July 15, 2011

UK's Competition Commission inspects Kerry-Headland merger

UK's Competition Commission will look into the merger of two giant ready-meal suppliers after customers complained about recent price hikes.

Kerry Foods Limited acquired Headland Foods Limited in January this year to form the largest chilled and frozen ready-meals business in the UK, supplying supermarkets and retail customers.

The Office of Fair Trade (OFT) investigated the proposed merger before it took place, but said it was unable to determine whether sales of refrigerated ready meals acted as a significant competitive constraint on sales of frozen ready meals.

Since then, the vast majority of customers have complained to the OFT, concerned about the significant increase in price, as well as the lack of alternative manufacturers capable of supplying such large volumes of frozen ready meals.

Amelia Fletcher, chief economist at the OFT, said, "Significant price rises after any completed acquisition give the OFT cause for concern. In this case, the merged company's large share in the frozen ready meals market, compared with that of its competitors, corroborated that concern, as did the strength of complaints from retail customers. Though increases in raw material costs may justify part of the increase, this did not fully allay our concerns. The merger will therefore be referred to the Competition Commission for an in-depth investigation."

As well as chilled and frozen ready meals, Kerry Group also owns sausage brands Wall's, Richmond, Porkinson Bangers and cooked meat brand Mattessons.