An in-depth investigation into the takeover of Jus-Rol by bakery giant Cérélia has concluded the deal could push up prices and lower quality in the home baking category.
The Competition & Markets Authority said the merger brought together the two leading suppliers in the market by “a considerable margin”.
It follows a five-month phase 2 probe by the watchdog, launched in June after its initial investigation identified possible competition concerns.
BakeAway, which is the UK arm of French parent group Cérélia, said it was “deeply disappointed”. It added the provisional findings failed to reflect how competition worked in the grocery market, and contained “material errors of assessment”.
Cérélia agreed a deal with General Mills in November last year to buy its European dough business, which included private label operations in the UK, Ireland and Germany and the Jus-Rol and Knack & Back brands.
The CMA said Jus-Rol was “by far” the largest supplier of branded ready-to-bake products in the UK, while Cérélia was the largest supplier of own-brand ready-to-bake products.
Consumers spend more than £100m a year on the category in the UK, including staples such as shortcrust and puff pastry and pizza and patisserie dough.
Items made by Cérélia and Jus-Rol accounted for almost two-thirds of all such products, the CMA added.
Evidence gathered by the CMA showed Jus-Rol competed with supermarket own-label products supplied by Cérélia for the same space on many shelves in store, with “few alternative suppliers of either branded or own-brand products”.
Grocery retailers also told the CMA their ability to trade off Jus-Rol and Cérélia when purchasing these products enabled them to get a better deal for customers.
The CMA’s investigation provisionally found the two businesses faced “very limited competition” and it concluded it was unlikely any supplier would enter the market, or expand existing activities, to address the loss of competition brought about by the deal.
As a result, the watchdog provisionally concluded the deal would substantially lessen competition and would risk UK grocers facing higher prices and lower-quality products, which could ultimately be passed on to consumers.
Margot Daly, chair of the independent inquiry group carrying out the phase 2 investigation, said: “Food prices are already increasing, which makes it important that we don’t allow a lack of competition to make the situation worse.
“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.”
BakeAway, which is based in Corby in Northamptonshire, added it was concerned that blocking the deal would deprive UK consumers of the benefits of an expanded category with more innovation.
The business said the more likely longer-term consequence of the CMA’s decision would be a stagnating UK home baking category, which would suffer from a lack of attention, investment and growth.
Managing director Jan Boers said: “We are deeply disappointed with the announcement which, if confirmed in a final decision, would negatively impact the UK grocery sector, affecting its value, blocking much-needed investment into growth, and depriving shoppers of the benefits of important investment and innovation in the home baking segment.
“BakeAway competes in the market alongside large and highly efficient European contract manufacturers, as well as several strong UK suppliers. The CMA’s provisional decision underestimates the strength of these competitors.”
BakeAway already produces the Jus-Rol product range in its newly built factory, which opened in 2020.
The CMA will now consult on its findings and listen to any further views before reaching a final decision.
Any remedies to address its concerns will be considered ahead of a final report, due by 24 January 2023.
Cérélia is a market leader in the dough category, with a presence in more than 50 countries, annual revenues of almost €500m and 1,600 employees across 10 production facilities in France, Belgium, the UK, the Netherlands, Canada and the US. It makes a lineup of pie and pizza dough, pancakes and cookies and owns a number of brands, including English Bay, Abra-Ca-Debora, Jan, Pop Bakery and Croustipate.
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