U.S. to Fight Heinz Merger With Bumble Bee Seafoods
The federal government said on Thursday that it wants to stop H. J. Heinz, the owner of Star-Kist, from buying Bumble Bee Seafoods, saying the merger would mean higher prices for canned tuna.
The Justice Department said it will file a lawsuit to halt the proposed $225-million acquisition of San Diego-based Bumble Bee because the merger was a “significant threat” to competition.
“Our prediction is that this merger would result in increased prices to consumers” for a food that is a “staple product” in most American homes, Assistant Atty. Gen. Charles F. Rule said Thursday.
Star-Kist, Bumble Bee and Chicken of the Sea “have maintained a roughly 70% share of the market for the past 10 years,” Rule said. “The Big Three’s share has remained remarkably consistent.”
Heinz is expected to announce today whether it will continue to pursue Bumble Bee, which is owned by company executives and financial partner First Boston Corp. The group, which acquired Bumble Bee for $73 million in 1985, declined comment Thursday.
The announcement was a victory for the American Tunaboat Assn., a San Diego-based group that represents about 350 owners and operators of large tuna boats. The group had demanded that the Justice Department stop the acquisition.
“I think the U.S. consumer is the winner because of this (decision),” American Tunaboat Assn. President August Felando said.
Star-Kist is the nation’s leading canned tuna brand with 36.5%, followed by Ralston Purina’s Chicken of the Sea brand with 20% and Bumble Bee with 15%, according to Advertising Age magazine.
A Heinz spokesman on Thursday defended the acquisition as part of a strategy designed to transform Long Beach-based Star-Kist into a lower-cost producer that can survive increased competition from lower-cost foreign producers.
“The whole basis of our argument was that tuna is actually a worldwide commodity,” Heinz Assistant Treasurer John Mazur said. “Import competition has been providing significant competitive pressures and we had hoped to achieve some significant cost efficiencies.”
Mazur said brand franchises are “relatively weak,” and that it is price differences that make a large difference to shoppers.
Canned tuna is “always on special so you can’t have margins that allow you to advertise heavily in the media,” Mazur said. Shoppers do have favorite brands, but to most consumers, “a can of tuna is a can of tuna,” according to Mazur.
The Justice Department decision occurred at a time when domestic tuna brands are slowly losing market share to foreign brands, according to Mazur. Foreign companies now account for 27% of the branded tuna sold in the United States, he said, up from 6% in 1977.
THE TUNA MARKET Chicken of the Sea (Ralston) 20% Bumble Bee 15% Star-Kist (H. J. Heinz) 36% Others 29% The U. S. plans to try to stop Heinz from adding to its market dominance by buying Bumble Bee.
