On Friday, the Competition Commission of South Africa granted conditional approval for the acquisition of the Bovril and Marmite brands by Rymco from Pioneer Foods Groceries,a subsidiary of PepsiCo South Africa. This decision marks a significant development in the country's food industry, particularly concerning these iconic savoury spreads.
Consumers in South Africa love these brands and argue over which is better. The most significant difference between Bovril and Marmite is the base ingredients used to make the spreads. Bovril is primarily made with beef extract and a little on yeast extract, while Marmite is almost entirely made of yeast extract.
The transaction encompasses the transfer of both the 'Black Spreads' division, responsible for the production of Bovril and Marmite, and the Savoury Food Ingredients (SFI) division, which manufactures meaty savoury base flavours used in products like soups, sauces, gravies, and pies.
Rymco, a subsidiary of Lallemand, a Canadian company specialising in yeast and bacteria production, is set to integrate these divisions into its existing operations.
the Competition Commission said it had received a notice of the intermediate merger on August 5 2024.
The Commission's assessment identified vertical overlaps between the merging entities, noting that Rymco supplies fresh liquid yeast to the Target Business as an input for manufacturing its products. However, it concluded that these overlaps are unlikely to result in input or customer foreclosure, thereby posing no significant threat to competition within the market.
This acquisition aligns with Rymco's strategic objectives to expand its footprint in the savoury spreads and food ingredients market. By integrating Bovril and Marmite into its portfolio, Rymco aims to leverage its expertise in yeast production to enhance product offerings and drive innovation.
The transaction is anticipated to be finalised in the fourth quarter of 2024, following the fulfilment of all regulatory requirements and conditions set forth by the Competition Commission.
In terms of public interest considerations, the Commission addressed several key areas:
Employment: One of the primary concerns raised during the merger review was the potential impact on jobs. To address this, the Commission has mandated that the merged company cannot lay off any employees due to the merger for at least two years. After this period, the company must prioritise the re-employment of any workers affected by retrenchment, provided they have the necessary skills and experience. The company is also required to maintain current employment levels in South Africa until at least the end of March 2025.
Investment in the Business: Another important condition is a commitment to invest in the revitalisation of the Target Business. Over the next 30 months, the merged company is required to spend R10 million on upgrades, which will include improvements in production processes and waste management. This investment is aimed at improving the efficiency and sustainability of the business.
Skills Development and Training: The merged entity must also ensure that its new employees receive opportunities for growth. Rymco has committed to extending its existing skills development programmes to the employees transferred from Pioneer Foods. Additionally, the company must increase its annual spending on training by 5% over the next three years to help employees develop new skills.
Monitoring Compliance: To ensure that the conditions are met, the Commission will monitor the merged company’s activities over the coming years. Rymco will be required to report annually on its progress in areas like employment, capital investment, and skills development. If the company fails to meet these conditions, it could face penalties or be required to make corrective actions.
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