And the ACCC also says it will not oppose Saputo’s plans to sell two milk processing factories to Coles.
Bega has one milk processing plant in Tasmania at Lenah Valley, which produces fresh drinking milk, milk-based beverages and packaged cream.
TasFoods acquires raw milk from a third party processor and some raw milk from farmers in Tasmania.
Bega proposes to acquire the Betta Milk brand, Meander Valley Dairy brand, and a licence of the Pyengana Dairy brand, as well as the plant and equipment used to process and pack the products of these brands (except for those used for the Pyengana cheese branded products).
The ACCC examined the proposed purchase to decide whether there were market competition issues.
The ACCC found that Ashgrove and TasFoods are the primary competitors in the wholesaling of branded and premium fresh white drinking milk.
“Although Bega does supply branded fresh white drinking milk in Tasmania, it has significantly lower market share than both Ashgrove and TasFoods,” the ACCC found
“The continued presence of Ashgrove and its strong brands will continue to constrain the merged entity post-acquisition.
“In relation to private label or ‘economy’ fresh white drinking milk, the ACCC found that Bega and TasFoods were the only suppliers of these products in Tasmania.
“However, the ACCC considered that the limited capacity of TasFoods compared to Bega reduced its importance in the ongoing competitive dynamic of this market segment.
“In addition, the ACCC found that the ongoing threat of other processors starting to supply private label or ‘economy’ fresh white milk would continue to constrain the merged entity post-acquisition.
“Therefore the ACCC found that, given the constraints present in the wholesaling of both branded and “economy” fresh white milk, the proposed acquisition would be unlikely to lead to a substantial lessening of competition in this market.“
COLES ACQUISITION OF SAPUTO FACTORIES
The ACCC has approved Saputo’s sale of two factories in Laverton North, Victoria, and Erskine Park, NSW, to Coles.
The ACCC considered the effect of the proposed acquisition on markets for the acquisition of raw milk in NSW, Victoria and South Australia, and the impact on markets for the processing and wholesale supply of dairy products.
The ACCC found that the acquisition was unlikely to change the number and strength of acquirers of raw milk.
“Therefore the ACCC found that there was unlikely to be a substantial lessening of competition in these markets,” the ACCC said.
In relation to the market/s for the acquisition of raw milk in NSW, the ACCC found that Saputo has a commercial incentive to continue selling Devondale branded milk in NSW and has recently entered into a five year toll-processing agreement with Coles.
“Taking these factors into consideration, the ACCC considers that the transaction is unlikely to change Saputo’s incentives to continue acquiring raw milk in NSW for at least the next five years.
”The ACCC also found that Bega and Lactalis would continue to operate as strong competitors in NSW post acquisition, with Norco continuing to provide some constraint in the northern dairy regions of NSW.“
Business Council of Co-operatives and Mutuals CEO Melina Morrison said the group remained concerned the proposed acquisition was likely to significantly reduce competition in the dairy market to the detriment of consumers and family farmers.
“As processing facilities are further concentrated in the hands of a few investor-owned dairy processors and retailers, there is less and less pressure on these businesses to share profits with farmers,” Mrs Morrison said.
“That means farmers will have less capacity to reinvest in the sustainability of their own businesses.
“Australia’s domestic food security and potential export earnings and income tax derived from dairy could all be impacted.”
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