EU to review proposed merger between Mondelez and DE Master Blenders

The European Commission (EC) is to initiate an in-depth investigation to examine a proposed joint venture between Netherlands-based coffee manufacturers Douwe Egberts Master Blenders 1753 (DEMB) and US-based Mondelez International (MDLZ).

The enquiry is aimed at assessing if the two companies are following the European Union (EU) merger regulation.

DEMB owns popular brands such as L’Or, Douwe Egberts, Senseo and Merrild, while Mondelez owns Carte Noir, Jacobs, Gevalia, and Tassimo.

The investigation is the result of the EU’s concern that the proposed transaction may reduce competition for various coffee formats in Austria, France, Denmark and Latvia and for single-serve systems in multiple member states.

As a result of the proposed transaction, the operating subsidiaries and substantially all the material assets of DEMB and its subsidiaries with Mondelez International’s coffee businesses will be combined into a joint venture.

The new entity to be formed post-merger will operate under the name of Jacobs Douwe Egberts.

The EC said in a statement: "The commission’s investigation revealed that the transaction would bring together a number of very important brands that currently compete against each other in these various formats. This would significantly reduce competition for roast and ground coffee in France, Denmark and Latvia, as well as for filter pads in France and Austria.

"DEMB and Mondelez are also the leading manufacturers of Nespresso compatible capsules sold by retailers in a number of countries (Nespresso’s own capsules are not sold through retailers). This concentration of key local brands in the hands of one company increases the likelihood of price increases for retailers and ultimately for consumers."

Expressing its concern, the statement went on to say that the deal would bring together DEMB’s Senseo and Mondelez’s Tassimo systems, which are two of the four leading systems in Europe.

The EC also said that this could also lead to higher prices for customers of machines and consumables and less innovation.