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Commission grants clearance for sauce merger subject to divestments

9 March 2018

The Commerce Commission has granted clearance for Heinz Wattie’s to acquire the food and instant coffee business of Cerebos Gregg’s subject to a divestment undertaking.

The divestment will include licences for the Gregg’s brand for the New Zealand supply of red sauce (tomato sauce and ketchup), barbeque sauce and steak sauce, and the F. Whitlock & Sons brand for the supply of Worcestershire sauce in New Zealand.

In November 2017, Heinz Wattie’s applied to the Commission and competition authorities in Australia and Singapore to acquire Cerebos Gregg’s as part of an international transaction.

In making its decision, the Commission primarily considered competition issues in the national markets for the manufacture, importation and wholesale supply of a number of table sauces to supermarkets and 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. 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,” Commission Chair Dr Mark Berry said.

The Commission is satisfied there are no competition concerns in the markets for Asian sauces, condiments, chilli sauce, gravies, powdered 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.

Background

Heinz Wattie’s

The ultimate parent company of H.J Heinz Company (New Zealand) Limited (Heinz Wattie’s) is the Kraft Heinz Company, a public company listed on the NASDAQ whose core products are beverages, cheese, convenience foods, dairy foods, and snack foods. 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.

Cerebos Gregg’s

Cerebos Gregg’s Limited is ultimately owned by Suntory Beverage & Food Pte Ltd, a food and beverage company operating throughout Australasia. In New Zealand, Cerebos Gregg’s supplies sauces under a number of brands including Gregg’s and F. Whitlock & Sons. Cerebos Gregg’s produces the sauces at its manufacturing plant in Australia.

Merger clearance process

When considering a proposed merger, the 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. 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. A fact sheet explaining how the Commission assesses a merger application is available on the clearances page.