The door is open to the biggest consolidation yet on Britain's private label soft drinks market, after competition authorities provisionally backed Cott Corporation's takeover of rival Macaw.
The deal was unlikely to substantially reduce competition in the market for private label, carbonated soft drinks packed in PET bottles, said the Competition Commission in its provisional ruling.
The decision indicates that regulators accept consolidation is necessary on the UK soft drinks market, amid pressure on soft drinks makers from large retailers and consumer health trends.
Cott, the biggest private label soft drinks supplier in the world, signed a deal to buy Macaw, its biggest UK rival, for £75.7m last summer. Together these two control 57 per cent of the country's private label soft drinks market.
Regulators were called to investigate because of fears the resulting giant would monopolise the market and push up prices.
The Competition Commisssion reported on Tuesday that this was unlikely because retailers could still switch quickly and easily between suppliers if unhappy with their current deal. After Macaw, Cott's main UK competitors are Princes and Silver Spring.
The Commission said these had enough spare capacity to mean that "retailers will still be able to choose between suppliers and restrict Cott's ability to raise prices".
Laurence Elks, chairman of the inquiry into the deal, said supermarkets already held "significant bargaining power" when negotiating with private label fizzy drinks makers.
Cott hopes the Macaw deal can now alleviate margin pressure by giving it more muscle in retailer talks.
The takeover will also enable it to supply more of the non-carbonated soft drinks that consumers, and so retailers, now want.
Cott was stung in several markets last year by consumers switching from fizzy sodas to healthier drinks like juice and bottled water. The group's net income fell from $78.3m in 2004 to $24.6m in 2005.
Macaw gives Cott a first inroad into aseptic drinks production, a fast-emerging technique among soft drinks producers because of its ability to satisfy growing consumer demand for non-carbonated and healthier products.
Aseptic production also helps firms to add value by fortifying drinks with vitamins and minerals, as well as maintaining a high juice content in juice drinks.
Andy Murfin, managing director of Cott's UK and Europe divisions, previously told www.BeverageDaily.com that demand for aseptic production lines would push the category's growth into double figures over the next few years.