Refresco-Cott soft drinks merger faces CMA investigation

The CMA is concerned that a takeover of Cott by Refresco, maker of Innocent and Sunny D drinks, could lead to higher prices for some brands

Refresco makes drinks for brands such as Innocent and Sunny D (AFP/Getty Images)

The competition watchdog is to investigate the $1.25bn (£935m) merger between soft drinks firms Refresco and Cott after warning that shoppers could face higher prices as a result of the deal.

The Competition and Markets Authority (CMA) said the takeover by Dutch company Refresco of Cott's global beverage manufacturing business could lead to "higher prices for some supermarkets and leading household brands".

Refresco and Cott manufacture, package and distribute soft drinks for a number of brands - including Sunny D and Um Bongo - as well as supermarkets and shops in the UK.

While the CMA's initial investigation into the merger did not find any competition concerns for the majority of these products, the watchdog said on Wednesday that an aseptic production process for juice drinks is concerning.

The CMA said: "Both companies supply juice drinks using a special aseptic production process that allows them to be sold preservative-free and without refrigeration.

"Only one other competitor in the UK currently supplies third parties with juice drinks using this production process.

"The CMA is therefore concerned that, after the merger, the combined business might be able to increase prices or lower quality standards."

The CMA said it will refer the merger for an in-depth investigation unless Refresco offers acceptable undertakings to address competition concerns.

Rachel Merelie, acting CMA executive director and decision-maker, said: "These companies supply well-known UK shops and brands with soft drinks, who in turn sell these to thousands of people daily. It is therefore important that we address any issues to ensure that shoppers do not lose out.

"We have looked at all aspects of this merger and have concerns that the merger could lead to reduced competition in the manufacturing and packaging of certain juice drinks. This may result in higher prices or quality standards slipping for stores and brands, with potential knock-on effects to end-consumers."

Refresco said it is currently examining the details of the decision and is willing to offer "suitable remedies and will fully co-operate with the CMA to address the concerns raised".

PA