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Food cans supplier merger may give rise to competition concerns

15 January 2015

The CMA has found that Sonoco Products Company’s acquisition of Weidenhammer Packaging Group GmbH gives rise to a realistic prospect of a substantial lessening of competition and will be referred for an in-depth phase 2 investigation unless acceptable undertakings are offered.

Sonoco and Weidenhammer both manufacture and supply composite cans for food products. Typical uses include packaging food products such as gravy granules, chocolate powder, crisps, crackers and coffee.

The Competition and Markets Authority (CMA) found that, as a result of the transaction which completed on 31 October 2014, the merged company will be the largest manufacturer and supplier of composite cans for food products in the UK.

The merged company would be the only credible supplier of this type of packaging for some customers and the CMA found that it would only continue to face competition from 2 other significantly smaller producers of composite cans for food products in the UK. The CMA is concerned that a lessening of competition may result in higher prices or a reduction in choice or quality for customers.

The transaction will be referred for an in-depth phase 2 investigation unless Sonoco offers acceptable undertakings to address the CMA’s competition concerns in a clear-cut manner.

Sheldon Mills, CMA Senior Director of Mergers and decision maker in this case, said:

The transaction combines the number one and two players for the supply of composite cans for food products in the UK and will reduce the choice of suppliers available to brand owners, licensees and retailers.

End customers and retailers prefer composite cans over a range of other packaging formats for certain types of products. As such, the evidence available at this stage does not show that the parties face a significant threat from other producers of composite cans for food or other types of packaging such as flexible plastics or cartons.

This loss of competition may give the newly-merged company the ability to raise prices to customers and ultimately this could feed into higher retail prices for a range of everyday food products. Unless Sonoco offers undertakings that resolve these concerns, it will be necessary to investigate the transaction in greater detail.

This merger was called in for review as a result of the CMA’s merger intelligence function.

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