Customers and rivals of frozen ready meals giant Kerry Group have accused it of trying to take advantage of its dominant market position to force through price rises after quietly snapping up a major rival this month.
Kerry moved to buy North Wales-based Headland Foods for an undisclosed amount at the end of last year, completing the deal on 14 January.
Combining the two leading suppliers of own-label frozen ready meals, "they own the market," said one leading chilled ready meals source. "It's a very clever move if they can get away with it."
But customers are up in arms. "We are very disappointed, to say the least," said one, who claimed that Kerry was demanding price hikes of up to 30%.
"We believe its behaviour is anti-competitive, and we are examining all our options to challenge this."
Kerry denied its requests for price increases were linked to the acquisition, saying it had embarked on a "cost recovery programme" with customers long before the Headland deal was completed.
"Cost inflation has been well documented for some time, and we have continued to engage with customers with regards to cost recovery," said a spokesman.
Kerry told customers and employees about the deal in December but has yet to announce it more widely, although a spokesman said it would do so at its annual results next month.
But one source claimed it was keeping quiet because it didn't want to attract the attention of competition authorities.
The OFT said it was not currently looking at the transaction but would not be drawn on whether it had received representations from third parties requesting it investigate.
Kerry said its advisers had deemed its acquisition of Headland "not an issue" given the scale of the European convenience food and meals market.
The Grocer understands that Headland MD Mike Russell has already left the business and that further management changes are expected, while a 90-day consultation period is ongoing for the 340 Headland staff at its main factory in Flint, North Wales.
"Having bought its biggest competitor, price rises were inevitable," said one industry expert. "Kerry and Headland have been hammering each other with deals such as five ready meals for £4 or four for £3."
The UK ready meals market was worth £435m in 2009, of which £201m was own-label [Mintel].
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Kerry tipped to take over Newmarket (13 February 2010)
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