Commission: Lucky Star and Glenryck should not merge

The housing of the country’s two dominant canned pilchard brands, Lucky Star and Glenryck, within a single corporation is undesirable.

That is one of the the bottom lines in the ruling made by the Competition Commission in the bid by Oceana Group to acquire Foodcorp’s fishing operation.

The Commission released its ruling yesterday saying it has approved the proposed transaction. The approval comes with a condition that that Foodcorp dispose of the Glenryck Trademark. Foodcorp must also divest the small pelagic fish quota allocated by the Department of Agriculture, Forestry and Fisheries (DAFF).

The Commission noted that the Foodcorp fishing operation pursued by Oceana is made of the business of harvesting, processing and selling deep sea trawl hake, south coast rock lobster (SCRL) pelagic fish and small pelagic fish like pilchard, anchovy and red eye. Foodcorp owns the Glenryck brand.

The Commission also noted that Oceana is also active in the markets for harvesting, processing and selling deep sea trawl hake, SCRL and small pelagic fish and it owns the Lucky Star brand.

The Commission said it assessed the likely effects of the proposed transaction in a number of markets, namely, SCRL, anchovy and fishmeal, hake and canned pilchard. The Commission said its investigation included site visits, obtaining the views of competitors and customers and also consulted with DAFF.

“The Commission’s investigation found that the proposed transaction will substantially prevent or lessen competition in the market for the harvesting, processing and marketing of canned pilchard to the detriment of competition and customers”.

The Commission added that its investigation found that it is important to own a strong brand and have access to sufficient quota of small pelagic fish allocation in order to effectively compete in this market.

“The proposed transaction will result in the removal of Oceana’s closest competitor.  Post-merger, Oceana will account for more than 80% of the market whist its nearest competitor will account for less than 10% of the market”.

The Commission also found that the market for the harvesting, processing and marketing of canned pilchard is characterised by high barriers to entry and expansion in the form of regulatory barriers, high capital outlays, brand loyalty, input scarcity, amongst other barriers”.

The Commission therefore approved the transaction subject to Foodcorp selling off the Glenryck brand and its small pelagic fish allocation, to an independent entity prior to implementing the proposed transaction”.

news@ujuh.co.za

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