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CC Says Egg Merger Reduces Competition

by 5m Editor
5 January 2007, at 12:00pm

UK - The CC has provisionally concluded that the completed merger of Clifford Kent Holdings Ltd, parent company of Stonegate Farmers Limited (Stonegate), and Deans Food Group Limited (Deans) through the creation of a new company, Noble Foods Limited (Noble) would reduce competition in key markets for shell eggs and liquid egg, leading to higher prices for retailers and other customers.

In a summary of its provisional findings published today, the CC has provisionally concluded that the merger, which brings together the two largest suppliers of shell eggs and processed eggs in the UK, is likely to lead to a substantial lessening of competition in markets for the supply of shell eggs—cage (intensive), free range and organic—to retailers, for the supply of liquid egg to some customers and for the procurement of eggs from producers.

Inquiry Chairman, Dame Barbara Mills said:

The merged company would be in a notably strong position, accounting for over half of both sales of shell eggs to retailers and the supply of liquid egg. Customers’ ability to switch to alternative suppliers would be much reduced as a result of the merger with potential competitors unable to provide the required volumes due to their small scale by comparison with Deans and Stonegate (Noble). There would also be difficulties with increasing production capacity within a reasonable time. Other factors affecting possible competitors are a shortage of surplus eggs and problems over the use of imported eggs. In addition, many liquid egg customers also stated that powdered eggs do not represent a suitable substitute.

Given these factors, we think it is likely that the merged company would be able to increase prices to its customers, knowing that many would be unable to respond by buying from another supplier. Ultimately these prices rises could feed through to the consumer.

We also considered that the merged company’s size could have an adverse effect on egg producers, giving it the ability and incentive to use its buying power to reduce prices and the quantity of eggs produced. This would have a further damaging effect on competition in the supply of eggs to customers.

5m Editor