In a ruling issued today, the CMA suggested Cérélia sells the Jus-Rol UK business.
Today’s ruling does not affect the sale of the European dough assets. In March, the German competition authority unconditionally cleared the sale of local bake-at-home brand Knack & Back. Irish competition officials have not raised concerns about the deal, Just Food understands.
Cérélia’s UK subsidiary BakeAway said the group disagreed with the decision.
The CMA said: “The acquisition by Cérélia Group of certain assets relating to the United Kingdom and Ireland dough business of General Mills , operated under the Jus-Rol brand has resulted or would result in a substantial lessening of competition (SLC ) in the wholesale supply of dough-to-bake products to grocery retailers in the UK, harming the interests of these retailers and, potentially, end-consumers of these products.”
If the deal was allowed to go through as proposed, it “may be expected to result, in adverse effects, for example in the form of higher prices or lower quality and reduced innovation compared to what would otherwise have been the case absent the merger”, the watchdog explained.
The CMA said it has identified “only one suitable remedy” to the issue, which is the full divestiture of the Jus-Rol UK business assets acquired by Cérélia in the deal.
“We consider that a full divestiture of the Jus-Rol UK business assets would be similar to a prohibition of the merger and it would re-create a similar market structure to that which existed at the time of the merger,” it said.
“Our initial view is that there are no other structural or smaller asset divestitures that would address the provisional SLC because the merger primarily consists of only the Jus-Rol UK brand and UK customers. We do not consider smaller permutations of the divestiture package would be a comprehensive remedy that would effectively remedy, mitigate or prevent the identified SLC from arising.”
The CMA has invited comments on this suggestion from the interested parties by 18 November.
The deal, announced last November, saw General Mills agree to sell its European dough businesses – including the Knack & Back and Jus-Rol brands – to the France-based bakery group, a specialist in ready-to-bake dough, operating in both the private-label and retail channels.
Cérélia is the largest manufacturer of bake-at-home dough products in the UK, producing private-label products on behalf of some of the largest grocery retailers in the country.
Jus-Rol is the best-selling brand in the bake-at-home dough category.
Responding to the CMA ruling, UK pastry and dough maker BakeAway – acquired by Cérélia in 2016 – said the company disagreed with the findings and will work with the watchdog to find a solution.
It suggested the CMA’s provisional findings “fail to reflect how competition works in the [UK] grocery market and contain material errors of assessment”.
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.”