Premium Food Group can acquire control of The Family Butchers
Andreas Mundt, President of the Bundeskartellamt: “We have examined this merger project very closely, as it involves Germany’s largest sausage manufacturer taking over the number two player in the market. In our assessment we also took into account Tönnies’s strong position in the upstream market for pig and cattle slaughter. Ultimately, however, the requirements for prohibiting the takeover were not met. Even after the takeover the parties will have combined market shares below 40 per cent for most sausage varieties. There are numerous competing producers and therefore sufficient alternatives available to customers, namely to food retailers. In addition, many large food retail chains have their own sausage production facilities which are part of their corporate groups”.
In 2023 PFG achieved a global turnover of 7.3 billion euros and a turnover of 4.1 billion euros in Germany. According to the company’s own information, this made PFG the largest supplier to the German food retail sector. PFG, which is based in Rheda-Wiedenbrück, is a family-owned company focusing on the slaughter and cutting up of pigs and cattle, the utilisation of slaughter by-products and the production of meat products from pork, sow, beef and poultry meat. With its subsidiary Zur Mühlen Gruppe, PFG is Germany’s largest sausage manufacturer.
Having achieved a total turnover of 700 million euros across all product segments in 2023, The Family Butchers is one of the next largest sausage manufacturers in Germany. The company was created in 2020 by a merger of the two family-owned companies Kemper and Reinert.
The merger affects various product groups in the sausage and cured meat products segment. The Bundeskartellamt conducted extensive investigations, surveying the main producers, food retailers and the retailers’ own meat processing facilities. The investigations have shown that due to their different manufacturing processes, it is necessary to distinguish between raw sausage (such as salami and Teewurst), boiled sausage made from raw meat (such as Vienna sausages, Bockwurst, Bratwurst and Lyoner), cooked sausage made from largely pre-cooked meat (such as liver sausage, blood sausage and head cheese), cooked cured meat (such as cooked ham) and raw cured meat (such as Black Forest ham and Lachsschinken). The Bundeskartellamt also differentiated between different types of meat and between chilled products (for example in self-service refrigerated shelves) and non-chilled products (such as dry sausage and jarred or canned sausages). Based on these differentiations, over 20 different product markets were examined.
According to the Bundeskartellamt’s findings, the geographical scope of these markets is limited to Germany. The quantities of imported sausage and cured meat products sold in the German food retail sector are very low.
Even after the merger the parties will have market shares below 40 per cent in almost all relevant markets, thus remaining below the statutory threshold for the presumption of market dominance. There are numerous other producers in Germany besides the two companies involved in the merger.
The merger will create competitive advantages for PFG due to the company’s strong position in the upstream markets for slaughterhouses in Germany, which secures the supply of meat for its meat processing facilities. Some competitors believed that, due to the company’s own slaughterhouses, PFG’s position of power in the upstream slaughter markets was stronger and more problematic from a competition perspective than its powerful position in the sales markets affected by the present merger.
In two markets for poultry products the combined market shares after the merger will be below or approximately 40 per cent. However, PFG is not active in the slaughter of poultry and therefore does not have any additional advantages in this segment over other market participants in the upstream markets.
The fact that many food retailers produce their own sausage products (in particular, Edeka, Rewe and Kaufland) creates strong competitive pressure. Their integrated meat processing facilities supply only their own retail divisions within the corporate group. For the food retailers, their in-house production is an alternative source of supply which, according to the producers’ statements, regularly plays a role in negotiations. It has happened before that sausage manufacturers lost quotas to the food retailers’ integrated meat processing facilities. As a result the sausage manufacturers were no longer able to operate their own facilities at sufficient capacity.
Despite the parties’ strong combined market position, and despite PFG’s and The Family Butchers’ significant increases in market shares, the requirements for prohibiting the merger are ultimately not met. After the merger there will still be just enough competition, and food retailers will have sufficient alternative sources of supply to choose from.
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