    REFERENCE RELATING TO THE COMPLETED
 ACQUISITION BY CÉRÉLIA GROUP HOLDING SAS
  (EITHER DIRECTLY OR INDIRECTLY) OF CERTAIN
ASSETS RELATING TO THE UK AND IRELAND DOUGH
   BUSINESS (JUS-ROL) OF GENERAL MILLS, INC.

                        Summary of Final Report

                      Published: 20 January 2023

Overview of our findings
1.   The Competition and Markets Authority (CMA) has found that the acquisition
     by Cérélia Group Holding SAS (Cérélia) of certain assets relating to the
     United Kingdom (UK) and Ireland dough business of General Mills, Inc. (GMI),
     operated under the ‘Jus-Rol’ brand (Jus-Rol Business) (Cérélia and GMI –
     together, the Parties) (the Merger) has resulted in a substantial lessening of
     competition (SLC) in the wholesale supply of dough-to-bake (DTB) products
     to grocery retailers in the UK, harming the interests of these retailers and,
     potentially, end-consumers of these products.

2.   On 4 November 2022, we announced our Provisional Findings, in which we
     provisionally concluded that the Merger would result in an SLC. Following
     consultation (and continued further evidence-gathering and analysis where
     appropriate to respond to matters raised on consultation), we have now made
     our final decision, which we summarise here. The report and its appendices,
     which will be published together with or shortly after this summary, constitute
     the CMA’s Final Report.

3.   The Parties proposed remedies intended to address the competition concerns
     we identified. We found – following a thorough assessment – that these
     remedies would be insufficient to restore the competition that would be lost as
     a result of the Merger.
4.    We have decided that only an asset divestment involving the sale of the entire
      Jus-Rol Business, akin to an unwinding of the Merger, to a suitable purchaser
      would be an effective remedy to address the SLC.


What are DTB products?

5.    DTB products include ingredient pastry dough (i.e., shortcrust, puff and filo
      pastry dough), pizza dough and other ready-to-bake dough products
      (including ready-to-bake croissant dough, pain au chocolat dough, cinnamon
      swirl dough, gingerbread dough, and cookie dough). DTB products are
      manufactured by combining flour with a liquid (e.g., water) and/or fat (butter,
      olive oil etc.) and sometimes with flavoured toppings. They are primarily sold
      in grocery retailers in the chilled shelves as part of the butter, spreads and
      margarine category of products. A smaller proportion are also available as
      frozen products, or at ambient temperatures.

6.    Most of the largest retailers in the UK stock both private label (PL) and
      branded DTB products. Branded products are sold under the brand name of
      the suppliers that sell them to retailers (although Jus-Rol is the only full-range
      branded supplier of DTB products with a national presence). We refer to this
      as the “branded channel”. PL products (also known as ‘own brand’ or ‘own
      label’ products) are products sold exclusively by a given retailer with their own
      packaging and branding. We refer to this as the “PL channel”.


Who are the businesses and what services do they provide?

7.    The Jus-Rol Business is by far the largest supplier of DTB products to grocery
      retailers in the UK and the only full range brand with a national presence.

8.    Prior to the Merger, the Jus-Rol Business was owned by GMI, a US-based
      global manufacturer and marketer of consumer and pet food. The Jus-Rol
      Business supplies branded DTB products to grocery retailers and foodservice
      customers primarily in the UK, and to a lesser extent in Ireland.

9.    The Jus-Rol Business’ UK product range is available either chilled or frozen in
      sheets, block and ready to bake forms. Specific products within the range
      include ingredient pastry dough, pizza dough, sharing bread dough and
      certain breakfast dough-to-bake products supplied in cans such as croissant
      dough, pain-au-chocolat dough and cinnamon swirl dough.

10.   The Jus-Rol Business is the largest supplier of DTB products (whether
      branded or PL) to grocery retailers in the UK by value by a considerable
      margin and, as noted above, the only full-range branded supplier of DTB
      products with a national presence.

                                           2
11.   Cérélia is by far the second largest supplier of DTB products in the UK and
      the largest supplier of PL products to grocery retailers.

