OFT refers Cott drinks deal over monopoly fears

By Chris Mercer

- Last updated on GMT

Related tags Cott Soft drinks United kingdom

Private label soft drinks giant Cott Corporation will have to wait
to get its hands on UK rival Macaw after Britain's competition
watchdog raised monopoly concerns.

The UK's Office of Fair Trading (OFT) said it was referring the deal to the Competition Commission over concerns that Cott may dominate private label soft drinks in Britain.

Cott's UK subsidiary, Cott Beverages, signed a deal to buy Macaw for £75.7m this year.

Cott UK and Macaw combined supply 57 per cent of private label soft drinks in Britain. "Most customers raised concerns that the merger would lead to higher prices,"​ the OFT said.

Vincent Smith, the OFT's competition enforcement director, said: "The key question is whether customers could resist post-merger price increases by changing to credible alternative suppliers.

"There is substantial doubt on this issue and the OFT therefore has referred the merger to the Competition Commission for further examination."

The move is the latest sign that the OFT is taking a more rigorous approach to competition enforcement in Britain, after recently stepping in on price-fixing and acquisitions in the dairy sector and re-opening an investigation of retailer power.

The Competition Commission is expected to decide on Cott-Macaw by 15 May next year, leaving Cott hanging on for what it sees as a very lucrative takeover.

Andrew Murfin, managing director of Cott UK, said there was nothing uncommon in the OFT's move.

"We are confident that the Commission will agree that this acquisition does nothing to diminish the robust competition that currently exists among non-alcoholic beverage manufacturers."

Cott said it would operate the Macaw business without integrating it into the Cott UK division.

Cott's shares tumbled this summer after it withdrew earnings estimates, warning profits would be badly hit by low fizzy drink consumption, rising PET costs and poor performances from own-label bottled water.

The Macaw deal 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.

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