Over the past 12 months, M&A activity in food and beverage sectors has piqued interest, as companies seek to diversify product portfolios or geographic presence and strengthen market positions amid shifting consumer demands and inflationary pressures, often through acquisitions rather than through innovation alone. Recent headlines are focused on Mars' impending acquisition of Pringles manufacturer, Kellanova. If cleared by the European Commission (EC) as anticipated, Mars will expand its popular existing product base into new snack categories in one of the largest food mergers of the decade. But the sector is no stranger to large-scale deals, with recent high-profile M&A activity including:
- Carlsberg's acquisition of Britvic which completed in January this year, combining its alcoholic beverage portfolio with Britvic's soft drinks and juice brands;
- Ferrero's purchase of WK Kellogg's, allowing Ferrero to expand beyond confectionery and enter the US cereal market by acquiring iconic breakfast favourites; and
- PepsiCo's acquisition of soda brand Poppi, providing PepsiCo access to the fast-growing prebiotic beverage segment aligning with growing health-focused consumer trends.
What do these deals appear to have in common? Diversification through adding new but related or complementary products, raising interesting questions regarding the competitive assessment of conglomerate deals. Conglomerate mergers are between firms active in different markets (though they are often related in some way) – unlike horizontal mergers, which combine competitors in the same market, or vertical mergers, which integrate supply chains – whose combined strength can still distort competition. The concern is not direct loss of competitive constraint leading to price increases or input foreclosure typically seen in merger analysis, but the indirect effect that conduct in one market might have on competition in the other.
Conglomerate mergers stirring-up competition scrutiny
While conglomerate mergers may not raise immediate or obvious competition concerns due to the lack of direct product market overlap – and may generate efficiencies and economies of scope, or other customer benefits – competition authorities, including the Competition and Markets Authority (CMA), acknowledge that they can still give rise to anti-competitive concerns including through "portfolio effects" theories of harm.
Portfolio effects can arise when a merger between businesses with complementary or related offerings could give the merged entity a dominant position in a market. Such dominance can lead to anti-competitive practices by the merged firm, such as bundling or "tying" (making the purchase of one product conditional on purchasing another), or leveraging increased bargaining power to impose unfavourable terms on retailers or suppliers. These practices can foreclose smaller competitors and reduce choice and increase prices for customers.
The CMA considered the potential for harmful portfolio effects arising out of Carlsberg's acquisition of Britvic, which integrated Carlsberg's beer products with Britvic's international soft drinks business.1 Although not direct competitors, the CMA examined whether the merger may give rise to conglomerate effects through the bundling of Britvic's soft drinks with Carlsberg's beer and cider offerings or offering conditional discounts, to the detriment of rival brewers.
The CMA unconditionally cleared the merger without an in-depth Phase 2 review at the end of 2024. Following extensive investigation, with input from customers, rivals, and third parties at other levels of the supply chain, the CMA was satisfied that the merged entity would only have limited ability, and no incentive, to engage in a tying or bundling strategy in the relevant licensed on-trade market (i.e. bars, pubs etc). The CMA was therefore comfortable that the combined product portfolio did not give rise to a realistic prospect of a substantial lessening of competition. The EC reached a similar conclusion.2
Crunch time for Mars/Kellanova3
The EC's final decision on Mars' proposed acquisition of Kellanova is eagerly awaited, having launched an in-depth investigation into the deal just as the US Federal Trade Commission (FTC) cleared it in June this year. The deal will see Mars, a significant player in confectionery and snacks, acquire popular Pringles and Pop-tarts manufacturer, Kellanova. The FTC highlighted that the merging parties' US brands differ from those owned and sold worldwide, and limited product overlap allowed the regulator to rule out immediate consumer harm. But the EC's preliminary finding was that Mars and Kellanova have strong market positions across multiple Member States. Major EU retailers such as Tesco urged the EC to investigate the deal over concerns that if Mars adds Kellanova's complementary "must-have" brands to its existing portfolio, the merged entity could gain excessive bargaining power over retailers.
If these concerns are borne out, retailers may have to accept higher prices or unfair terms to maintain access to these popular products, which may be passed on to consumers. Retailers' warnings, combined with ongoing inflationary pressures on food baskets and the need to ensure the costs of food shopping are not driven further up, mean the EC is taking its time to determine whether the initial competition concerns remain. This highlights the relevance of third-party opposition, economic climate, and broader policy objectives to merger review. While rumours are that the EC is heading towards unconditional clearance, the final decision is expected by mid-December.
Regardless of whether Mars/Kellanova successfully lands, the sector will continue to be shaped globally by relatively large-scale deals as companies seek to optimise product portfolios to satisfy changing consumer preferences. However, this apparent trend is not limited to this sector – similar strategies are giving rise to portfolio effects concerns in technology mergers and "ecosystem" theories in digital markets.
Indeed, in 2021, the CMA removed the reference in its Merger Assessment Guidelines to non-horizontal mergers being "benign" and has since explored ecosystem-type concerns in several high-profile cases. Looking forward, as brands consolidation continues, we would expect that increasing portfolio power and any resulting competitive advantage would naturally lead to changes in regulatory scrutiny even beyond merger control. However, it remains to be seen whether the CMA's appetite for pursuing arguably more novel theories of harm remains "healthy" throughout 2026 as it balances various priorities and policy objectives.