Group affected by sugar dispute
The Real Good Food Company (RGFC), a diversified food group and owners of Napier Brown, Renshaw, R&W Scott, Garrett Ingredients and Haydens Bakery, has released its third quarter trading update.
In the update, RGFC warned that it was facing short-term challenges due to instability in the sugar market. These challenges include an ongoing pricing dispute with British Sugar, a major supplier to Napier Brown.
Napier Brown has made a complaint to the Office of Fair Trading regarding this dispute, claiming that British Sugar is abusing its dominant position. If the complaint is successful, Associated British Foods, owner of British Sugar, would be a repeat offender and could face a substantial fine. The OFT has confirmed that the complaint has been referred to the new Competition and Markets Authority, the successor to the OFT, which begins operating on 1 April 2014.
Earlier this month British Sugar temporarily withdrew supply of sugar to Napier Brown despite Napier Brown continuing to pay over 95% of the imposed price while it sought a solution to the pricing dispute. British Sugar has a monopoly in the supply of UK beet sugar, leaving Napier Brown with no alternative but to pay the imposed price. Napier Brown argues that this price is anti-competitive, leaving them unable to compete commercially. The company believes that this is a breach of undertakings given by British Sugar to the EU Competition Authorities in 1988 after it had received a fine for abusing its dominant position.
There are currently no negotiations with British Sugar underway and it is therefore unlikely that this pricing dispute will be resolved in the near future. The short-term impact on Napier Brown’s and Garrett Ingredients’ results of this action by British Sugar is significant and will inevitably be reflected in the RGFC’s full year results for the year to 31 March 2014 and in the following financial year.
Pieter Totté, executive chairman, comments, “Given the progress elsewhere within the Group, which we have outlined in our previous updates, it is very disappointing that we find ourselves in the position where a major supplier is, in our view, abusing its dominant market position in the supply of sugar to us.
“If British Sugar is allowed to impose a price on Napier Brown, its largest customer and the UK’s largest reseller of sugar, without any reference to market pricing, the consequent impact on UK customers and consumers would be significant.”
