Declining consumption of potatoes in Australia is not enough reason to block the sale of Thomas Foods International’s potato packing business to fellow South Australian-based rival Mitolo, the national competition regulator has found.
While competition within the potato market would reduce if Mitolo absorbed TFI’s packing and wholesale business, and a general slowing demand trend had created “difficult circumstances” for potato growers, the Australian Competition and Consumer Commission said most growers had other market options if unhappy about Mitolo’s conditions.
The consumption decline would also continue to affect Australian growers regardless of whether the transaction went ahead.
“Feedback from potato growers and other industry participants suggested if Mitolo sought to lower prices it paid growers, most producers would be able to switch to rival packing sheds,” said ACCC deputy chairman Mick Keogh. “Some would be able to swap to growing potatoes for processing into potato products.”
Mitolo and TFI grow potatoes and operate packing sheds in SA, and overlap in the acquisition of some crops from third party growers, and the supply of washed potatoes to supermarkets and wholesalers.
The 50-year-old Mitolo business grows potatoes and onions in SA and NSW for the wholesale markets around Australia, except Tasmania and Western Australia, although only acquires a small proportion of its needs from other growers.
TFI, which is primarily a meat processor, supplies fresh washed potatoes for retail, wholesale and export channels, but buys a much bigger portion of its supplies from third party growers.
The company branched into the potato business in 2013 when it bought Mondello Farms.