. As a customer put it “[t]o our best knowledge, there are

sufficient alternative suppliers for all products concerned.” Another customer said

“[t]he market is still fragmented with many other supplier”.260

(275) The market investigation confirmed that already today competitors of IFF and of

N&B, such as Givaudan, Symrise, Kerry, DSM, ADM, Cargill, Tate & Lyle,

Ingredion, JRS, among other, offer blends/systems of ingredients as well as

integrated solutions. One competitor stated that “[f]unctional systems, i.e. blends of

different ingredients, are widely used in the industry”261. Whereas a majority of

respondents referred that the capability of matching the bundles offered by the

merged entity depended on the exact blend/integrated solution, several respondents

confirmed the Parties’ claim that competitors also enter into partnerships and/or

outsource certain ingredients to be able to offer a blend or integrated solution.262 One

customer indicated that “[c]ompetitors of IFF/N&B will have possibilities to

purchase the single products to combine it in bundles”; a competitor mentioned “in

many situations, industry partnerships will be able to create joint solutions, which

can compete with IFF/N&B's integrated solutions”.263

(276) Second, the market investigation indicated that one cannot talk about a market trend

towards blends or integrated solutions and that not all customers prefer such

offers.264 It seems the large customers rather procure single ingredients and develop

the blends/systems themselves. As a customer put it, “for small and mid-sized

companies, there is often a growing demand for and/or supply of integrated

solutions. For the large companies, this demand does often not exist. They prefer to

buy the products separately to keep control on the recipe, suppliers and costs, except

when there is functional benefit in the use of integrated solutions.” As a competitor

described it, “[t]here is an industry desire to sell more integrated solutions but from

a market standpoint, there is no trend but rather some opportunities to deliver more

value by the combination of ingredients or to support companies who do not have

product development expertise or resources”.265

(277) Third, the market investigation indicated that customers are not willing overall to

compromise on the quality of their end product, nor incur risk for their own

production processes for savings in transaction costs. The vast majority of

respondents considers that customers value the quality, performance and stability of

259 Q1 – Questionnaire to customers, replies to questions K.3. and K.8.2; and Q2a and Q2b –

Questionnaires to competitors, replies to questions K.3. and K.9. 260 Q1 – Questionnaire to customers, replies to question K.6.1. 261 Q2a – Questionnaire to competitors, replies to question K.4.1. 262 Q1 – Questionnaire to customers, replies to question K.7; and Q2a and Q2b – Questionnaires to

competitors, replies to question K.7. 263 Q1 – Questionnaire to customers, replies to question K.7.1; and Q2a and Q2b – Questionnaires to

competitors, replies to question K.7.1. 264 Q1 – Questionnaire to customers, replies to question K.5; Q2a and Q2b – Questionnaires to

competitors, replies to question K.5. 265 Q1 – Questionnaire to customers, replies to question K.5.1; and Q2a and Q2b – Questionnaires to

competitors, replies to question K.5.1.

52

their supplies and do not switch suppliers based only on transaction costs.266 As

a customer put it “[s]avings on transaction costs by reducing suppliers cannot

compensate the risk assumption in terms of product quality and production

processes”.267

(278) In fact, the majority of respondents considered that customers would not be locked in

by the merged entity bundle offers and cross-selling practices, as they would be able

to switch suppliers.268 One customer explained that “[d]ue to the competitive

landscape in the relevant product markets, customers are still able to switch

suppliers.”269 Another customer mentioned that “customers still would be able to

switch suppliers and find alternative sources”.270 A further customer indicated that

“they [customers] would be still able to find alternatives, but might have to open up

the ingredient mix and source it from different suppliers or go to another "solution

provider".”271 A competitor said that “[w]e expect customers to be able to continue

to switch suppliers like today”.272 Another competitor considered “risk of a major

lock-in of the customer base to be quite hypothetical.”273

(279) Similarly, a majority of respondents also considered that the large portfolio of

products and the opportunity to cross-sell would not give the merged entity the

ability to exclude rivals.274

(280) In the light of N&B’s significant position (market share of at least [30-40]%) in

some markets and market segments closely related to the products offered by IFF,

the Commission has investigated whether the merged entity could leverage its

position from these markets to others by means of tying, bundling or other

exclusionary practices. On balance, as explained bellow, the results of the market

investigation indicate that the merged entity is unlikely to have the ability and

incentive to implement such foreclosure strategies.

