ACCC expresses concerns over Saputo cheese business acquisition

Saputo owns a milk processing plant in Smithton, Tasmania, and proposes to acquire Lion’s Tasmanian cheese processing plants, located in Burnie and King Island, as well as Lion’s cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.

The proposed acquisition would combine processing plants of the second and third biggest buyers of raw milk in Tasmania, which currently compete separately with the biggest buyer, Fonterra.

“We are concerned that combining these two operators may lead to Tasmanian dairy farmers being paid lower prices for their raw milk,”​ ACCC deputy chair Mick Keogh said.

“If Saputo acquires the Burnie and King Island Lion plants, we will be left with a structure where two companies, Fonterra and Saputo, buy more than 80% of the raw milk produced in Tasmania.​

“Each would have a market share several times bigger than the next largest buyer of raw milk, Mondelez-Cadbury.”​

Some farmers have told the ACCC Lion has been offering competitive contract terms, including better prices for winter milk and an option to fix the price of a percentage of their milk for up to three years.

The ACCC is further investigating whether these features may be lost after the proposed acquisition.

The ACCC has also examined the impact of the proposed acquisition on the supply of cheese in Australia. Saputo’s cheese brands include Coon, Sungold and Devondale. The ACCC said its preliminary view is that the proposed acquisition is unlikely to raise competition concerns in this area.

“Lion focuses on premium speciality cheeses, and Saputo focuses on everyday cheeses. Our initial analysis suggests that a combined Saputo-Lion would face continued competition from a range of suppliers, including domestic cheese producers, supermarket private labels, and cheese importers,”​ Keogh said.

The ACCC said it invites submissions from interested parties by August 22, 2019, with a final decision scheduled for September 26, 2019.