Competition watchdog gives green light to NTUC Enterprise's acquisition of Kopitiam

SINGAPORE - The competition watchdog on Thursday (Dec 20) gave the green light for NTUC Enterprise's proposed acquisition of food centre operator Kopitiam, saying that it would not lead to a substantial lessening of competition.

In its grounds of decision issued on Thursday, the Competition and Consumer Commission of Singapore (CCCS) said that it has studied the three markets that would be affected by the proposed transaction, after it was notified about NTUC Enterprise's move on Sept 28.

The acquisition of Kopitiam Investments and its subsidiaries was announced on Sept 21. The value of the transaction has not been disclosed.

The proposed acquisition would bring Kopitiam, one of the largest players in the industry, under the umbrella of NTUC Enterprise. Kopitiam has 80 outlets comprising 56 foodcourts, 21 coffee shops and three hawker centres, as well as two central kitchens. Among them is the famous Lau Pa Sat Festival Market in Raffles Quay, which Kopitiam acquired in 1995.

NTUC Enterprise is the holding entity and single largest shareholder of NTUC Social Enterprises, which includes NTUC Foodfare which manages 14 foodcourts, 10 coffee shops and nine hawker centres.

IMPACT ON SALE OF COOKED FOOD

In assessing the sale of cooked food to consumers in hawker centres, coffee shops and foodcourts within a 500m radius of the parties' premises, CCCS said it found that they sold such food only in a very limited number of stalls in these locations.

There are many stalls operated by third-party food vendors in most of these premises.

Thus, the proposed acquisition would still see sufficient competition, with the combined market share in the overlapping catchment areas well below 20 per cent, even after the sale of drinks was also considered.

IMPACT ON RENT FOR HAWKER CENTRE STALLS

Given the small number of hawker centres that would be operated by the merged entity, CCCS also found little prospect of anti-competition consequences in the market for the rental of hawker centre stalls.

The watchdog said that the parties overlap in the operation of only four new hawker centres, out of a total of 114 centres.

IMPACT ON RENT FOR STALLS IN COFFEE SHOPS AND FOOD COURTS WITHIN CATCHMENT AREA

The rental of stalls in coffee shops and foodcourts to food vendors within a catchment area of 500m to 1km radius from the parties' premises was also assessed.

CCCS found that in these cases, the combined market shares of the parties in most of these areas range between 30 per cent and 40 per cent, with the combined market shares of the three largest firms less than 70 per cent.

This falls below CCCS' indicative thresholds of a merger situation that may raise competition concerns, it said.

Furthermore, CCCS noted that there are also at least five other established competing operators that will remain post-merger.

Other points noted by the watchdog include the fact that the parties are not each other's closest competitor, food vendors will still have some bargaining power, barriers to entry and expansion are likely to remain low, and a collusion between operators is unlikely.

It also concluded that the merged entity from the proposed acquisition would not have the ability or incentive to shut out competitors and to mandate purchases through central kitchens and supply chain networks.

NTUC Enterprise said in a statement on Thursday that it welcomed CCCS' decision and that the proposed acquisition is expected to be completed in January 2019.

NTUC Foodfare and Kopitiam will continue to operate separately, with their respective management teams and employees remaining in place.

Business will continue as usual and Kopitiam Loyalty Card users can go on using their Kopitiam Card at all Kopitiam outlets, it added.

"NTUC Enterprise will continue to work as a group to fulfil our social mission of providing quality essential services and products," said NTUC Enterprise's executive director Kee Teck Koon.

"In particular, with the combined footprint of NTUC Foodfare and Kopitiam, we will be in a better position to make quality cooked food affordable and more widely accessible to all."

NTUC Enterprise said that it is looking towards extending some existing initiatives, such as its Rice Garden mixed rice set for lower-income consumers and breakfast sets, at various locations.

The Rice Garden set is priced from $1.50 for ComCare and NTUC Foodfare Privilege cardholders; from $2 for senior citizens, students, full-time national servicemen and NTUC Union members; and from $2.70 for the general public.

NTUC Enterprise will also work towards offering coffee and tea at reduced prices, with more details set to be announced in the first quarter of next year, it added.

Kopitiam said on Thursday that it will work with NTUC Enterprise to ensure the successful completion of the transaction.

It added that both parties hope to align best practices and leverage on their combined strengths to make affordable and quality meals more widely accessible to all.

This article was first published in The Straits Times. Permission required for reproduction.