EU gives the okay to big Brazilian orange juice merger

By Guy Montague-Jones

- Last updated on GMT

Related tags Orange juice European union Mergers and acquisitions

The European Commission has approved the merger of Citrovita and Citrosuco - two orange juice businesses that together process 40 per cent of the orange juice from Brazil.

The tie-up between Citrovita and Citrosuco, owned by the Votorantim Group and the Fischer Group respectively, will create the world’s largest wholesale supplier of orange juice with annual revenues of $1.2bn.

But despite the size of the deal and the fact that the proposed joint venture combines two of the four main suppliers of orange juice to Europe, the Commission decided that competition would not be compromised.

Investigation results

Its investigation, which has been running since January, concluded that there are enough rivals in Europe and elsewhere to preserve competition.

And these competitors were found to have sufficient market power to ensure that competition would not be undermined.

For example, the Commission said they are not restricted in their access to fresh oranges so the Brazilian joint venture would be unable to increase market prices by reducing output. And if the joint venture were to up its prices, customers could easily switch to another supplier at a low cost.

Juice consolidation

The merger between Citrovita and Citrosuco is part of a movement towards greater consolidation in the juice market.

Rabobank analyst Francois Sonneville said orange juice has become something of a commodity product in Western Europe where private label now dominates.

This concentration at the top of the market is fueling consolidation down the supply chain.

To supply a big supermarket, Sonneville said a bottler or processor has to be able to supply significant volume and do so at a low price. The synergies and economies of scale achievable through mergers and acquisitions make consolidation an attractive strategy.

The orange juice processing market is now quite consolidated, especially in Brazil, leaving little scope for more deals similar to the merger between Citrovita and Citrosuco. But Sonneville said there is plenty of room for consolidation among European bottlers, who pack and distribute juice to retailers.

Related topics Manufacturers Juice drinks

Related news

Follow us

Products

View more

Webinars