The Commerce Commission is this month expected to release a decision on an application by three national egg producers seeking clearance to merge, to combine their egg production and wholesale supply.
The application, which has come from Heyden Farms Ltd, Henergy Cage-Free Ltd and Rasmusens Poultry Farms Ltd, may have a decision released from the commission on September 18.
Heyden Farms supplies caged eggs, barn laid eggs, and free range eggs from its production facilities in the Waikato and Bay of Plenty. It sells its eggs under the Morning Harvest, Sure as Eggs and New Day Free Range brands, which are owned by the Independent Egg Producers Co-operative, of which it is a shareholder. It also produces liquid eggs.
Henergy Cage-Free supplies barn laid eggs from its production facilities near Masterton and sells its eggs under its Henergy Cage-Free brand.
Rasmusens Poultry Farms Ltd supplies caged eggs and free range eggs from its production facilities near Whanganui and sells its eggs under the Morning Harvest and New Day brands as an IEP Co-op shareholder, as well as Rasmusens’ free range brand. It’s also involved in commercial sale of pullets.
In addition to branded eggs, Heyden Farms and Rasmusens Poultry Farms Ltd, via the IEP Co-op, and Henergy Cage-Free each supply eggs on a private label basis to supermarkets.
In the application, the companies say the proposed merger will provide the merged entity with scale, balance sheet strength and access to cost-effective production that will allow it to invest and innovate in ways that drive efficiencies into its business. “Over time, the benefits of these investments and efficiency gains can be shared with consumers through lower prices.”
Applicants also believe there is no realistic prospect the proposed merger will result in a substantial lessening of competition in NZ’s egg market due to egg-producers being price-takers; the exit of traditional caged eggs from the market come 2022; and the forecasted eventual phase out of colony eggs by major supermarkets, among other factors.
The three parties acknowledged the phasing out of traditional caged-laying, which would be prohibited in New Zealand by 2022, would see big changes in the industry. It is thought the change will have a knock-on effect to the market, making a previously premium product – cage-free eggs – less premium, pulling up the market price of eggs.
Government made the decision in 2012 to ban the battery cage as part of a new welfare code for laying hens, with colony cages approved as the new caged system to replace them.
The Egg Producers Federation estimates 40 per cent of current production is carried out by conventional cage set-ups that are due to be phased out in two years.
If the merger gets the go-ahead, the companies intend to merge the entirety of their current operations into a single entity; a new company called ‘Better Eggs Limited’.