Brazilian Regulator Recommends Blocking Nestle and Fonterra's DPA Brasil Sale to Lactalis

Brazil's antitrust watchdog, CADE, has received a recommendation from its technical staff to block the sale of DPA Brasil by Nestle and Fonterra to Lactalis. The potential transaction is set to undergo further review by CADE's court, which will vote on its approval. The regulator's technical team highlighted concerns about horizontal competition issues in the Brazilian dairy products market, particularly in the fermented milk, petit-suisse, and dairy dessert segments.

CADE's technical team has expressed reservations about the sale of DPA Brasil, which owns the popular Chambinho, Molico, and Chandelle brands. The regulators fear that the transaction could create horizontal competition issues within the Brazilian dairy market, given the significant presence of Lactalis in the industry. The team also noted a reduced number of rival companies operating in the fermented milk, petit-suisse, and dairy dessert markets, raising concerns about competitors' ability to challenge Lactalis' market power resulting from the acquisition.

DPA Brasil, a major player in the Brazilian yogurt, dairy dessert, and cream cheese sectors, was established in 2003 and operates two factories in the country. The proposed sale to Lactalis by Nestle and Fonterra was announced late last year and reportedly valued at 700 million reais ($147.74 million). Lactalis, the world's largest dairy producer based in France, already owns 13 brands in Brazil, including Parmalat, Batavo, Itambe, and Pocos de Caldas.

Implications of the Potential Blockade

The technical staff's recommendation to block the sale raises questions about the consolidation of power in the Brazilian dairy market. If CADE's court ultimately approves the recommendation, it may signal a more cautious approach by regulators towards significant acquisitions by dominant players in the industry. The outcome will have substantial implications for the competitive landscape in Brazil's dairy sector and may set a precedent for future mergers and acquisitions within the industry.

The Brazilian regulator's recommendation to block the sale of DPA Brasil to Lactalis by Nestle and Fonterra indicates heightened scrutiny of the potential impacts on competition within the country's dairy market. As the review process proceeds, stakeholders and industry players will closely monitor CADE's decision, which could shape the dynamics of the Brazilian dairy sector and influence future investment and consolidation efforts in the industry.