Saputo given approval to buy Lion cheese factories in Tasmania

The Australian Competition and Consumer Commission says it has thoroughly investigated a plan by Saputo Dairy Australia to buy the Lion Dairy & Drinks Tasmanian cheese business.

AUSTRALIA’S competition watchdog has made a decision about the potential impacts of a major dairy deal in Tasmania’s North-West on competition for raw milk.

The ACCC has decided it would not oppose plans by Saputo Dairy Australia to purchase Lion Dairy & Drinks’ Tasmanian-based cheese businesses at Burnie and on King Island.

Saputo is proposing to acquire the cheese processing plants and Lion’s cheese brands, including South Cape, King Island Dairy and Tasmanian Heritage.

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Saputo has an existing milk powder processing plant in Smithton.

ACCC deputy chair Mick Keogh said the organisation’s investigation included a detailed examination of the effect the deal would have on competition for the acquisition of raw milk.

“We looked very closely at the transaction because it will combine the processing plants of the second and third-biggest raw milk buyers in Tasmania,” he said.

“We spoke with many farmers and other interested parties.”

Fonterra is the largest buyer of raw milk and Saputo’s closest competitor in Tasmania.

Other processors include Mondelez-Cadbury, Lactalis-Parmalat and a small fresh-milk plant in Hobart that Lion will retain.

“Some farmers told us that Lion has been offering competitive contract terms and they were concerned these would be lost after the proposed acquisition,” Mr Keogh said.

“However, most farmers were not concerned about the transaction, and told us the remaining milk processors will keep price and non-price terms competitive. Many farmers expressed strong support for Saputo’s investment in cheese production in Tasmania.”

Lion Speciality Cheese factory at Burnie

Mr Keogh said ultimately the ACCC did not think the acquisition was likely to have the effect of substantially lessening competition.

“However, the ACCC acknowledges that there is a significant degree of concentration in the Tasmanian dairy sector. Any further consolidation of dairy processors would cause significant concern,” Mr Keogh said.

The ACCC also examined the impact of the proposed acquisition on the supply of cheese in Australia.

Saputo’s cheese brands include Coon, Sungold and Devondale and Lion’s cheese brands include South Cape, King Island Dairy and Tasmanian Heritage. The ACCC determined the proposed acquisition was unlikely to substantially lessen competition in the supply of cheese.

“Lion focuses on premium speciality cheeses and Saputo focuses on everyday cheeses,” Mr Keogh said.

“We considered that a combined Saputo-Lion would face continued competition from domestic cheese producers, supermarket private labels, and cheese importers.”

Originally published as Saputo given approval to buy Lion cheese factories in Tasmania