Unilever-McCormick deal may hit UK competition, says CMA

(Sharecast News) - Unilever's planned $65bn merger of its foods business with US spices maker McCormick has run into UK regulatory scrutiny after the Competition and Markets Authority said the deal could reduce competition.

The watchdog said on Wednesday it would launch an in-depth Phase 2 probe unless the companies submit undertakings to address its concerns by 18 November.

Unilever announced the deal in March, combining its foods division, which includes Hellmann's mayonnaise and the Knorr brand, with McCormick, owner of Frank's RedHot and French's mustard, in one of the largest transactions ever seen in the food sector.

The CMA's concerns are focused on the supply of dry ingredient mixes and dry sauces to UK retailers. It believes the combination of Unilever and McCormick could reduce competition in categories such as chilli con carne mixes and parsley sauce.

It added that rival products, including Nestlé's Maggi, Premier Foods' Bisto range and supermarket own-label brands, provide only limited competitive pressure in these markets.

The CMA also reviewed the mustard market but reached a different conclusion. It found that English, French and American-style mustards are separate product categories because consumers do not regard them as close substitutes.

As a result, Unilever's Colman's and Maille brands are not considered close competitors to McCormick's French's mustard brand, and the watchdog identified no competition concerns in that area.

Reporting by Frank Prenesti for Sharecast.com