Heinz awaits competition clearing

By Anita Awbi

- Last updated on GMT

Related tags: Heinz, Ketchup

The UK's Competition Commission (CC) has released comprehensive
guidelines for it's probe into Heinz' acquisition of HP, inviting
comment on the sale that will see two of the world's top condiments
manufacturers combined.

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 the CC has now revealed it plans to investigate market definitions of rival products, such as HP's Daddies Sauce and Heinz' Tomato Ketchup, to assess the impact of possible loss in competition the merger may generate.

Supply chain issues will also be examined, such as the possible effects of product bundling, to ascertain if there will be substantial portfolio consequences from a consolidation of 'must stock' items supplied by Heinz and HP.

"If the Inquiry Group considers that the merger may be expected to result in substantial lessening of competition, it will consider whether and, if so, what remedies might be appropriate and will issue a remedies statement at a later date,"​ the CC statement of issues reports.

But the commission is quick to assert it has not yet established any specific competition concerns, as the full results of the inquiry are not expected until April 2006.

Iconic manufacturer Heinz, which posted a profit of $203.8 million for the second quarter, up from last year's $199m, is showing strength in core areas and recent actions indicate the company is making strategic moves outside its US domestic market.

Last week the sale of Heinz frozen vegetable subsidiary HAK was permitted by the Dutch competition board, and the approved acquisition of Russian condiments maker Petrosoyuz earlier this year indicates the company is moving further towards it's three key market categories: ketchup, condiments and sauces, meals and snacks, and infant nutrition.

Heinz hopes this redirection will bring European operations in line with its successful growth-boosting model in North America and Australasia.

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 world renowned food label, after months of speculation that PepsiCo was interested in making an offer.

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.

Related topics: Market Trends

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