tutor2u™ businesscafé Supporting Teachers: Inspiring Students Competition Commission May Refuse to Pass the When acquired rival HP Foods in June 2005 it intended to strengthen its market leadership of the UK and market. However, the Competition Commission have decided to take a look at the deal.

Heinz in a Pickle company,” said Heinz president and chief executive William Johnson. Fears that consumers could end up paying more for baked beans and Buying HP Foods was “consistent have prompted the Office of with our strategy to drive growth in Fair Trading (“OFT”) to refer Heinz’s our profitable and expanding core recent acquisition of HP Foods to the condiments and sauces category”, he UK competition authorities. said. The OFT said the sale of the HP Sauce Heinz said it had identified many and Lea & Perrins maker to Heinz could opportunities to expand sales of the see retail customers and consumers HP, Lea & Perrins and Amoy brands. “suffer from less competition resulting in higher prices for products such as HP Heinz views Lea & Perrins as “an brown sauce, tomato ketchup and baked historic global brand” which has spread beans”. world-wide since it was first served to passengers on ocean liners in 1837. Lea It has asked the Competition & Perrins and HP sauce are exported to Commission to explore its concerns. 75 countries. Vincent Smith, Director of Competition Enforcement Thick and thin at the OFT, said: The total sauces and condiments market in the UK is ‘This transaction brings together two of the largest worth £537 million and is growing at around 2 per branded sauce suppliers in the UK who compete in a cent per year. 98.5% of UK households buy these number of product categories.” products - so there is little room for growth through attracting new consumers. The takeover would make Heinz the leading seller of sauces in the UK. Heinz employs more than 5,000 Growth strategies therefore focus on boosting the staff at five sites across the UK. HP Foods employs average spend per consumer and getting consumers about 450 workers in the UK. to shop more often. Heinz, which is famous for its own-brand baked Thick (such as tomato and brown sauce) and thin beans and tomato ketchup, said it remained sauces (e.g. soya sauce) are the largest product confident that its takeover of segment, with a 34% share. They HP Foods would eventually be are also growing fastest. approved by the authorities. Lots of Variety: Some Heinz Brands: The segment has been Spicy strategy in decline in the last few years. u Pickle sales are static, as are At the time of the acquisition in u sales of . June 2005, Heinz management u Jack Daniels grilling sauce explained their strategy for HP In terms of retailing, Tesco has a Foods. u Linda McCartney meals 28.5% share of the market, with u Weight Watchers Sainsbury second (16.1 share). “This acquisition underscores our commitment to become a u Farleys faster-growing, more focused u John West

Sources: Office of Fair Trading; The Grocer Magazine; TNS Superpanel July 2005; BBC website. © Tutor2u Limited 2005 www.tutor2u.net/cafe/default.php