by Sarah Hills - FoodBizDaily.com London
January 07 2010 - The European Commission has cleared the proposed acquisition of Cadbury by Kraft Foods.
But it said that the decision was conditional upon the divestment of the Polish and Romanian chocolate confectionary businesses of Cadbury.
Competition Commissioner Neelie Kroes said in a statement: “In view of the remedies offered, I am satisfied that the proposed takeover would not adversely affect competition anywhere in Europe and that consumers would not be worse off.”
The commission said that both Kraft and Cadbury were strong players in the chocolate confectionary business in the European Economic Area (EEA) but while Cadbury’s market share was very significant in the UK and Ireland, the penetration of Kraft's brands in these markets remains low.
In addition, it said that Kraft's and Cadbury's brands do not compete closely with each other, given the strong preference of UK and Irish customers for traditional British chocolate rather then "continental types" of chocolate.
Therefore, the Commission concluded that it found no competition concerns in the UK and Irish markets.
However, it did identify competition concerns within chocolate confectionery in Poland and Romania, where it said the combined market share of Kraft/Cadbury was particularly high and their brands were competing closely, in particular in the chocolate tablets markets.
In continental Europe, Cadbury is mainly active in France, Poland, Romania and Portugal, through local brands which it previously acquired.
Kraft has committed to divest Cadbury's Polish confectionery business marketed under the Wedel brand and Cadbury's domestic chocolate confectionery business in Romania, which the Commission concluded would remove the competition concerns identified.
The commission’s decision the latest hurdle to be crossed by Kraft in its hostile takeover bid for Cadbury but it still faces the battle of winning over shareholders.