UK shoppers could face added pressure to the current cost of living crisis as a dough merger is set to raise prices of certain products, it has been revealed.
According to an in-depth investigation from the Competition and Markets Authority (CMA), Cérélia’s purchase of Jus-Rol may leave UK retailers facing higher prices and lower quality products.
Jus-Rol is the largest supplier of branded ready-to-bake products in the UK, while Cérélia is the largest supplier of own-brand ready-to-bake products, making these items on behalf of some of the nation’s largest grocery retailers.
Ready-to-bake items supplied by both companies account for nearly two-thirds of all such products sold in Britain.
The competition watchdog warned that their deal, which took place in June 2022, could affect the prices of ready-to-bake products, including staples such as shortcrust and puff pastry, pizza and patisserie dough. UK consumers spend more than £100m each year on these products.
The CMA launched a review after an initial Phase 1 investigation identified possible competition concerns.
Over the past five months, an independent panel analysed evidence from Cérélia and Jus-Rol, grocery retailers, and other industry players in order to fully understand the market, as well as the potential impact of the deal.
While there are differences between the companies’ products, the evidence shows that Jus-Rol products compete with grocery retailers’ own-brand products supplied by Cérélia for the same space on many supermarket shelves.
Evidence from grocery retailers showed that they consider the companies’ products to be important alternatives to one another — in particular because there are few alternative suppliers of either branded or own-brand products.
Grocery retailers also told the CMA that their ability to trade off Jus-Rol and Cérélia when purchasing these products enables them to get a better deal for customers.
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But the CMA’s investigation provisionally found that the two businesses face very limited competition, with all other suppliers being far smaller, and many lacking the capabilities held by the merging businesses.
It also provisionally found it is unlikely that any supplier would enter the market, or expand its existing activities, to address the loss of competition brought about by the deal.
The CMA concluded that the deal would substantially lessen competition.
“This would risk UK grocers facing higher prices and lower quality products, which could ultimately be passed on to their customers,” the CMA said.
“Food prices are already increasing, which makes it important that we don’t allow a lack of competition to make the situation worse,” Margot Daly, chair of the independent inquiry group carrying out the Phase 2 investigation, said.
“Jus-Rol and Cérélia are by far the largest suppliers in the ready-to-bake sector and the competition that takes place between them helps grocers to give shoppers the best possible deals.
"Today’s decision is provisional, and we will now consult on our findings and listen to any further views before reaching a final decision.”
The CMA has welcomed responses from interested parties to its provisional findings by 25 November and its notice of possible remedies, which sets out potential options for addressing its provisional concerns, by 18 November 2022.
These will be considered ahead of the CMA issuing its final report, which is due by 24 January 2023.