Proposed acquisition by Groupe Danone of Sparkling Spring Water Holdings Limited

No. ME/1659/02

A report under section 125(4) Fair Trading Act 1973 on the advice given on 14 January 2003 to the Secretary of State for Trade and Industry under section 76 of the Act

JURISDICTION

The merger satisfies the assets test and share of supply test of the Fair Trading Act (FTA) in respect of the supply of water coolers in Scotland.

THE PARTIES

Groupe Danone is an international food and drinks group. In calendar year 2001, it reported turnover of Euro 14,470 million. Groupe Danone recently acquired Chateaud'eau International S.A., a water cooler supplier in the UK, which was cleared on 5 December 2002. Before that acquisition Groupe Danone had no water cooler business in the UK.

Sparkling Spring Water Holdings Limited (Sparkling Spring) is a Canadian company active in the supply of water coolers in Canada, the USA, the Netherlands and the UK. In calendar year 2001, it reported turnover of US$92.5 million and gross assets of US$133.2 million (approximately £95.4 million) as at 31 December 2001.

ASSESSMENT AND RECOMMENDATION

The acquisition qualifies on both the assets test and share of supply test of the FTA. The parties overlap in the supply of mobile water coolers and point of use coolers (together water coolers) in the UK. The mobile water cooler business consists of the supply of electrically powered cooler units, re-useable large bottles (around 19 litres in capacity) of water to use with such units and ancillary services such as maintenance of such coolers. Point of use coolers are plumbed into mains water and thus the supply of such coolers exhibit fewer characteristics of a service.

The merger creates a combined UK share of supply of water coolers of 14 per cent (increment 8 per cent). The parties' combined UK share of supply of mobile water coolers only is 15 per cent. Neither party is active in the supply of point of use coolers. While the parties have a share of supply of mobile water coolers of 56 per cent in Scotland, the market is relatively undeveloped, most third parties are not concerned and barriers to entry appear low. In no other region is the share of supply of mobile water coolers greater than 16 per cent.

Groupe Danone's interests upstream (its Evian and Volvic brands) are centred in France and, given the high transport costs and low significance consumers attach to the type of water used in mobile water coolers, appear unlikely to have any significant impact on competition in the UK.

No conclusions were drawn on geographic market, as no competition concerns were raised by analysing the transaction on either a national or regional basis.

On these grounds we recommend that this merger is not referred to the Competition Commission.

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