Japanese conglomerate Mizkan has offered to offload its Burntwood production facility in the UK in a bid to win competition clearance for its acquisition of Premier Foods plc's pickles and vinegars business.

In a statement released today (26 September) by the UK's Office of Fair Trading, it emerged Nakano, a division of Mizkan, has said it would sell off its production facility in order to assuage competition concerns arising from the acquisition, which was completed earlier this year.

The OFT has warned Mizkan and Premier were the only two UK manufacturers of malt and spirit vinegars and the largest suppliers of these products to food manufacturers.

The competition watchdog rejected the argument that European vinegar producers would present viable competition on the basis on the higher transportation costs that such groups would incur.

A spokesperson for the OFT told just-food the regulator is now considering whether the proposal would remedy the situation. While Mizkan's offer is being assessed, the OFT will refrain from sending the merger to the Competition Commission, the UK's ultimate competition authority, the spokesperson said.

"If it is found that the sale of the facility would not remedy the problem, we would then refer the case to the Competition Commission," the spokesperson concluded.

Mizkan was not available for comment at time of press.

Show the press release

OFT considers divestment remedy in vinegars merger

The OFT is considering undertakings offered by Nakano (part of the Japanese Mizkan Group Corporation) to divest its production plant in Burntwood, Staffordshire to address the competition concerns arising from its completed acquisition of the vinegar and pickles businesses of Premier Foods Group Limited (Premier).

Prior to the merger, Nakano and Premier both manufactured and supplied unbranded malt and spirit vinegars, and supplied unbranded wine and cider vinegars in the UK. Premier supplied branded malt and wine vinegar and pickles under the Sarson's, Dufrais and Haywards brands.

The OFT's investigation found that the parties were the only two UK manufacturers of malt and spirit vinegar and the largest suppliers of these products to food processor customers (who use them in the manufacture of pickles and sauces), food service customers (including wholesalers and fish and chip shops) and supermarkets.

The OFT received a number of submissions from these customer groups who were concerned about the loss of the Premier business as a competitor in the supply of vinegar.

The OFT considered whether European manufacturers of malt and spirit vinegar (as well as manufacturers of alternative products including non-brewed acetic acid) would be capable of exerting a competitive constraint on the merged entity, but the evidence did not show that they necessarily would, due to higher transport costs and other factors.

In order to meet the OFT's concerns, Nakano has offered to sell its Burntwood production facility to an upfront buyer to be approved by the OFT in order to ensure that there is competition in this market going forward.

Ali Nikpay, OFT Senior Director and Decision Maker in this case, said:
'The companies are the two leading suppliers of malt and spirit vinegars in the UK, especially to food processor customers and supermarkets. A number of these customers told us that the transaction would result in the merged entity having a monopoly position and would therefore result in price increases. We are now considering Nakano's offer to sell its Burntwood plant to address our competition concerns.'

While the undertakings in lieu are being considered, the OFT's duty to refer the merger to the Competition Commission is suspended.

Original source: UK Office of Fair Trading