Egg packer has no power over price

01-01-2007 | |
Egg packer has no power over price

In its submission to the UK Competition Commission, giant packer Noble Foods (which was formed by the merger of Deans and Stonegate) says it will still be too small to have any influence on supermarket egg prices.

The Competition Commission is examining the merger of the two companies, to see whether it will have power over its customers to raise prices above competitive levels or to reduce service levels. Noble Foods says that will not be the case.
The company’s submission says that the merged companies will have no influence on supermarket prices because of “inexorable growth in concentration and market power among the leading UK retailers over the last 15 years.”
“If buyer power had been materially diminished as a result of the merger one would expect to see fewer and smaller price reductions and greater ease for the merged entity in pushing through price increases,” says the submission document. “That is not the case.”
In addition the terms of trading between packer and supermarkets are loaded heavily in favour of the retailers, says the document.
“The own-label egg supplier’s dependence is illustrated by the crippling impact that a loss of significant business from a customer can have on the economics of its business,” says the submission. “Unlike a manufactured goods producer it cannot simply turn off the tap. The hens must go on being fed and they will go on laying.” This means that the packer may have to off-load surplus supplies at low prices and suffer substantial losses.

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