Food For Thought: Consolidation In Irish Food And Drinks Markets Continues In 2011 Increased Scrutiny From European Commission And NCAs Expected

Author:Ms Fiona McKeever
Profession:Arthur Cox

The 2009 acquisition by Kerry Group plc of Irish competitor, Breeo Foods, remains the leading Irish merger between competing suppliers in the food sector. In overturning the Irish Competition Authority's prohibition decision, the Irish High Court landmark judgment included a number of important statements in respect of market definition, retailer brands and countervailing buyer power in retail markets.1

A number of those themes have since been developed by the Irish Competition Authority ("CA") as consolidation in the Irish food and drink supply chain has continued. Three mergers between competing food suppliers were notified to the CA in 2010, with the pace of consolidation increasing in 2011, during which, more than ten mergers between competing food suppliers were notified to the CA. This short article reviews some of the highlights from 2011 and briefly considers the outlook for the food sector in 2012.

Irish Highlights

The first merger of 2011 was triggered by the battle for Northern Foods plc when Greencore Group plc ("Greencore") notified its offer for Northern Foods plc to the CA.2 The activities affected by the proposal were primarily 'food to go' ("FTG") products, chilled ready meals and chilled sauces.

Although the CA did not consider it necessary to come to any definitive conclusion as to the relevant product markets, the case team undertook a relatively in-depth analysis of the competitive effects of the transaction on the narrowest possible product and geographic markets. The case team considered five candidate product markets:

the supply of manufactured sandwiches to the retail sector the supply of meal salads to the retail sector the supply of chilled ready meals ("CRM") to the retail sector the supply of chilled sauces to the retail sector the supply of manufactured sushi to the retail sector. The CA reviewed each market on a national basis. On four out of the five markets, the post merger market share was not significant. On the market for sushi, however, the CA estimated the post merger market share to be between 55- 65%. Notwithstanding this finding, the CA concluded that the combined entity would not be in a position to raise prices. The CA's published decision points to two reasons:

first, all retailers contacted by the CA expressed no concerns about the transaction, and second, a recent entrant in the market was held to be a creditable alternative to the post merger entity. Ultimately the analysis on sushi...

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