Heinz-HP deal in the can

By Anita Awbi

- Last updated on GMT

Related tags: Ketchup, Sauce, Condiment

Britain's Competition Commission (CC) has granted provisional
clearance for Heinz' acquisition of HP's leading sauce and canned
goods brands - and looks set to give full consent in April.

The case was referred to the CC last year, amidst fears that US-owned Heinz gained control of the brown sauce, tomato ketchup and baked beans market by taking over rival HP. Both brands supply retailers with 'must stock' items and have a presence in more than 50 countries.

But the CC has ruled that "there was very limited, if any, competition between Heinz and HP products in the supply to retail customers"​, adding that it did not expect an increase in prices following the merger.

The commission went further to say that Heinz and HP were not a competitive restraint on each other in the ketchup, brown sauce and baked beans sectors.

And although the CC acknowledges some evidence of competition between HP and Heinz barbeque sauce ranges, it claims barriers to entry in the sector are low and the product is not viewed as a 'must stock' item.

HP Baked Beans are currently made under licence by Premier Foods in the UK, and both Heinz and HP labels are competing against Branston and supermarket own-label varieties.

Parties interested in the CC inquiry, such as Associated British Foods, Premier Foods, Sainsburys and Morrisons, have contributed to the case, and the commission is still welcoming comments from concerned groups.

A CC spokesperson told FoodandDrinkEurope​: "This is the time to hear any competitor or supplier concerns, although it would have to be something substantial to change our minds."

The merger was completed last August and as yet there have been no negative pricing developments, said the CC.

The Heinz-HP deal is a signpost for renewed merger and acquisition activity within global food manufacture, as companies look to consolidate their portfolios amid rising fuel prices and increased pressure from global retailers.

"It's a very unconsolidated market relative to the retail sector it supplies. Manufacturers are constantly getting beaten up by retailers,"​ said Neil Sutton, PricewaterhouseCoopers food sector leader.

Some international suppliers are realising the middle ground may not be so profitable, as small firms with local strategies etch out a place alongside global businesses who are leading the way with key brands and formidable marketing.

Those manufacturers in the middle, stretching a global presence with a large and thinly spread portfolio, may find it tougher.

Heinz' acquisition of Danone's famous HP trademark, costing £470m (€658m), is consistent with the firm's plans to concentrate on big brands and large markets.

Related topics: Market Trends

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