07:00 Fri 21 Feb 2014
Real Good Food Co - Trading Statement
Trading Update
In its Third Quarter Trading Update, the Group warned that "instability in the sugar market is giving us short term challenges". One of the Group's challenges is a continuing pricing dispute with British Sugar (''BS''), a major supplier to Napier Brown.
With respect to that dispute, Napier Brown made a complaint to the
The OFT has now confirmed to representatives of Napier Brown that the complaint has been referred to the new Competition and Markets Authority ("CMA") (the successor to the OFT) which begins operating on
Earlier this month and following repeated threats, BS temporarily withdrew supply of sugar to Napier Brown despite Napier Brown continuing to pay over 95% of the imposed price while it sought a solution to the pricing dispute. Given that BS has a monopoly in the supply of
Napier Brown believes, and has evidence to the effect, that this price is anti-competitive thereby preventing Napier Brown effectively competing commercially. This approach by British Sugar is, in Napier Brown's view, in breach of undertakings given by British Sugar to the EU Competition Authorities in 1988 after it had received a fine for abusing its dominant position. Full background to this dispute is shown below.
There are no current negotiations with BS and it is therefore unlikely that this pricing dispute will be resolved in the near future. The short term impact on Napier Brown's and Garrett Ingredients' results of this action by BS is significant and will inevitably be reflected in the Group's full year results for the year to
As previously announced, the Group will provide a further update on trading in April.
"Given the progress elsewhere within the Group, which we have outlined in our previous updates, it is very disappointing that we find ourselves in the position where a major supplier is, in our view, abusing its dominant market position in the supply of sugar to us.
"If British Sugar is allowed to impose a price on Napier Brown, its largest customer and the
Napier Brown/British Sugar - background to the current dispute
1. Napier Brown occupies a unique position within the
2. In 1988, the
3. In response to a statement of objections from the Commission proposing interim measures (as requested by Napier Brown), British Sugar voluntarily put in place a competition compliance programme, and also offered to be bound by certain undertakings ("the 1988 Undertakings") including that:
a. British Sugar would supply a quantity of standard, industrial sugar to Napier Brown on terms and conditions acceptable to the Commission;
b. British Sugar recognised the need for sugar merchants (i.e. wholesalers such as Napier Brown), believed they had a useful function to perform in the
c. British Sugar would engage in normal and reasonable pricing practices, in particular recognising the Commission's concern that an insufficient margin between its prices for (i) wholesale supply (from Silver Spoon) to retailers and (ii) industrial sugar might be considered an unreasonable pricing practice.
4. As a consequence of British Sugar's voluntary establishment of a compliance programme, its offer of the 1988 Undertakings, and what the Commission described as its "exemplary" behaviour following the statement of objections, the Commission concluded in the 1988 Decision that British Sugar had brought the infringement to an end and set the level of the fine at a level substantially lower than it would otherwise have been, namely,
5. As a further consequence of the 1988 Decision, on
6. For a period of over 20 years, mindful of the 1988 Undertakings and 1990 Agreement, Napier Brown has successfully purchased sugar from British Sugar. Unfortunately, over the past few years, British Sugar has not only informed Napier Brown that it believes the 1990 Agreement is no longer in force, despite neither party having sought to terminate it, but has also, in the opinion of Napier Brown, resorted to serious anti-competitive and abusive pricing behaviour. Whatever the status of the 1990 Agreement, Napier Brown believes that British Sugar, is a dominant company and is hence subject to the special responsibility with which it is endowed as a dominant undertaking not to infringe the obligations contained in Article 102 TFEU.
This situation has culminated in a position whereby, for the sugar contract year 2013/14, British Sugar has imposed a price to Napier Brown, without any recourse to independent scrutiny, which Napier Brown believes to be anti-competitive and unreflecting of market realities which thereby prevents Napier Brown from effectively competing commercially. Napier Brown's efforts to challenge this price with BS have been rebuffed. Previously (indeed as recently as 2010) when there had been a dispute between the parties about market price levels, British Sugar had offered an independent audit of its selling prices (as provided for in the 1990 Agreement) but on this occasion this has been steadfastly refused. In
7. Given its concerns, Napier Brown approached the
8. Napier Brown is confident of its case. It plays an important role in the
9. British Sugar's actions are currently putting short term financial pressure on Napier Brown and its parent company
10. The decision by the
11. Napier Brown's long term strategy remains sound; it is committed to bringing in new sources of sugar to meet the demands of the
ENQUIRIES:
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Pieter Totté, Chairman |
Tel: 020 3056 1516 |
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Tel: 020 3056 1516 Tel: 0151 706 8200 |
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Tel: 020 7408 4090 |
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Tel: 020 7367 5100 |
Cebuan Bliss |
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