Dive Brief:
- The European Commission announced it has until July to investigate Cargill Inc.'s plans for a $440 million purchase of Archer Daniels Midland Co's chocolate business, which it believes may reduce competition and could lead to higher prices in parts of Europe.
- Competition in the industrial chocolate supply market could be threatened in Britain and Germany should the merger go through, as uncovered by the Commission's preliminary investigation. Cargill and ADM are already two of those countries' top suppliers.
- According to Reuters, Cargill had once intended to buy ADM's chocolate sector as well as its cocoa business, but long-running negotiations fell through. Sources told Reuters that this was due in part to European regulation concerns at that time as well. To continue pursuing a deal with Cargill, ADM plans to sell its cocoa business to Olam International Ltd instead.
Dive Insight:
The merger is part of a growth strategy for Cargill, possibly in part due to a recent slowdown in chocolate demand. According to the European Cocoa Association, this decrease includes a 7.4% drop in cocoa-bean processing for the fourth quarter year over year in Europe and a 2% dip for the U.S. in the same period, The Wall Street Journal reported.
In other news, Cargill announced it completed an investment to expand in South Africa, in particular a $12.5 million investment in an animal feed facility in response to rising demand for those products in the region.