Frozen Pizza: Takeover of Galileo by Dr. Oetker cleared

Following extensive market investigations the Bundeskartellamt has cleared the takeover of Galileo Lebensmittel GmbH & Co. KG (Galileo) by the Dr. August Oetker KG group (Dr. Oetker) in the first phase of the merger control proceeding.

Andreas Mundt, President of the Bundeskartellamt: “The market for frozen pizza is very concentrated. With its eponymous brand Dr. Oetker is the market leader, and by acquiring Galileo, it takes over an important manufacturer of private-label products. We are clearing the takeover based on extensive investigations and we looked into the case from all conceivable angles. Despite the high market shares, there are ultimately no serious competition law concerns. By acquiring Galileo, Dr. Oetker will neither become the dominant company in the market nor are the additions significant in the overall market context. Consumers and retailers will still have sufficient alternatives to choose from. What is more, the market has become very dynamic over the last few years. New competitors are putting pressure on established brands. Frozen pizzas from brand manufacturers are increasingly available at food discount stores and sales generated through special offers are gaining in importance.”

Dr. Oetker is one of Europe’s largest food manufacturers. The company is the market leader in the frozen pizza segment, followed by the Nestlé-Wagner group. Galileo, headquartered in Trierweiler (Germany), is an important manufacturer of frozen mini pizzas, which are almost exclusively distributed as private-label products of food retailers. In the course of its investigations the Bundeskartellamt surveyed manufacturers of frozen pizza products and food retailers.

The investigations have shown that Dr. Oetker's and Galileo’s market shares together are close to the threshold for the assumption of market dominance. However, there are several factors that prevent market dominance by Dr. Oetker. The Nestlé-Wagner group, Dr. Oetker's most important competitor, also holds a very significant market position with its brands. The market share Dr. Oetker gains by acquiring Galileo is relatively small when considering the overall market for frozen pizza products. With regard to the frozen mini pizza segment, which has so far been dominated by Nestlé-Wagner as the only brand manufacturer, the merger could prove to be rather beneficial for competition. Furthermore, the merger is not expected to give rise to or increase a joint dominant position of Dr. Oetker and Nestlé-Wagner in the market for frozen pizza products. Although the two largest brand manufacturers’ joint market share of over 60 per cent exceeds the threshold for the assumption of joint market dominance, the market development in recent years, which has been marked by competition, suggests that Dr. Oetker and Nestlé-Wagner do not form a non-competitive duopoly. In 2016 the brand manufacturer Gustavo Gusto entered the market. The company has since been gaining market share quickly and is putting Dr. Oetker and Nestlé-Wagner under competitive pressure.

Besides these factors, sales generated through special offers play an important role in the market for frozen pizza products, especially because branded products are increasingly available at food discounters. In addition, the buyer power of food retailers has limited the scope for pricing of the two leading manufacturers Dr. Oetker and Nestlé-Wagner and most of the surveyed food retailers do not expect the merger to result in severe consequences for the supply situation. Moreover, food retailers can switch to other manufacturers of frozen pizza products, especially from other European countries, to find alternatives to the products of Dr. Oetker and Nestlé-Wagner.