CADE conditionally clears acquisition of Wickbold by Bimbo

On 17 September, the Administrative Council for Economic Defense (CADE) cleared the acquisition of Wickbold by Bimbo do Brasil Ltda. upon the signature of a merger control agreement. Bimbo is acquiring six companies of the Grupo Wickbold, which also operate in the production and commercialisation of bakery goods, such as Wickbold & Nosso Pão Indústrias Alimentícias Ltda.

According to Commissioner Camila Alves, rapporteur of the case, the transaction was extensively and carefully reviewed, especially regarding the impacts of the decision on the consumers’ daily routine. “Industrial bread is part of the everyday life of Brazilians; it is not only a convenience good, but an essential part of a typical family diet and budget. Thus, rivalry conditions have even more sensitive aspects here”, she highlighted.

Both companies compete in the segment of industrial baking in Brazil. Bimbo produces bread, cakes, bread rolls, and savoury snacks under brands such as Pullman, Plusvita, Artesano, Ana Maria, Nutrella, Rap10, Bisnaguito, Crocantíssimo, and Takis. Wickbold manufactures bread, cakes, biscuits, and panettones under the brands Wickbold, Seven Boys, Tá pronto!, and Do Forno. The companies operate in the retail, wholesale, and food service sectors, supplying restaurants, snack bars, fast food chains, hotels, and hospitals with baked goods.

The review identified overlap in the industrialised bread segment and its sub-segments, deepening the examination of the rivalry among the different categories in this market. The evaluation considered both the national and regional markets, considering the particularities of the competitive factors in each category and the specific competitive dynamics of each location.

The decision reinforces the agency's concern about the impact of the operation on the markets and their consumers. Since the beginning, the Tribunal sought to go beyond a formal reading of documents, mainly focusing on internal evidence from the companies, which provided a more transparent view of the reasoning behind the transaction and how the parties see their competitors.

The investigation highlighted that, in markets of differentiated products, such as industrialised bread, competition depends more on brand strength, consumer loyalty, logistical coverage, and privileged access to points of sale than solely on the number of companies operating.

The analysis combined quantitative and qualitative metrics, competitive proximity tests and market tests, aiming to understand whether the brands involved compete directly with each other and if the merger could reduce the competitive pressure that currently regulates prices and market conditions.

Thus, various categories of industrialised bread were examined, considering that, in some segments, price is the main factor of competition, while in others, attributes such as brand, portfolio, tradition, and reputation prevail.

At the end, the decision shows the agency's concern to ensure that transactions submitted to CADE are assessed according to their impacts on competition, market contestability, and consumers.

The SG concluded that the transaction raises competition concerns in certain categories of industrialised bread, especially in the segments of whole-grain sliced bread and tortillas/wraps, both at national and regional levels. In addition, the decision also imposes structural and behavioural remedies to mitigate competition risks identified in the operation.

Remedies

The structural remedies involved the sale of Bimbo's Nutrella brand, which operates in the healthy bread segment, where high levels of concentration were identified in the Midwest, Southeast, and South Regions of Brazil, as well as the sale of Wickbold's Tá Pronto! brand in the tortilla/wrap sector, a direct competitor of the Rap10 brand. Furthermore, the party committed to only use trademarks containing the word element ‘"Rap10" to offer tortillas in the national territory for three years.

For Nutrella, the package includes all intellectual property rights of the brand, the domain “nutrella.com.br”, the inventory of sliced bread, breads with grains, rolls and mini rolls, as well as promotional materials, lists of recent customers, contracts with suppliers of specific inputs, and the transfer of formulas and recipes related to current products.

During the divestment of Tá Pronto!, all intellectual property rights, inventory, and promotional materials for the tortillas, the customer list of the last 18 months, as well as the product's exclusive formulas and recipes, will be transferred to the buyer.

Besides structural commitments, specific behavioural remedies were established for the bread roll and bread stick segment in the Midwest Region. The committed party is forbidden to sign contracts and agreements with retailers that imply exclusivity, including requirements for exclusive marketing, privileged reservation of shelf space, imposition of minimum exposure levels, or category captaincy arrangements for a period of three years.

A monitoring trustee will ensure the fulfilment of all measures, supervising the maintenance of sales volume, distribution channels, product quality, and marketing activities, until the brands are fully transferred.

Access the Case no. 08700.009090/2024-02.