12.   Cérélia is a joint stock company headquartered in Paris, France. Cérélia is
      controlled by funds affiliated with the private equity firm Ardian France SA
      (Ardian). Cérélia produces pies, pizzas, pastry dough, crepes, pancakes,
      waffles, cookie dough and ready to eat cookies for its own brands and for PL
      brands of its customers from nine manufacturing sites in Europe.

13.   In the UK, Cérélia operates under the name ‘BakeAway’, with a manufacturing
      plant in Corby, Northamptonshire. Cérélia’s predominant activity in the UK is
      the supply of DTB products to grocery retailers who sell these products to
      end-consumers under their PL brands. Cérélia currently also manufactures a
      large proportion of the Jus-Rol branded products sold in the UK. The Corby
      plant manufactures ingredient pastry dough, pizza dough, cookie dough,
      brownie dough and gingerbread dough.

14.   Cérélia is the second largest supplier of DTB products to grocery retailers in
      the UK (after Jus-Rol) by value with a share of supply that is more than
      double the size of the next largest supplier. Cérélia is also the largest supplier
      of DTB products to meet the PL product needs of grocery retailers by a
      considerable margin.


Our assessment

Why are we examining this Merger?

15.   The CMA’s primary duty is to seek to promote competition, both within and
      outside the UK, for the benefit of UK consumers. Following an initial ‘phase 1’
      investigation, the Merger was referred for a more in-depth ‘phase 2’
      investigation on 15 June 2022. At phase 2, the CMA considers whether:

      (a) there is a ‘relevant merger situation’ for the purposes of the Enterprise Act
          2002,

      (b) that relevant merger situation has resulted, or may be expected to result,
          in an SLC within any market or markets in the UK for goods or services,
          and

      (c) if so, whether remedial action should be taken, and if so, what action and
          by whom.

16.   The central question for the CMA is whether the Merger has had or may have
      an impact on competition in the UK. The link to the UK is established by


                                           3
      meeting one of two tests for jurisdiction: (i) the turnover test (based on the
      target’s turnover in the UK), and (ii) the share of supply test (requiring that the
      Parties together supply at least 25% of a particular good or service supplied in
      the UK, and there is an increment to the share of supply).

17.   As explained above, Cérélia and the Jus-Rol Business are both active in the
      UK and provide products to UK customers. We conclude that the Merger has
      resulted in the creation of a relevant merger situation on the basis of the share
      of supply test. This is because, based on our estimates, the Parties have a
      combined share by value of [60-70]% with an increment of [30-40]% in the
      wholesale supply of DTB products to grocery retailers in the UK.


How have we examined this Merger?

18.   In assessing the competitive effects of the merger, the CMA must determine if
      either an SLC has resulted, or it has not; or if there is an expectation (i.e. a
      more than 50% chance) that an SLC may be expected to result, or it would
      not.

19.   To determine whether this is the case, we have gathered information from a
      wide variety of sources, using our statutory powers to ensure that we have as
      complete a picture as possible under the constraints of the statutory timetable
      to understand the implications of the Merger on competition. The evidence we
      have gathered has been tested rigorously, and the context in which the
      evidence was produced has been considered when deciding how much
      weight to give it.

20.   At phase 2, as with phase 1, we have focused our investigations on one
      possible way in which the Merger could give rise to an SLC. This ‘theory of
      harm’ was whether the Merger may be expected to result in an SLC as a
      result of horizontal unilateral effects in the wholesale supply of DTB products
      to grocery retailers in the UK. What we mean by this is the possibility that the
      Merger could remove from the market a business that was competing with
      Cérélia in the supply of these products. We describe this as ‘horizontal’ effects
      because, in this respect, Cérélia and Jus-Rol would both be active at the
      same level of the supply chain (i.e. offering DTB products to grocery retailers).

21.   We conclude that the Merger has resulted result in an SLC on this basis. This
      is discussed in further detail below.


What evidence have we looked at?

22.   In assessing the Merger, we looked at a wide range of evidence that we
      considered in the round to reach our decision.

