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Commission clears McCain to acquire potato factory

Media Release

Issued 10 May 2001/50

Commission clears McCain to acquire Heinz Wattie's Feilding potato and vegetable processing factory

The Commerce Commission today cleared McCain Foods (NZ) Limited to acquire Heinz Wattie's Limited's potato and vegetable processing factory at Feilding.

The proposal does not include Heinz Wattie's retail businesses, and Heinz Wattie's will retain its brands.

Commission Deputy Chair Mark Berry said that the Commission was satisfied that, should the proposal go ahead, McCain would not acquire or strengthen dominance in any market.

Mr Berry said that the relevant markets in this case were national markets for the production of: * frozen French fires for supply to quick service restaurants (QSR) * frozen or chilled potato products for supply to other food service outlets, and * frozen potato products for supply to supermarkets.

The proposal would involve some aggregation in markets for other vegetable products but as these market shares are relatively low, the Commission did not consider these markets to be of concern.

McCain and Heinz Wattie's are the only companies currently supplying frozen French fries to New Zealand QSRs. However, Talley Foods processes chips for export to Australia and Asia, and already supplies various McDonalds QSRs in the Philippines. It meets McDonalds' international specifications and is able to supply McDonalds and other QSRs in New Zealand.

Talleys being a strong potential entrant, along with QSRs having some countervailing power if prices increased, satisfied the Commission that the proposal would not result in McCain acquiring or strengthening dominance in this market.

In the market for supply to other food service outlets, McCain would be constrained by existing strong competitors who have the ability to expand production. There is also some potential for new entry.

In the market for supply to retailers, Heinz Wattie's would retain a strong presence through a co-packing agreement with McCain. The Feilding factory would continue to produce Heinz Wattie's products under contract.

The co-packing arrangement would mean that there should be no significant changes in the market during the term of the contract. At the end of the contract, Heinz Wattie's would still retain its brands and would be able to source production from other producers or renegotiate with McCain.

Existing competitors also provide some constraint in this market.

"Taking these factors into account, the Commission is satisfied that the acquisition would not result in dominance being acquired or strengthened in any market, and it has given a clearance," Mr Berry said.

Public copies of the Commission's decision will be available early next week.

Media contact: Commerce Act Manager Geoff Thorn Phone work (04) 498 0958

Senior Advisor Communications Vincent Cholewa Phone work (04) 498 0920, Commission media releases can be viewed on its web site

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