Pastry manufacturer BakeAway has said it is ‘deeply disappointed’ that the UK competition watchdog has raised concerns over its acquisition of Jus-Rol.
The Competition and Markets Authority (CMA) has warned that the merger of General Mills’ Jus-Rol operation and BakeAway, UK arm of French business Cérélia, could result in retailers facing higher prices and lower-quality products. Northamptonshire-based BakeAway already manufactures Jus-Rol products under contract as well as own-label lines.
Cérélia completed the acquisition of Jus-Rol on 31 January 2022 but has had to keep it separate since 3 February, when the CMA imposed an Initial Enforcement Order.
An inquiry was launched by the CMA in June, with an independent panel analysing evidence from grocery retailers and other industry players to determine the impact of the deal.
Announcing its provisional findings today (4 November), the CMA concluded a merger would substantially lessen competition by bringing together ‘what are the two leading suppliers in the market by a considerable margin’. The CMA said its view is that the only way to address the competition issues is for Cérélia to sell Jus-Rol in its entirety.
It pointed out that ready-to-bake items supplied by Cérélia and Jus-Rol accounted for nearly two thirds of such products sold in the UK.
The CMA evidence showed that Jus-Rol competes with own-label products supplied by Cérélia for the same space on many supermarket shelves, and that there are few alternative suppliers. Retailers had told the CMA their ability to trade off Jus-Rol and Cérélia when negotiating enabled them to get a better deal for consumers.
“Food prices are already increasing, which makes it important that we don’t allow a lack of competition to make the situation worse,” said Margot Daly, chair of the CMA independent inquiry group.
Responding to the report, BakeAway claimed the findings do not reflect how competition works in the grocery market.
“BakeAway competes in the market alongside large and highly efficient European contract manufacturers, as well as several strong UK suppliers,” said managing director Jan Boers. “The CMA’s provisional decision underestimates the strength of these competitors.”
The supplier pointed out that it had brought production of Jus-Rol from continental Europe back to the UK and had made significant investments in its Corby production site.
BakeAway said it hoped to reinvigorate the Jus-Rol brand through investment and product innovation, and to grow the UK pastry category. It added that blocking the merger could ultimately lead to the UK home baking category stagnating.
“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,” added Boers.
The CMA is due to issue its final report on the acquisition by 24 January 2023.
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