Australian regulator opposes Heinz’s acquisition of baby food producer Rafferty’s Garden

The Australian Competition and Consumer Commission (ACCC) has opposed the proposed acquisition of organic baby food producer Rafferty’s Garden by the US-based food giant HJ Heinz.

This decision follows ACCC’s seven-month review of the transaction.

According to the ACCC, the merged entity would give Heinz a dominant 80% of the share of sales in the wet infant food market and about 70% in infant cereals and infant snacks market.

ACCC chairman Rod Sims said the Commission concluded that the proposed acquisition is likely to result in a substantial lessening of competition as Rafferty’s Garden has around 40% market share in wet infant food and is a close competitor of Heinz.

"The proposed acquisition would combine the two largest suppliers of wet and dry infant food in Australia, resulting in highly concentrated markets where barriers to entry and expansion are high, particularly because of brand recognition and preference."

"This is likely to reduce the frequency and depth of promotional activity, increase prices and reduce innovation in the wet and dry infant food markets," Sims added.

The ACCC stated that in reaching this decision, it has carefully evaluated the dependence of both Heinz and Rafferty’s Garden on the major supermarket chains for stocking their products.

In addition, it has extensively consulted on the proposed deal, focusing on whether removing Rafferty’s Garden would reduce competition in the current marketplace.

Heinz and Rafferty’s Garden are the two leading suppliers of wet and dry infant food in Australia.

Heinz manufactures canned wet infant food in cans, glass jars and pouch/pouch-and-spout packaging in Australia and is a leading player in glass jar-packaged food.

Rafferty’s Garden is a producer of wet infant food in pouch/pouch-and-spout packaging.

Both companies supply dry infant products, including cereals, snacks and teething rusks.

Rafferty’s Garden is owned by Australian private equity firm Anacacia Capital, which acquired the baby food firm in 2010.

In October 2012, Anacacia Capital entered into an agreement with Heinz to sell Rafferty’s Garden, which prompted a review by the ACCA.