An independent inquiry group from the Competition & Markets Authority (CMA) has just published its final report following an in‑depth second phase of investigation into the anticipated merger of Associated British Foods (ABF) and Hovis Group Limited.
ABF, which owns Kingsmill, supplies bread and other bakery products across the UK. ABF’s UK bakery business, Allied Bakeries (AB), and Hovis are also significant suppliers of own brand bakery products to major supermarkets.
Since the start of the investigation, the inquiry group has heard that bread suppliers in the UK have faced longstanding challenges, including declining demand and significant increases in costs.
Evidence gathered during the investigation showed that AB and Hovis have each faced financial challenges - with AB making significant losses over the last 14 years, despite exploring a range of options to improve performance, due to the overall decline in demand for bread, the increase in “demand for lower-margin private label products and significant increases in costs, such as energy, wheat and distribution.”
Having carefully considered the evidence and engaged in two public consultations, the inquiry group has found that if the merger did not go ahead, the most likely outcome would be that AB would exit the market entirely in Great Britain and Northern Ireland.
This means the competitive pressure from AB would be lost, with or without the merger, and therefore the inquiry group has found that the merger does not raise competition concerns.
Cyrus Mehta, Chair of the independent inquiry group leading the investigation, said: “Bread is a basic staple for millions of people, which is why it’s important we looked carefully at this deal and assessed the competition implications for households across the UK.
“On the basis of the wide range of evidence we received, which showed the difficult position many UK-based bakeries are in, we found Allied Bakeries would likely leave the market entirely if the deal did not proceed. Taking that into account, we have concluded the deal does not raise competition concerns.”
No comments yet