5th May 2022 By Staff Reporter | email@example.com | @foodtickernz
The Commerce Commission has ongoing concerns that Life Health Foods’ proposed takeover of plant-based rival Chalmers Organics will substantially lessen competition in New Zealand.
The competition watchdog has released a Statement of Unresolved Issues, which centre on the supply of tofu to the two main supermarket groups – a major area of overlap between LHF via its Bean Supreme brand and Chalmers’ Tonzo brand.
On the supply side, the Commission was not yet convinced existing rivals or a new entrant would be able to compete with the merged entity, and on the demand side, it still needed to be swayed that the duopoly had options to constrain any attempt by the enlarged company to raise tofu prices or drop quality.
“In the Statement of Issues, we identified concerns that the proposed acquisition could lead to unilateral effects in relation to a national market for the supply of tofu to the major grocery retailers,” the Commission said in the 39-page document.
“After further investigation, we are still not satisfied that the proposed acquisition would not be likely to substantially lessen competition in this way.”
It gave three main reasons for its conclusion.
Firstly, it was not satisfied that other tofu manufacturers who supply grocery retailers would provide sufficient competitive constraint to the merged entity – basically existing rivals would not be strong enough to compete.
Secondly, it was not convinced that a new supplier could enter the market or an existing supplier could expand quickly enough and become big enough to compete with the merged entity.
And finally, it had not yet been swayed by arguments made by LHF and Chalmers that New Zealand’s major grocery retailers would exercise “countervailing power” to constrain the merged entity.
This was because it could not see the main supermarkets sponsoring the entry of a new competitor, giving favourable selection to their own brands, or boycotting or threatening to boycott other products supplied by the merged entity in response to a tofu price hike.
It called for further submissions by 17 May 2022, and it again agreed to push out the deadline for its final decision, this time to 31 May.
In December last year, LHF sought clearance to buy privately-owned Chalmers Organics, which manufactures and supplies retailers with vegetarian and plant-based products spanning sausages to sauces under the brand names Tonzu and Zenzo.
LHF is a sister company to Sanitarium and is ultimately controlled by the Seventh-day Adventist Church.
LHF has seven vegetarian and plant-based brands, including Bean Supreme, The Alternative Meat Co, and Vegie Delights, and supplies the foodservice and quick service restaurant channels, as well as retail.
Auckland-based Chalmers is currently equally owned by four shareholders comprised of Elizabeth, Daniel, Jesse and Stephen Chalmers.
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