Kerry Group has expressed “surprise” that its acquisition of UK frozen-food firm Headland Foods will be the subject of a competition investigation.
The Ireland-based company, which bought Headland in January, faces a probe from the UK’s Competition Commission following complaints from its retail customers that the deal led to higher prices for frozen ready meals.
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A spokesman for Kerry said the company had increased prices but said it had been looking to offset rising raw material costs.
“We’ve witnessed serious raw material cost inflation over the last 12 months or so in what was already a highly competitive market with poor profitability,” the spokesman told just-food. “We had no choice but to try to recover these cost increases.”
The deal will face the scrutiny of the Competition Commission after the Office of Fair Trading opened an investigation in March into the possible impact on competition.
The OFT said Kerry and Headland’s customers had expressed concern about “significant” price increases and the lack of alternative suppliers.
Amelia Fletcher, the OFT’s chief economist and the decision maker in this case, acknowleged that higher raw material costs could partly explain the price increases but insisted the watchdog still had concerns over the deal.
The Kerry spokesman insisted the UK frozen ready-meals sector remained competitive. “It’s clear that there are other domestic suppliers, other European manufacturers selling into the UK private-label marketplace and we have some strong international brands who compete in this sector,” he said.
“We’re confident that the investigation will not find any issue with this acquistion.”
