Before the merger both firms manufactured and supplied unbranded malt and spirit vinegars, and supplied unbranded wine and cider vinegars to the UK.
Premier Foods manufactured branded malt and wine vinegar and pickles under the Sarson’s, Dufrais and Haywards brands.
Only two UK manufacturers
An OFT investigation found that the firms were the only two UK manufacturers of malt and spirit vinegar and the largest suppliers of these products to food processor customers. They used the products to manufacture pickles and sauces. They were also the largest suppliers to foodservice customers − including wholesalers and fish and chip shops − and supermarkets.
The OFT reported receiving evidence from these customer groups who worried about the loss of Premier as a competitor in the supply of vinegar.
Ali Nikpay, OFT senior director, 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.”
Competitive constraint
He is considering whether European manufacturers of malt and spirit vinegar − and 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 would, due to higher transport costs and other factors, he said.
The OFT said its duty to refer the merger to the Competition Commission was suspended pending its decision about Nanakano’s offer to sell its Burntwood plant.
Premier Foods announced at the end of July that it had completed the sale of its vinegar and sour pickles business to the Japanese food manufacturer Mizkan – owner of Nakano.
The business, which includes the Sarson’s, Hayward’s and Dufrais brands, was sold for £41M on a debt-free and cash-free basis, in a deal that was agreed in mid-June.
