Mars-Kellanova deal cleared in US, faces EU showdown

Mars’ takeover of Pringles maker Kellanova has passed a major hurdle in the US, but regulators in Europe aren’t convinced just yet. This follows Bakery&Snacks’ initial report on 23 June detailing the European Commission’s concerns about the deal’s impact on competition and pricing.

Also read → Is the $36 billion Mars-Kellanova merger at risk of collapsing?While the FTC wrapped up its review without objections, the European Commission has now confirmed it is moving ahead with a full-scale investigation, citing fears the merger could increase pressure on retailers and affect shelf prices.

FTC gives the thumbs-upOn Wednesday (25 June), the US Federal Trade Commission (FTC) officially ended its review of the blockbuster snack deal, concluding it doesn’t pose a threat to market competition. That’s despite earlier calls from consumer groups to scrutinise the merger, citing worries over grocery prices.

“Our job is to determine whether there is a violation of American law that we can prove in court. And once we’ve concluded there is not, our job is to get out of the way,” said Daniel Guarnera, director of the FTC’s Bureau of Competition.

Privately held Mars said it was pleased with the outcome.

“We are very pleased that the FTC has completed its review of the transaction without the imposition of any condition or requiring any remedy,” said CEO Poul Weihrauch. “This brings us one step closer to uniting two iconic businesses.”

Together, the companies would control about 12% of the US snacks and candy market, according to NielsenIQ, still trailing competitors like PepsiCo, Mondelez and Hershey.

Steve Cahillane, chairman and CEO of Kellanova, called the approval a “significant milestone,” saying the combined company would be in a stronger position to meet evolving consumer demands.

But Europe hits pauseWhile US regulators are stepping aside, Europe’s watchdogs are stepping in. The European Commission announced it would launch an indepth probe, warning the deal could give Mars too much power when negotiating with retailers and that could translate to higher prices on shelves.

“As inflation-hit food prices remain high across Europe, it is essential to ensure that this acquisition does not further drive up the cost of shopping baskets,” said EU antitrust chief Teresa Ribera.

The Commission cited concerns that Mars and Kellanova’s combined brand portfolio – which includes ‘must-have’ products like Pringles, Pop-Tarts, M&Ms and Cheez-Its – would make it tough for retailers to push back on pricing. Several European grocers reportedly fear losing customers if they don’t stock the merged company’s products.

Mars said it was “disappointed” by the EU’s move but remains optimistic.

“We remain confident the pending combination of Mars Snacking and Kellanova’s complementary footprints and portfolios will deliver more choice and innovation to consumers,” said Mars in a statement. “We look forward to delivering the benefits of the pending transaction to all Mars and Kellanova stakeholders.”

If the European Commission concludes the deal would significantly reduce competition, it could require Mars to divest assets in certain markets or block the merger outright. The Commission has set an 31 October deadline to make its decision, following its preliminary investigation and retailer feedback.

The EU’s move is the latest example of Brussels taking a more aggressive stance on consolidation in consumer goods, especially when inflation and supply chain volatility have already stretched household budgets.