                                           4
23.   We considered evidence from the Parties submitted during the phase 1
      inquiry, responses to our informal and formal requests for information and
      internal documents during phase 2, site visits, the Main Party Hearings, in
      response to our Provisional Findings and other phase 2 submissions.

24.   We spoke to and gathered evidence from other market participants in the
      industry (including both grocery retailer customers and competitors of the
      Parties) to understand better the competitive landscape for the supply of DTB
      products, and to get their views on the impact of the Merger.

25.   We calculated market shares. In keeping with the established approach to
      market definition set out in the CMA’s guidance, we have considered the
      appropriate product market definition in this case from the starting point of
      whether the Parties are considered as alternatives by customers (grocery
      retailers). This takes into account the differences between the Parties’
      activities, as well as the similarities in the light of grocery retailers’
      requirements. We have also considered what other suppliers are considered
      as alternatives by customers and evidence of the ability to readily adapt
      manufacturing processes to supply different types of products. On that basis,
      we have concluded that the relevant market is the wholesale supply of DTB
      products to grocery retailers in the UK.

26.   As well as the size of the Parties’ market shares, our assessment also took
      into account the stability of those shares and the strength of competitive
      constraints on the Parties.

27.   We examined the Parties’ own internal documents, which show how they run
      their businesses and provide some insight into how they view their rivals.

28.   We have had some regard to tendering evidence. However, given that we
      have only seen evidence of tendering within the PL channel (described further
      below), we would not expect to see the Parties competing against each other
      head-to-head in tenders.

29.   We have looked closely at how the sector operates at the retail and wholesale
      level and considered the interaction between consumer demand and
      wholesaler demand.

30.   We have also considered the incentives of the Merged Entity and whether
      these mean that it would not be profitable to it to increase prices or degrade
      its offering to grocery retailers as a result of the Merger.




                                          5
What did this evidence tell us…?

…about what would have happened had the Merger not taken
place?

31.   In order to provide a comparator and determine the impact that the Merger
      may have on competition, we have considered what would have happened
      had the Merger not taken place. This is known as the counterfactual.

32.   Following an assessment of GMI’s internal documents which discussed its
      options in some detail, our view is that it was likely that, in the absence of the
      Merger, GMI would have continued to own and operate the Jus-Rol Business
      in the short to medium term whilst seeking an alternate buyer. Our
      assessment of the effects of the Merger are therefore considered in
      comparison to a scenario in which, had the Merger not gone ahead, the most
      likely scenario would have been GMI continuing to operate Jus-Rol in line with
      pre-merger conditions.


…about the nature of competition in the relevant market?

33.   PL and branded DTB products have very similar physical characteristics and
      are used by end consumers for the same purpose. Around 80% of DTB
      products supplied in the UK are sold by grocery retailers that provide both PL
      and branded DTB products. Other retailers, accounting for a limited share of
      the market, stock only PL DTB products or only branded DTB products,
      although we found that they may still consider the offering in the other channel
      when making purchasing decisions.

34.   We found that the Parties’ offerings to grocery retailers differ in some
      important respects because of the differences in the way that products from
      each channel are supplied to grocery retailers. The PL channel typically
      requires a more iterative negotiation process between the grocery retailer and
      the supplier where the retailer typically has a high degree of involvement in
      the specification of the PL products. In contrast, branded supply is offered to
      retailers on a ‘take it or leave it’ basis.

35.   When grocery retailers run tenders to select their DTB suppliers, these are
      specific to a particular channel (i.e., PL or branded). This means that the
      Parties do not compete head-to-head in tenders. However, there is also
      cross-channel competition. Because the physical characteristics and intended
      use of PL and branded DTB products are very similar, retailers (and end-
      consumers) view them to be substitutes. Grocery retailers have a finite



                                          6
      amount of shelf space for DTB products, and there is competition between PL
      and branded DTB suppliers for this space.

36.   DTB suppliers are therefore incentivised to offer retailers a good deal not only
      to secure their position as the preferred supplier in their respective channel,
      but also to win sales from suppliers in the other channel. This cross-channel
      competition results in a rivalry or competitive tension between the Parties, as
      Cérélia seeks to win sales in the PL channel from Jus-Rol in the branded
      channel and vice versa.


