UK: Real Good Food in sugar price row with ABF
British Sugar has "abused" its "dominant position" in UK sugar, Real Good Food has claimed
The Real Good Food Co. has accused British Sugar, the UK sugar arm of Associated British Foods, of "abusing its dominant market position" in a pricing row between the two companies.
In a lengthy statement to the London stock exchange today (21 February), Real Good Food said British Sugar had "imposed" an "anti-competitive" sugar price on its wholesale sugar arm Napier Brown.
Real Good Food also claimed British Sugar "temporarily withdrew" the supply of sugar to Napier Brown. The company said British Sugar's move came after "repeated threats" and was despite Napier Brown paying "over 95% of the imposed price".
Real Good Food has complained to the UK's Office of Fair Trading, which has referred the dispute to the country's new Competition and Markets Authority, which opens in April.
British Sugar is the only producer of UK beet sugar. Tate & Lyle Sugars refines imported raw cane sugar. Napier Brown is a distributor and marketer of sugar, which it buys from multiple sources. It has a 15-20% market share of sugar supply within the UK.
Real Good Food said the "short-term impact" on Napier Brown and another subsidiary, Garrett Ingredients, would be "significant".
Shares in Real Good Food had slumped by 26% to 46.25p at 13:22 GMT.
Pieter Totté, Real Good Food's executive chairman, said: "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 UK's largest reseller of sugar, without any reference to market pricing, the consequent impact on UK customers and consumers would be significant."
The dispute is not the first between the two companies. In 1988, the European Commission found British Sugar occupied a dominant position in the market for the industrial supply of bulk, white, granulated sugar and had, Real Good Food, said "committed multiple abuses of that dominant position, to the detriment of Napier Brown". The Commission imposed a fine of EUR3m, after British Sugar's offered to make undertakings to remedy its conduct.
Real Good Food said British Sugar had also pledged to "engage in normal and reasonable pricing practices, in particular recognising the Commission's concern that an insufficient margin between its prices for, one, wholesale supply from Silver Spoon to retailers and, two, industrial sugar might be considered an unreasonable pricing practice".
In 1990, the two sides struck a supply deal. Napier Brown said the agreement stated the price it would pay British Sugar was fixed against the average price its supplier paid its five largest customers.
However, in its statement today, Real Good Food Co. said: "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."
It added: "Given that British Sugar has a monopoly in the supply of UK beet sugar, Napier Brown had no alternative but to pay the imposed price under duress in order to maintain supply to its customers."
When contacted by just-food, British Sugar said: "The recent commercial dispute between the two companies is not a matter upon which it is appropriate to comment. The matter was recently considered by the relevant regulator, the Office of Fair Trading who in February took an administrative decision not to open an investigation."
However, it added: "British Sugar is confident that were the CMA or any other regulator to look at this matter it would find that British Sugar has acted appropriately."
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