The Dutch anti-trust regulator has blocked Unilever’s sale of the Unox brand almost two years after the deal with Zwanenberg Food Group was announced.
Following a review of the transaction launched last year by the Netherlands Authority for Consumers and Markets (ACM), the competition body concluded Zwanenberg would have become the “only major supplier” of smoked and boiled sausages to Dutch supermarkets.
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And in ambient soups, the ACM added the Almelo-headquartered business would have dominated the category with a market share of 60% to 85%.
“ACM sees a risk that Zwanenberg could have used this strong market position to charge supermarkets higher prices,” the regulator said in a statement.
Martijn Snoep, the chair of ACM’s board, added: “We wish to prevent individuals from being confronted with higher prices as a result of this planned acquisition…That is an undesirable prospect, especially in a time when the public already has many concerns about higher food prices.”
Zwanenberg said in a statement that its CEO Sjoerd van der Laan is considering appealing the ACM’s decision, which it added also encompasses the Zwan canned meat brand that was part of the original deal with Unilever.
It disputes the conclusion from ACM that the transaction would lead to “market dominance” in the Netherlands in the categories concerned and is also disappointed that the regulator has not taken its resolutions on board.
In supporting notes, Zwanenberg said it had proposed selling three “production lines” to a third party in order to appease the ACM’s concerns.
The company added: “The supermarkets were fundamentally positive about the buyer. When presenting the proposal, the ACM did not properly inform the supermarkets about the buyer’s ambitions. As a result, the supermarkets assessed the proposal based on a false impression, and the ACM subsequently weighed their responses in its rejection.”
For its part, the ACM said the proposed buyer of the production lines would have enabled the undisclosed party to compete with Zwanenberg and deflect the risk of price increases.
However, the regulator has concluded the “proposals are insufficient for taking away ACM’s concerns” because the new buyer has insufficient capacity in boiled sausages.
It added: “The plan lacks specifics, and there will be a dependency between Zwanenberg and the buyer in the first two years. As a result, the risk of price increases will continue to exist.
“Supermarkets, too, have expressed their concerns about whether the proposals will ensure sufficient competition in practice.”
Zwanenberg supplies its own brands and also caters to private-label customers, operating production sites in the Netherlands, the UK and the US.
With €560m ($621.7m) in annual sales, the company’s local brands include Kips, Huls and Chicken Tonight sauces.
The Dutch group was also critical of the ACM’s decision in weighing up brands over private label, arguing the two are “not competitors at the production level” and should not be lumped together as one by the regulator.
It also argued that Dutch food retailers have the “power” of negotiation over prices.
However, the ACM contests the “acquisition would have made Zwanenberg practically the only supplier of private-label products, as well as the owner of a strong high-end brand (which is Unox)”.
Meanwhile, Unilever provided its reaction to the decision via a spokesperson.
“We are very disappointed by the ACM’s decision. We fully stand behind the proposal that was put forward and remain convinced that it provides a robust and workable solution to address the concerns raised by the ACM.
“We will carefully review today’s decision and use the coming period to determine our next steps.”
