OFT Considers Divestment Remedy in Vinegars Merger
The OFT is considering undertakings offered by Nakano (part of the Japanese Mizkan Group Corporation) to divest its production plant in Burntwood, Staffordshire to address the competition concerns arising from its completed acquisition of the vinegar and pickles businesses of Premier Foods Group Limited (Premier).
Prior to the merger, Nakano and Premier both manufactured and supplied unbranded malt and spirit vinegars, and supplied unbranded wine and cider vinegars in the UK. Premier supplied branded malt and wine vinegar and pickles under the Sarson’s, Dufrais and Haywards brands.
The OFT’s investigation found that the parties were the only two UK manufacturers of malt and spirit vinegar and the largest suppliers of these products to food processor customers (who use them in the manufacture of pickles and sauces), food service customers (including wholesalers and fish and chip shops) and supermarkets.
The OFT received a number of submissions from these customer groups who were concerned about the loss of the Premier business as a competitor in the supply of vinegar.
The OFT considered whether European manufacturers of malt and spirit vinegar (as well as manufacturers of alternative products including non-brewed acetic acid) would be capable of exerting a competitive constraint on the merged entity, but the evidence did not show that they necessarily would, due to higher transport costs and other factors.
In order to meet the OFT’s concerns, Nakano has offered to sell its Burntwood production facility to an upfront buyer to be approved by the OFT in order to ensure that there is competition in this market going forward.
Ali Nikpay, OFT Senior Director and Decision Maker in this case, said: “The companies are the two leading suppliers of malt and spirit vinegars in the UK, especially to food processor customers and supermarkets. A number of these customers told us that the transaction would result in the merged entity having a monopoly position and would therefore result in price increases. We are now considering Nakano’s offer to sell its Burntwood plant to address our competition concerns.”
While the undertakings in lieu are being considered, the OFT’s duty to refer the merger to the Competition Commission is suspended.