….about the extent of competitive interactions between the
Parties?

37.   Large grocery retailers, which account for the large majority of DTB products
      sold in the UK, told us that their ability to trade off the Parties in their
      negotiations is an important constraint which enables them to get a good deal
      when purchasing DTB products.

38.   These grocery retailers told us that they may not typically explicitly pit their PL
      supplier against their branded supplier but that the availability of both is a
      source of competitive tension that would be lost by the Merger, thereby
      reducing their ability to protect against potential price rises (or other kind of
      worsening in the Parties’ DTB offerings). The Parties’ internal documents also
      show some evidence of this kind of constraint operating in practice.

39.   We consider that the constraint between the Parties is important for both
      channels, noting that PL in particular (for which Cérélia is the leading supplier)
      operates as a pricing discipline on Jus-Rol. Post-merger, the strong market
      positions held by each of Cérélia and Jus-Rol will be consolidated within the
      Merged Entity, resulting in the loss of the constraint between the Parties
      which will, in turn, affect grocery retailers’ ability to resist a price rise (or other
      worsening in the Parties’ offerings).

40.   There is significant overlap in the product ranges that the Parties supply to
      grocery retailers. While some retailers might only buy some of the products
      within the Parties’ ranges at present, we found that the DTB product category
      should, for the purposes of assessing competition, be considered as a whole
      (because retailers consider all DTB products together and suppliers are able
      to alter and expand the types of DTB product that they offer to grocery
      retailers).

41.   While, as noted above, there are important differences in the offerings of the
      Parties, the relative importance of the competitive constraint offered by the
      Parties upon each other also depends on the available alternatives. As

                                             7
      discussed further below, we found that there were few credible alternatives for
      grocery retailers purchasing DTB products, which makes the loss of the
      competition between the Parties particularly important.

42.   The Parties told us that because Cérélia already manufactures most of the
      Jus-Rol products sold in the UK, there could be no existing competition
      between the Parties which would be lost by the merger. We note that this
      submission is not fully supported by the data that the Parties have provided.
      We also note, more broadly, that Cérélia’s role in manufacturing Jus-Rol
      products is based on a contractual relationship, which is materially different in
      nature to a merger. A contractual relationship does not result in a lasting
      change in market structure, has limited duration and may be renegotiated or
      terminated even before its initial term.

43.   In this regard, the Merger would result in material changes in competitive
      dynamics and market structure:

      (a) Post-Merger, Cérélia would have control over all aspects of the wholesale
          offering to retailers across both channels, which it does not have at
          present. In particular, Cérélia would have control over pricing of both the
          PL products bought by retailers from Cérélia and Jus-Rol products and
          could determine pricing to maximise joint profits (which is not the case at
          present).

      (b) The Merger would also ‘cement’ Cérélia’s role as the manufacturer of Jus-
          Rol products. As a result of the transaction, GMI would lose its ability to
          independently decide its commercial strategy, including whether to
          terminate the agreement with Cérélia and appoint an alternative supplier,
          take the production back in-house, or take any other course of action
          relating to its Jus-Rol products.

44.   We therefore found that the Parties’ submissions, that it would not be
      profitable to raise prices or degrade the quality of both Jus-Rol products and
      Cérélia’s manufacturing services to retailers for the PL channel, were not
      supported by the evidence available to us.


….about the alternatives available to the Parties’ customers?

45.   We have found that the competitive constraint on the Parties from alternative
      suppliers is limited, both individually and in aggregate. The Merged Entity
      would be the largest supplier of DTB products to UK grocery retailers by a
      considerable margin, combining the first and second largest existing
      suppliers. The Merged Entity would face limited competition from other firms.
      Only two other suppliers (Bells and Henglein, which are both predominantly


                                          8
      PL suppliers) have material shares of supply and their shares are
      substantially lower than either of the Parties.

