Nestlé faces Pfizer Nutrition brand 'blackout' in Australia after Mexican setback

By Ben BOUCKLEY contact

- Last updated on GMT

Related tags: Milk

Nestlé faces Pfizer Nutrition brand 'blackout' in Australia after Mexican setback
The Australian Competition and Consumer Commission (ACCC) yesterday approved Nestlé’s €9bn ($11.59bn) acquisition of infant nutrition business Pfizer Nutrition.

But the ACCC only gave the green light on the condition that Nestlé license Pfizer Nutrition’s Australian infant nutrition business brand portfolio to a third-party buyer vetted by the commission.

The Swiss firm has accepted this undertaking, which it proposed itself, and the ACCC said it was enforceable in court; it involves the sale of a 10-year license for Pfizer Nutrition’s Australian brands.

Following this, Nestlé will face a further 10-year blackout period during which it will not be permitted to re-enter the national market using the Pfizer Nutrition brands.

Asked if Nestlé was disappointed or satisfied with this outcome, a spokesman told that the Pfizer acquisition was a strategic move to improve the company’s global position in infant nutrition, especially in emerging markets.

Nestlé acknowledges the ACCC’s decision, and looks forward to continuing to compete with [Pfizer Nutrition brand] S26 in the Australian market,” ​he said.

“As the global acquisition remains subject to completion, Nestlé does not consider it appropriate to comment further,” ​he added.

‘Significant concerns’ about market concentration

Nestlé and Pfizer Nutrition are two of the three largest infant formula and toddler milk suppliers in Australia. Other large suppliers in the country include Danone (Nutricia Australia) and Abbott.

Nestlé supplies such products under the NAN and Lactogen brands, while Pfizer Nutrition sells the S-26 and SMA brands.

The ACCC said it had focused on the extent to which removal of Pfizer Nutrition as a Nestlé rival would reduce competition in the market in the wake of the deal, agreed back in March.

The body said it had “significant concerns”​ about further concentration in an already consolidated market, and thus insisted on the licensing undertaking.

Rod Sims, ACCC chair, said: “If the proposed acquisition were to proceed in Australia, the number of major suppliers of infant formula and toddler milk in each of the distribution channels would be reduced from three to two.

“Our enquiries indicated that this would be likely to substantially lessen competition in the supply of infant formula and toddler milk,”​ Sims added.

Nestlé works to reverse Mexican veto

Nonetheless, the ACCC said it did not require Nestlé to divest the brands entirely, stating that the company’s licensing and re-branding remedy addressed its primary competition concerns.

“[This solution] is likely to create an effective, independent and long-term competitor to the merged entity,”​ Sims said.

“The ACCC is aware of a number of potential purchasers of the divestiture business, which have proven expertise in the manufacture and supply of infant formula and toddler milks.

The licensing deal would allow a sanctioned buyer to rebrand the Pfizer products and further build brand equity during the later blackout period, the ACCC said.

On Wednesday Mexican competition authorities blocked the massive deal over concerns about possible unit price increases of up to 11.5%; Nestlé and Pfizer have 30 days to appeal the decision.

The Nestlé spokesman told this publication that the company would “continue to work with the commission to try to address those concerns” ​and had no further comments to make at present.

Chinese, Brazilian and Indian competition authorities have already approved the deal.

(*Register here for free access to the first ever online event​ devoted to Operational Efficiency in food and beverage processing on November 29, organized by our sister site and William Reed Business Media.)

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