Question

A merger in premium ice cream? A few years ago, US antitrust officials faced the following case. Nestle, producers of Haagen-Dazs wanted to merger with Dreyers, another producer of what is called "superpremium" ice cream. Those opposing the merger pointed about the combined market share of Nestles and Dreyers would be 56% so that along with Unilever, producer of Breyers and Ben&Jerrys, three firms would sell 97% of this half-billion dollar market. Those in favor of the merger countered that the total supermarket ice cream sales are much greater, in excess of $1 billion because consumers can choose non-superpremium ice cream in which Nestle and Dreyer would command only 22% of the market and Unilever an additional 21% What is the best way to measure the market for ice cream: superpremium or all supermarket ice cream? Should the merger have been allowed?

Answer 1

Hello,

Please find the answer below:

The measure to be used to understand the market of ice-cream should be super premium ice-cream. Super premium ice cream is a sub-category of supermarket ice-cream with high market share and should be considered as separate measure for merging.

The merger of two giants - Nestle and Dreyers should not be allowed.

In super category - Pre merger - we have 3 big players i.e. Nestle , Dreyers and Unilever. The merger of Nestle and Dreyers would result in approximately 56% of market share with merged entity, Unilever with 41% and the remaining 3% with minor players. So looking at the post merge market shares, there will be situation of less competition. Post merger scenario might not be good for consumers as there are chances of increase in prices and less innovation in the product category.

answered by: anonymous