5.4.2. Cultures

(281) N&B has a significant position in Fresh Dairy Cultures ([30-40]% worldwide and

[30-40]% in the EEA).275 However, N&B is not the market leader. It is not only

constrained by the market leader, Chr. Hansen, but also by other established

competitors such as DSM and Glanbia. More importantly, already today, other

266 Q1 – Questionnaire to customers, replies to question K.10; and Q2a and Q2b – Questionnaires to

competitors, replies to question K.12. 267 Q1 – Questionnaire to customers, replies to question K.10. 268 Q1 – Questionnaire to customers, replies to question K.8.3; and Q2a and Q2b – Questionnaires to

competitors, replies to question K.9.2. 269 Q1 – Questionnaire to customers, reply to question K.8.3. 270 Q1 – Questionnaire to customers, reply to question K.8.3. 271 Q1 – Questionnaire to customers, reply to question K.8.3. 272 Q2a– Questionnaires to competitors, reply to question K.9.2. 273 Q2a– Questionnaires to competitors, replies to question K.9.2. 274 Q1 – Questionnaire to customers, replies to question K.6; and to Q2a and Q2b – Questionnaires to

competitors, replies to question K.6. 275 Form CO, Table 64.

53

suppliers offer bundles of Fresh Dairy Cultures with flavours and/or colours,

including Chr. Hansen, the Kerry Group, DSM, Sacco, Lallemand, and Vivolac.276

(282) One of the cultures competitors mentioned that the merged entity would have a

significant product portfolio, particularly in plant-based and meat ingredients, and

that the merged entity would become a “one-stop shop” against which it may be

more difficult to compete. However, the same competitor acknowledged that the

success of such one-stop shop strategy “will very much depend on how customers

will react to the Transaction. Whether they will still want a specialised product or

will go for a bundle with a broader portfolio of products.” The competitor also

acknowledged it “does not expect the Parties to leverage their reinforced market

position post-transaction in an anti-competitive way. What is more [the competitor]

is confident about its strategy of being a player specialised in cultures and enzymes

and will continue to foster innovation in relation to its services”277

5.4.3. Soy-based Proteins

(283) As analysed above, N&B holds a strong market position in Soy Protein Isolates ([30-

40]% worldwide and [40-50]%), as well as in other product segmentations by end

application such as Plant-based Proteins for Active Nutrition ([40-50]% worldwide

and [40-50]% in the EEA) and beverages ([40-50]% worldwide and [40-50]% in the

EEA). However, these are commoditised products and there are several other

suppliers on the market: not only multinational players such as ADM but also

Chinese players, which are selling globally.

(284) One competitor in Plant-based Proteins referred to the difficulty of competing with a

supplier with a large portfolio: “The combined product portfolio could make it

tougher for competitors with a more limited product range” and, in particular,

referred to the possibility that the merged entity would have to combine Plant-based

Proteins with flavours and masking agents.278 Today none of the Parties offer such

bundle but other competitors do offer bundles of Soy-based Proteins and masking

flavours for all types of soy-based proteins, including ADM, Kerry, Cargill, Symrise

and Givaudan.279

5.4.4. Locust Bean Gum

(285) N&B has a strong position in the Locust Bean Gum market ([30-40]% worldwide

and [30-40]% in the EMEA).280 However, it faces competition from established

suppliers. In fact, the majority of the respondents in the market investigation

considered that there will be alternatives sources of supply to the merged entity

bundles anchored in Locust Bean Gum.281 As a customer explained: “IFF/N&B is in

a privileged condition, since not many players will have the combined expertise of

such entity. However many players are already structuring themselves within

ecosystem network/open innovation, which means, partnering with other market

276 Form CO, para.6.719. 277 Minutes of call with a competitor held on 8 September 2020. 278 Q2a – Questionnaires to competitors, replies to questions D.B.9 and D.B.10. 279 Parties’ response to RFI no. 1. 280 Form CO, Table 64. 281 Q1 – Questionnaire to customers, replies to question E.B.12; and Q2a and Q2b – Questionnaires to

competitors, replies to question E.B.9.

