Heinz-HP deal may hit retailers warns OFT
acquisition of HP to the Competition Committee (CC) after growing
concerns that the merger will distort the grocery market.
The OFT claims that retailers and consumers could be hit due to lack of competition as the two main branded sauce suppliers merge - resulting in higher prices for market-leaders HP Sauce, Heinz Tomato Ketchup and Baked Beans.
"This merger principally concerns the areas of tomato sauce, condiments and canned goods, and when you consider for average families the proportion of money spent on these products each week, it could impact quite heavily on their budgets," said OFT spokesperson Kate Wilcox.
"What we are required to do is make the test for reference [to the CC] and be able to show our belief that there may be a reduction in competition in the market," she added.
In June American-owned Heinz, with five UK factories, announced the success of its £470m (€658m) bid for Danone's HP brand.
The transaction, completed in August, includes three factories - two in the UK and one in the US - that, together with its London head office, employ around 400 people.
Heinz beat rivals Premier Foods and Associated British Foods to buy the iconic food label, after months of speculation that PepsiCo was interested in making an offer.
Rights to HP's leading culinary lines, such as Lea and Perrins Worcestershire Sauce, Daddies sauce and a perpetual licence to market the expanding Amoy Asian range, are the motivation behind the merger.
The acquisition of these famous trademarks is consistent with Heinz' plans to concentrate on big brands and large markets, following revelations that they will sell off marginal product lines and concentrate on expansion.
But under the UK's Enterprise Act 2002, if two or more businesses cease to be distinct, and the value of the takeover is more than £70m, the merger should be investigated.
Heinz must now await the outcome of the CC inquiry, expected in April 2006.
The European director of corporate affairs told FoodandDrinkEurope.com: "There is no need for a contingency plan, because Heinz will continue to operate HP as stand-alone company until the Competition Commission has reached its decision.
"And we are very confident that the CC outcome this coming April will be in our favour."