ACCC opposes Woolworths’ store buy and Heinz baby food acquisition

Posted by AFN Staff Writers on 11th June 2013

The Australian Competition and Consumer Commission (ACCC) has announced it will oppose the proposed acquisition by Australia’s major supermarket group Woolworths Limited (Woolworths) of a supermarket site in Glenmore Park located off Sydney’s M4 Western Motorway by the Nepean River.

At the same time, the ACCC has announced it is opposing the acquisition by major baby food producer Heinz acquisition of its major competitor, Rafferty’s Garden.

No second Woolworths at Glenmore Park

The ACCC said that the proposed acquisition by Woolworths of the supermarket site at Glenmore Ridge in the suburb of Glenmore Park would be likely to result in a substantial lessening of local supermarket competition, despite Woolworths’ competitor Aldi being due to open a store in the area in 2014.

“Woolworths already operates the only supermarket in the suburb of Glenmore Park, and it has the next closest supermarket located in the nearby suburb of South Penrith,” said Rod Sims, ACCC Chairman. “The Glenmore Ridge site represents the only opportunity for a competing supermarket to enter Glenmore Park in the forseeable future, other than an Aldi that is due to open in 2014,” he said.

“In effect, the choice is between Glenmore Park residents having two Woolworths and one Aldi supermarket, or having three different supermarkets in their area,” Mr Sims said.

The ACCC said it believed that an alternative supermarket at the Glenmore Ridge site “would stimulate local competition and provide greater choice to residents of the area”.

The suburb of Glenmore Park is bound by the M4 Motorway and non-residential areas, which the ACCC said emphasises the importance of access to supermarket shopping in the Glenmore Park area.

A public review of the Glenmore Park site matter began on 20 June 2012 and the ACCC said it had completed its review by October 2012, but had suspended the timeline at the request of Woolworths to allow the supermarket group to provide addition information.

ACCC opposes Heinz Rafferty’s Garden buy

Meanwhile, the ACCC has also announced that it will oppose the proposed buy up of baby food manufacturer Rafferty’s Garden by competitor Heinz.

Heinz and Rafferty’s Garden are the two largest suppliers of wet and dry infant food in Australia. The ACCC said a merged Heinz/Rafferty’s Garden would have accounted for about 80 per cent of the share of sales in the wet infant food market and about 70 per cent in infant cereals and infant snacks.

“The ACCC concluded that the propose acquisition is likely to result in a substantial lessening of competition through the removal of Rafferty’s Garden, which has around 40 per cent market share in wet infant food and is a close and effective competitor of Heinz, which also has around a 40 per cent market share in wet infant food,” Mr Sims said.

“The proposed acquisition would combine the two largest suppliers of wet and dry infant food in Australia, resulting in highly concentrated markets where barriers to entry and expansion are high, particularly because of brand recognition and preference,” Mr Sims said. “This is likely to reduce the frequency and depth of promotional activity, increase prices and reduce innovation in the wet and dry infant food markets,” he said.

Supermarkets are key market for baby food in Australia

In reaching its decision, the ACCC said it “carefully considered” the dependence of both Heinz and Rafferty’s Garden on the major supermarket chains for stocking their products.

“We are not satisfied that the power possessed by the major supermarket chains will necessarily constrain prices for consumers or drive innovation. Fierce inter-brand competition is more likely to achieve this,” Mr Sims said.

Baby food market in Australia

According to data collected by market research organisation Nielsen, published in ‘Retail World Grocery Guide 2012’, the baby food sector was worth $315.7 million in 2012. Wet baby food was worth $117.7 million, and dry baby food $36 million.

Other players in the wet and dry baby food sector in 2012 included Only Organic (7.4 per cent value share, 7.9 per cent volume share in the wet food sector) and Farex (11.8 per cent value share and 21.4 per cent volume share in the dry food sector).

Heinz produces a range of wet infant food in cans, glass jars and pouch/pouch-and-spout packaging. Rafferty’s Garden supplies wet infant food in pouch/pouch-and-spout packaging only. Both companies supply dry infant products, including cereals, snacks and teething rusks.

The ACCC has opposed Woolworths buying Glenmore Ridge site