UK competition regulator raises price concerns over sugar deal

The UK competition regulator has warned that a sugar deal between the makers of Tate & Lyle and Whitworths could push up the price of the staple for British shoppers, and has given the companies until next week to address its concerns.

The Competition and Markets Authority warned on Friday that T&L Sugars’ purchase of the Tereos unit that makes Whitworths and private-label sugars could leave only two large suppliers in the UK, leading to a “substantial lessening of competition”.

With British Sugar as the only rival to T&L Sugars if the deal goes through, CMA said that supermarkets might be forced into paying more for packed sugar, and the price rises could then be passed on to consumers.

“The supply of sugar to grocery retailers in the UK is already highly concentrated,” said CMA senior director of mergers Sorcha O’Carroll in a statement.

“This deal would bring together two of the three players in the UK sugar sector, reducing competition and choice further for people and businesses,” she added.

British Sugar is owned by Associated British Foods, which also owns Primark as well as brands ranging from Twinings to Patak’s.

Tereos, a sugar co-operative based in France, announced its plan to sell the business-to-consumer arm and its Tereos UK and Ireland site in West Yorkshire to TLS in November last year.

The regulator has given the parties five working days to allay its concerns about the acquisition before opening an in-depth probe of the deal that could last about six months.

“We will be absorbing the CMA feedback over the next few days and deciding how to progress from there,” said TLS in response to the announcement.

Tereos said it was assessing the implications of the CMA announcement.

The French co-operative, a leading sugar beet and sugar producer in the EU, bought the UK operations formerly known as Napier Brown Sugar in 2015. At the time, Tereos was preparing to increase its French sugar production by approximately 20 per cent following the EU’s deregulation of sugar production in 2017.

However, the UK operations have struggled since the takeover, reporting a £1.5mn loss in the year to March 2023, according to accounts filed at Companies House.

Sugar refiners have also been hit by cost increases because of poor harvests of sugar beet — a source of the sweetener in Europe — and sugar cane due to adverse weather. Production costs have also risen as a result of energy price increases following Russia’s full-scale invasion of Ukraine.

“The prices rose dramatically after the Russian invasion [of Ukraine], as the price of natural gas increased,” said Julian Price, executive director at ACP/LDC Sugar Industries Group. “Natural gas is needed to process sugar beets into sugar, and so the cost of production went through the roof.”