46.   We found there to be no credible alternative suppliers of branded products
      with an equivalent range at the national level. Retailers tend to stock primarily
      Jus-Rol and generally do not see other brands as strong alternatives. We are
      not aware of any examples of retailers switching branded products in the past
      five years.

47.   Switching private label suppliers does occur more frequently. Across the six
      largest grocery retailers (accounting for 90% of the DTB market), there have
      been five instances of switching private label supplier in six years, although
      two of these five instances were in 2017.

48.   The presence of other alternative PL suppliers means that retailers have more
      options in that channel and so the relative importance of the constraint of Jus-
      Rol on Cérélia is not as high as vice versa. However, the weakness of the
      constraint from those alternative PL suppliers, and the not immaterial costs
      involved in switching PL supplier (given the more complex PL procurement
      process), compared to simply flexing volume requirements from an existing
      PL supplier to a branded supplier, means that the constraint provided by Jus-
      Rol on Cérélia is nonetheless important.

49.   We have carefully considered whether the competitive threat from alternative
      PL suppliers would be sufficient to prevent the Merged Entity from degrading
      important aspects of its competitive offering following the Merger. Taking into
      account the attractiveness of these alternative options to retailers, the
      switching costs that retailers would face, and the existence of limited buyer
      power resulting from the lack of alternatives, we believe that retailers would
      be unlikely to switch for small, but significant, price rises.

50.   We also considered what, if any, scope there was for some competitive
      constraint to be provided from outside our defined market, through the
      potential for substitution from products from outside the retail sector (e.g.,
      from suppliers currently active in the foodservice and food manufacturing
      sectors). However, we found evidence of material differences in customer
      demand and supplier capabilities between the foodservice and food
      manufacturing sectors and the retail sector. These include different packaging
      requirements, a foodservice focus on frozen products, and higher technical
      specifications/requirements of retailers. These differences suggest it is not
      straightforward for suppliers of foodservice customers to also supply grocery
      retailers, which limits the scope for these to act as credible alternatives for
      grocery retailers.



                                          9
….about the extent of grocery retailers’ buyer power against the
Parties?

51.   A very high proportion of sales of DTB products at the wholesale level are to
      large grocery retailers.

52.   While grocery retailers in the UK are sophisticated buyers who are trying to
      achieve the best deals and can benchmark commodity prices or limit
      promotional space, their ability to constrain DTB suppliers primarily depends
      on the existence of alternative options to respond to a deterioration in
      competitive conditions (e.g. by switching to an alternative supplier, sponsoring
      entry or starting to self-supply). In some cases, special purchasing
      requirements (such as the desire not to use products containing ethanol),
      volume requirements (for example around Christmas, when demand for DTB
      products hugely increases) and strict purchaser approval processes may limit
      their realistic supply options further.

53.   The ability of grocery retailers to leverage the constraint between the PL and
      branded channels will decrease due to the merger, as the largest PL supplier
      and the largest branded DTB supplier will combine. As noted, we also
      conclude that the Parties face limited competitive constraints from alternative
      suppliers which limits the retailers’ ability to switch away from their suppliers.

54.   While the Parties submitted that the threat of grocery retailers “delisting” their
      products suggested a degree of buyer power held by the supermarkets, we do
      not consider that this eventuality, which limits choice, to be in the interests of
      grocery retailers or end consumers.


….about any countervailing factors?

55.   Once we have decided that a Merger could give rise to an SLC, we also
      consider whether there are any factors that might prevent or mitigate against
      that SLC from arising. These are known as countervailing factors.

56.   In this case, we focused on whether there could be any new entry or
      production expansion in the supply of DTB products that could prevent an
      SLC from arising. The CMA generally considers that entry and/or expansion
      preventing an SLC from arising will be rare and will seek to ensure that the
      evidence is robust when presented with claims of this nature.

57.   We therefore considered this question by looking at any recent history of entry
      and expansion, seeking the views of third parties who may potentially sponsor
      or support entry and expansion, looking at the conditions and incentives to
      enter or expand in the supply of DTB products to the UK grocery retail market


                                          10
      generally and seeking to identify any third parties with specific entry and
      expansion plans. Given the important differences in how products in the
      branded and PL channels are procured by grocery retailers, we considered
      the potential for entry and expansion in each channel separately.

