Unilever House, London, 2008 file photo. Cnbrb / CC BY-SA 3.0; cropped.
Britain’s competition watchdog raised concerns Wednesday that McCormick’s planned acquisition of most of Unilever’s food business would combine the country’s two largest branded suppliers of dry ingredient mixes and dry sauces, leaving too little competition in those supermarket categories.
The Competition and Markets Authority gave the companies until November 18 to offer remedies. If no remedies are offered, or the regulator finds them insufficient, the deal will move to an in-depth phase-two investigation. Wednesday’s phase-one finding is not a decision to block the acquisition, and the regulator has not yet referred it to phase two.
The review focuses on products sold to retailers in the United Kingdom. McCormick, based in Hunt Valley, Maryland, has brands there including Schwartz dry ingredient mixes and sauces and French’s condiments. Unilever, the UK-headquartered consumer goods group, sells food products under Knorr, Maille and Colman’s.
In its decision summary, the CMA said McCormick and Unilever compete closely in dry mixes and dry sauces. Combining them would create the largest supplier in each category by a wide margin. Supermarket own-label products and other brands provide some competition, but the watchdog found that they would place only a limited constraint on the merged business.
New suppliers would also face obstacles. Supermarket shelf space is limited, existing brands and own-label products are well established, and the CMA found no significant growth in these markets suggesting that new entrants or expanding rivals could offset the loss of competition.
The watchdog reached a different conclusion on mustard. It found that American-style mustard sold by McCormick’s French’s brand competes in a separate market from Unilever’s English-style Colman’s and French-style Maille products. Supermarket evidence indicated that shoppers generally do not see the different styles as interchangeable. The CMA found no realistic prospect of competition concerns in mustard.
The proposed transaction covers substantially all of Unilever’s global food business, with some food businesses staying with Unilever. Under the merger agreement, Unilever would receive McCormick shares and the right to appoint members of its board. Completion remains conditional on competition clearances, including from the CMA.
JBizNews Desk | London
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