The UK Competition and Markets Authority (CMA) has said it believes the merger of two home baking products groups could lead to higher prices for consumers.
Cérélia – which owns UK manufacturer BakeAway – struck a deal with rival home baking brand Jus-Rol last year. The CMA launched an investigation into the takeover in June this year after an initial Phase 1 investigation identified possible competition concerns, with the two businesses accounting for nearly two-thirds of the entire UK home baking market.
There are few alternative suppliers to Cérélia and Jus-Rol, and others in the market are much smaller, meaning they would struggle to compete with the merging businesses, the CMA found.
The watchdog noted that ready-to-bake products – including staples such as shortcrust and puff pastry, pizza and patisserie dough – are found in all major grocery retailers, with UK consumers spending over £100mln each year on these products. Jus-Rol is by far the largest supplier of branded ready-to-bake products in the UK, while Cérélia is the largest supplier of own-brand ready-to-bake products, making these items on behalf of some of the nation’s largest grocery retailers.
The CMA said it has provisionally concluded that the deal would substantially lessen competition and this would risk UK grocers facing higher prices and lower quality products, which could ultimately be passed on to their customers.
Margot Daly, chair of the independent inquiry group carrying out the Phase 2 investigation, said: "Food prices are already increasing, which makes it important that we don’t allow a lack of competition to make the situation worse.
"Jus-Rol and Cérélia are by far the largest suppliers in the ready-to-bake sector and the competition that takes place between them helps grocers to give shoppers the best possible deals."
The CMA said that the two companies can give their responses to the provisional findings by 25 November.
BakeAway, which is based in Corby in Northamptonshire, told the Evening Standard newspaper that it is “deeply disappointed” by the CMA’s findings which it claimed fails to understand how competition works in the grocery market.
BakeAway’s managing director Jan Boers said: “We are deeply disappointed with today’s announcement which, if confirmed in a final decision, would negatively impact the UK grocery sector, affecting its value, blocking much-needed investment into growth, and depriving shoppers of the benefits of important investment and innovation in the home baking segment.
“BakeAway competes in the market alongside large and highly efficient European contract manufacturers, as well as several strong UK suppliers. The CMA’s provisional decision underestimates the strength of these competitors.”