54

players (non competitors) with different expertise to offer a holistic solution

approach to consumers.”282

5.4.5. MCC

(286) N&B has a significant position in MCC for food applications ([40-50]% worldwide

and [30-40]% in the EEA) and in MCC for pharmaceutical applications ([30-40]%

worldwide and [20-30]% in the EEA)283. Despite its leading position in MCC for

food applications, N&B faces competition from other well-established players such

as JRS, Mingtai, Roquette, Asahi. These suppliers are also present in the segment for

pharmaceutical applications where, JRS takes the lead.284

(287) In the market investigation, a MCC competitor mentioned it would be more difficult

to compete with the merged entity as they can leverage on its wide portfolio of

products.285 However, already today other suppliers are able to provide similar

bundles of MCC and flavours (Chr. Hansen) and fragrances (Firmenich)286. The

Parties have also argued that MCC is a commoditised product readily available on

the market, which makes it a less interesting product to bundle. Other competitors

could therefore match the bundle, not giving the merged entity the opportunity to

differentiate itself.287

5.4.6. Emulsifiers

(288) N&B has a significant position in Synthetic Emulsifiers ([30-40]% worldwide and in

the EEA)288 where it faces competition from Kerry Group, Palsgaard, Corbion, BASF,

Oleon, and Lon.289 N&B has also a significant position in De-oiled Lecithin

Emulsifiers ([30-40]% worldwide and [20-30]% in the EEA)290 but faces

competition from well-established suppliers such as ADM, Cargill and smaller

players such as Stern, Lecico, Lasenor, Soya International.291 More importantly

already today suppliers such as Kerry and AMD offer combinations of emulsifiers

and flavours.292

(289) In the market investigation, no conglomerate concerns were voiced in relation to

these products.

5.4.7. Enzymes

(290) N&B has a significant position in Enzymes for Carbohydrates Processing ([30-40]%

worldwide and [30-40]% in the EEA).293 N&B faces however competition from the

282 Q1 – Questionnaire to customers, replies to question E.B.12. 283 Form CO, Table 64. 284 Form CO, Annex 7.9 285 Q2a– Questionnaires to competitors, replies to question J.1.1 286 Form CO, para. 6.724. 287 Parties’ reply to RFI no. 1. 288 Form CO, Table 64. 289 Form CO, para. 6.697. 290 Form CO, Table 64. 291 Form CO, para. 6.698. 292 Form CO, paras. 6. 672 and 6.673. 293 Form CO, Table 64.

55

market leader Novozymes (c. [40-50]% worldwide and c. [40-50]% in the EEA), as

well as from other players such as AB Enyzmes, Sensun, BASF.294 N&B has also a

moderate position in Enzymes for Animal Feed ([20-30]% worldwide and [20-30]%

in the EEA)295 but faces competitions from several other players such as DSM,

Huvepharma, Adisseo, Abvista and BASF.

(291) More importantly, a majority of respondents the market investigation did not

consider that the Transaction would give the merged entity the ability or incentive to

leverage on these products to sell other products.296 As a competitor explained:

“[t]he Transaction does not, in [the competitor’s] view, give the IFF/N&B entity any

additional power [and] incentive to bundle products.297 Moreover, the majority of

respondents also considered that there would be other sources of supply to match the

merged entity bundle offers.298

5.4.8. Probiotics

(292) N&B has a significant position in Probiotics for Dietary Supplements ([30-40]%

worldwide and [10-20]% in the EEA). However, N&B faces competition from

established players such as Chr. Hansen, Lallemand, and Biogaia. In addition,

already today, other suppliers have in their product portfolio probiotics and colours

(Chr. Hansen), and probiotics colours and flavours (DSM).299.

(293) More importantly, no respondent to the market investigation voiced concerns and

some competitors expressly referred to the unlikely success of a bundle strategy. One

competitor added “we experience - and expect to continue to experience after the

transaction - that customers source probiotic solutions primarily as a stand-alone

product.”; another competitor explained “[m]ost customers will look for the best

offerings by each supplier, and the bundling effect possible from the new entity is

considered modest in [the competitor’s] view”.300


Commission concludes that the possibility of conglomerate effects arising from the

Transaction does not result in serious doubts as to its compatibility with the internal

market.

294 Form CO, para. 6.727. 295 Form CO, para. and footnote 448 296 Q1 – Questionnaire to customers, replies to question H.B.7 and H.B.8; and Q2a and Q2b –

Questionnaires to competitors, replies to questions H.B.4 and H.B.5 297 Q2a– Questionnaires to competitors, replies to questions H.B.4.1. H.B.5.1. 298 Q1 – Questionnaire to customers, replies to question H.B.9; and lies to Q2a and Q2b – Questionnaires

to competitors, replies to question H.B.6 299 Form CO, para. 6.728. 300 Q2a – Questionnaires to competitors, replies to questions I.B.2 and I.B.3.

56

6. CONCLUSION

(295) For the above reasons, the European 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

Documents

Case M.9827 - INTERNATIONAL FLAVORS & FRAGRANCES