58.   Whilst past entry and expansion suggests that entry into the branded space is
      possible, we consider this most likely in a specific product category, rather
      than across the full range of DTB products offered by Jus-Rol. We found that
      there would potentially be significant investment required to launch a new
      DTB brand of a scale that could effectively constrain the merged entity. Jus-
      Rol holds a long-standing market position as the UK’s only national grocery
      retail DTB brand, which does not suggest that a branded competitor is likely to
      emerge as a strong alternative to Jus-Rol in a timely manner. The relatively
      small size of the overall market and degree of profitability we observed also
      suggest that entry from a branded supplier in an adjacent market is unlikely.

59.   We have also not identified any branded suppliers currently looking to enter
      the market or any specific plans from those in the market (on a more limited
      scale) to significantly expand or invest in their branded DTB business. We
      have also not identified any third parties with specific plans or intentions to
      sponsor or support branded DTB supplier entry or expansion.

60.   For PL products, we recognise that the relatively simple nature of the product
      and production process means that there could be, in theory, a number of
      potential new market entrants (e.g., from adjacent sectors, such as
      foodservice and food manufacturing) and that there was some willingness
      expressed by the grocery retailers to consider these potential suppliers if they
      could meet the qualifying criteria. In addition, we found that tender processes
      occur relatively regularly, providing an opportunity for potential new entry or
      expansion.

61.   However, we also found evidence of barriers to entry and expansion. A wide
      range of different factors were identified, including the fact there were
      relatively few large contracts to be awarded, the fact retailers do not currently
      commit to long term contracts, with most contracts being of no fixed term, the
      cost of capacity expansion relative to likely returns, the existence of some
      economies of scale, the need to have a UK-based sales team and a proven
      track record with grocery retailers in order to win PL contracts (i.e., an
      incumbency advantage), transportation logistics for non-UK based suppliers
      (particularly for larger supply contracts), the current difficult economic
      environment and the strong market position of the Parties.

62.   As with branded products, we have also not identified any potential PL
      suppliers currently looking to enter the market or any specific plans from those


                                          11
      in the market to significantly expand or invest in their PL DTB business. We
      have also not identified any third parties with specific plans or intentions to
      sponsor or support PL DTB supplier entry or expansion.

63.   Our assessment has therefore concluded that it is not likely that entry or
      expansion of sufficient scale would occur in a timely manner in order to
      prevent or reduce the impact of an SLC from arising as a result of this Merger.


Conclusions
64.   As a result of our investigation and our assessment, we have concluded that
      the completed acquisition by Cérélia of the Jus-Rol Business has resulted in
      the creation of a relevant merger situation.

65.   We have also concluded that the Merger has resulted or may be expected to
      result in an SLC in the wholesale supply of DTB products to grocery retailers
      in the UK. Having regard to the evidence in the round, our view is that the pre-
      merger constraint between the Parties is important and that the weakness of
      the limited alternative competitive constraints remaining post-merger will be
      insufficient to offset the effects of the Merger.


What must be done to remedy the SLC we have found?
66.   We considered different options for Cérélia to sell off all or part of the Jus-Rol
      Business and two alternative remedies proposed by Cérélia. We examined
      whether they would be effective at replacing the competition lost by the
      Merger, whether there would be any customer benefits resulting from the
      merger that would be lost due to their implementation, the requirements for a
      suitable purchaser for the business to be sold, and the process that should be
      followed to sell the business.

67.   We have decided that only an asset divestment involving the sale of the entire
      Jus-Rol Business, akin to an unwinding of the Merger, to a suitable purchaser
      would be an effective remedy to address the SLC and the harm it would
      cause to competition, and that requiring this would not be disproportionate.


What happens next?
68.   The CMA will now take steps to implement the remedies described above and
      will consult publicly on the approach to be taken.




                                          12
69.   In line with guidance, the CMA will implement its remedy decision within 12
      weeks of publication of the Final Report. The CMA may extend this time
      period once by up to six weeks.




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