Food groups merger forbidden

Press, 13 May 1987, Page 1

Food groups merger forbidden

By

HUGH STRINGLEMAN,

farm editor

Potential dominance in the flour milling, bread baking and poultry industries has led the Commerce Commission to turn down a. merger between Goodman Fielder, Ltd, and Wattie Industries, Ltd.

Dominance in those markets would have been substantial, said the commission yesterday, and the alleged benefits of a merger did not outweigh the detriments arising from dominance.

The Commerce Commission has turned down the merger proposal to protect the interests of all New Zealand consumers and its refusal has been welcomed by wheatgrowers. “It must be heartening to all New Zealanders that the Commerce Act works and the public can be protected,” said the chairman of United Wheatgrowers, Mr Mervyn Gray, last evening. "This was an instance where might was not right,” he said. A merged company would control 90 per cent of flour milling in the North Island and 40 per cent in the South Island, said the chairman of the Commerce Commission, Mr John Collinge, yesterday.

Also with deregulation of the wheat and flour industry it was likely that, many of the existing independent millers in the South

Island would be likely to close with Goodman Fielder-Wattie gaining market share, he said. The merged group would have had 52 to 60 per cent of the bread market, with a much greater share of sliced bread in particular. It would have completely controlled wet yeast production and all the bran and pollard which would be available to the poultry industry. Wattie already has 70 to 80 per cent of the poultry meat industry, commented the commission, with power to make further inroads into that market. Essentially the commission found that the dominance of the proposed merged group would have been such in these industries that it would have been very difficult for independents to survive or any new entrants to establish. It was argued that public benefits could flow from increased efficiencies but the commission found that there were no means of ensuring such benefits were passed to consumers and users.

The president of the New Zealand Flour Millers’ Association, Mr Roger Keenan, said the decision allowed all participants in the wheat and flour industry to consolidate their positions in the deregulated area.

The commission’s decision implied that independent millers would be able to supply flour to bakeries owned by Goodman Fielder and Watties.

For wheatgrowers, Mr Gray also looked to the future and concerns that the cross shareholdings, common directorships and chairmanship of the two large conglomerates would continue to mean common policies. “We fear that dominance by Goodman Fielder and Watties is preventing a true free market and that view seems to be upheld by the Commerce Commission,” he said. “So unless the integration of milling and baking in these companies is broken, problems will continue for wheatgrowers,” Mr Gray said.

Sony Corp’s parent company profit is expected to be around 36 billion yen in the year ending March 31, 1988, if the yen/dollar exchange rate remains at current levels, a company spokesman said. He said profits were 36.45 billion yen in the last full fiscal year ended December 31, 1986. Sales in 1987-88 are estimated at 1000 billion yen, against 1036 billion in 1985-86.