Fuchs - total domination of the German spice market

If one wonders about the high prices for spices in some German supermarkets: it's because the consumer pays monopoly prices.

Since many years one big player dominates a market with initially only a few visible entry barriers: FUCHS Gewürze GmbH.
According to a paper from the German antitrust agency, FUCHS, second only after McCormick & Co, in fact holds 60-80% of the German market for spices.
This after the company was allowed to buy its biggest competitor in October 2000.

Competition is weak and diverse with no one holding more than a single digit percentage of the market and most companies only achieving one-tenth of a percent market share.

But how is this possible?
According to the German antitrust agency FUCHS controls the most important distribution channels. By signing exclusive supply contracts with almost every German supermarket chain, FUCHS makes sure that no competitor is able to sell his spices in bigger volumes. These contracts often contain payments from FUCHS to the supermarkets, averaging 2.500 Euros per store.

The business practice is profitable for both. The supermarkets get an extremely high return from every sold unit, usually 50%. FUCHS achieves record margins and doesn't have to invest in his brand since it is omnipresent.

FUCHS was also able to take out the competition by buying them. German antitrust laws dind't apply because a revenue criteria wasn't met. The company also has signed "peace contracts" with it's biggest competitors only attacking selectively and regionally.

This continuing practices allow FUCHS to charge the maximum willigness to pay from every customer and also highlights one major weakness of German antitrust laws: The barrier of 500 million Euros regarding the combined revenue.

This revenue barrier also means a potentially successful business model for private equity companies, simply by combining all major players in a small- or midsized market and then charging monopoly prices.

CAGR of FUCHS from 1997-2002 : ca. 15%