Unilever’s planned $65bn merger of its food business with US spice giant McCormick has hit a regulatory hurdle after the UK’s competition watchdog warned the deal could leave supermarkets with fewer suppliers to choose from.

The Competition and Markets Authority has given the two businesses until 18 November to address its concerns or face an in-depth investigation that could delay the blockbuster deal.

The merger, announced in March, would bring Unilever’s food brands, including Hellmann’s, Knorr and Marmite, together with McCormick’s portfolio of Schwartz, French’s mustard and Frank’s RedHot.

However, the watchdog’s initial investigation found that combining the businesses could significantly reduce competition in the UK market for dry cooking mixes and sauces.

The CMA said the deal would bring together the two largest branded suppliers in both categories, leaving the combined business with a dominant position on supermarket shelves.

While rival brands such as Nestlé’s Maggi and Premier Foods’ Bisto, alongside supermarket own-label products, would continue to compete, the regulator found they provided only limited competitive pressure.

It also warned that limited supermarket shelf space and the established positions of major suppliers could make it difficult for new competitors to enter the market.

It’s a significant setback for Unilever, which has been reshaping its portfolio to focus on higher-growth beauty, personal care and household products.

As previously reported, the deal is expected to create one of the world’s largest food businesses, with annual revenues of around $20bn.

The transaction is currently expected to complete by mid-2027, subject to regulatory and shareholder approval.

Unilever has already moved to address potential competition issues, putting its historic Colman’s mustard brand up for sale in August.

However, the CMA said it had not identified competition concerns in the mustard market, finding that English, French and American-style mustards were sufficiently different products that shoppers did not generally consider them interchangeable.

Unilever said it was continuing discussions with potential buyers for Colman’s and was working constructively with the regulator. McCormick also confirmed it was cooperating with the watchdog.

The latest development comes just a week after Unilever unveiled plans to save €1bn by 2029 through a wider restructuring of its business.

The merger is a central part of that strategy, with Unilever looking to exit most of its food operations while retaining a stake in the enlarged McCormick business.

The CMA must now decide whether any remedies offered by the companies are sufficient to address its concerns.

If the regulator is not satisfied, the deal will be referred for a more detailed Phase 2 investigation, putting another hurdle in the way of one of the biggest transactions in the global food industry.

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