NZ Commission clears sauce merger of Heinz Wattie’s and Suntory’s Cerebos Gregg’s pending divestment
The divestment will include licences for the Gregg’s brand for the New Zealand supply of red sauce (tomato sauce and ketchup), barbecue sauce and steak sauce, and the F. Whitlock & Sons brand for the supply of Worcestershire sauce in New Zealand.
Last November, Heinz Wattie’s applied to the Commerce Commission and competition authorities in Australia and Singapore to acquire Cerebos Gregg’s as part of an international transaction.
Competition issues remedied?
In making its decision, the Commerce Commission considered competition issues in the national markets for the manufacture, importation and wholesale supply of a number of table sauces to supermarkets as well as the food service industry.
“We believe the merger of the number one and two wholesale suppliers to supermarkets of red sauce, barbecue sauce, steak sauce and Worcestershire sauce would be likely to result in a substantial lessening of competition in each of these markets,” said Dr Mark Berry, chairman of the Commerce Commission.
“However, we consider the divestment offered by Heinz Wattie’s is sufficient to remedy the competitive harm the merger would cause and we have given clearance to the merger subject to the divestment undertaking.”
The Commerce Commission said it is satisfied that there are no competition concerns in the markets for Asian sauces, condiments, chilli sauce, gravies, powered beverages, and soy sauce due to a range of factors, including low levels of overlap and the presence of competitive constraint from other suppliers.
A public version of the written reasons for the decision will be available on the Clearances Register in the near future.
Considerations for the merger
The Kraft Heinz Company is the ultimate parent of the H.J. Heinz Company (New Zealand) Limited, better known as Heinz Wattie’s.
In New Zealand, Heinz Wattie’s manufactures and supplies jams, dressings, soups, sauces, beans, spaghetti, canned fruit and vegetables, frozen meals and vegetables, pates and dips.
Relevant to the application for clearance is the range of sauces that Heinz Wattie’s supplies to supermarkets and the food service industry in New Zealand under the brands Wattie’s, Heinz, Lea & Perrins, HP, and Gourmet.
Until the acquisition is complete, Cerebos Gregg’s Limited is ultimately owned by Suntory Beverage & Food Pte Ltd, with operations throughout Australasia.
In New Zealand, Cerebos Gregg’s supplies sauces under a number of brands including Gregg’s and F. Whitlock & Sons. The company produces the sauces at its manufacturing plant in Australia.
When considering a proposed merger, the Commerce Commission must determine whether any competition that would be lost with the merger would be substantial. Where a merger is likely to substantially lessen competition in a market, the acquiring company may undertake to divest certain assets.
“If we consider the proposed divestment undertaking will remedy the likely substantial lessening of competition, we will clear the merger,” the Commission stated.
“For a divestment undertaking to remedy competition concerns, we must be satisfied that the divestment will result in sufficient additional competitive constraint on the merged firm, so that a substantial lessening of competition is no longer likely.”
