The European Commission (EC) has cleared the proposed restructuring of Coca-Cola Nestlé Refreshment Company (CCNR), an existing beverages joint venture in the field of iced tea and coffee between The Coca-Cola Company (TCCC) and Swiss-based food company Nestlé SA.
The operation does not give rise to any competition concerns given the existence of strong competing brands in Europe such as Unilever's Litpon or San Benedetto, the presence of a number of other local brands, and the absence of barriers to entry in the market concerned.
CCNR is a 50/50 joint venture between TCCC and Nestlé, which was originally created in 1991 for the manufacture and distribution of Nestea (a Nestlé's iced tea brand) as well as iced coffee and iced chocolate beverages. In 1995 the parent companies agreed to restructure CCNR and terminate its responsibility for iced chocolate beverages.
Following a new restructuring of the joint venture decided earlier this year, TCCC and Nestlé notified the operation again to the Commission for regulatory clearance under the Merger Regulation. The modifications are intended to enhance CCNR's autonomy from its parents and broaden its geographical scope (CCNR will be present worldwide except Japan, the US and Canada).
Nestlé will also contribute to CCNR its Beltè iced tea brand in Italy and its European iced coffee business. The product scope of CCNR will moreover be expanded to include R&D and production of beverages containing calcium, herbs or other nutritional ingredients that use tea or coffee as a carrier.
The Commission's review of the joint venture showed that in the iced tea market segment, Unilever's Lipton is the leading brand in several countries in the European Economic Area. By comparison, Nestlé's Nestea has relatively low market shares and is even absent in some EEA countries.
In Italy, where CCNR will combine Nestea and Beltè, the concentration did not give rise to any concerns, given the existence of strong brands such as San Benedetto and Tè Guizza, both owned by the San Benedetto company, Estathè and Litpon.
In Denmark and Spain, even if Nestea's share of the local sales is high, its presence in TCCC's portfolio was not a concern since iced tea is still a novel product in these countries, with small sales volumes compared to other non-alcoholic beverages. Other brands are also forecast to enter the Danish and Spanish markets or to increase their sales in the next years.
Coca-Cola Company welcomed the decision of the European Commission's Merger Task Force. Doug Daft, Chairman and CEO of The Coca-Cola Company, commented, "We welcome this decision which benefits the consumer by offering greater choice. This long-standing and now invigorated joint venture will make available existing brands as well as develop new beverage options."