If you had to make a New Year’s prediction, it would be a safe bet to say that the year ahead will be a pivotal one for the traditional grocery wholesale industry. Its bedrock customer base, the 30,000 or so independent retailers it supplies, is reducing at an alarming rate in the face of the multiple supermarkets’ incursions into the convenience sector and the unfair price differentials they are able to employ.
We will learn, probably in late April, whether or not the Office of Fair Trading will refer the grocery industry for a full review by the Competition Commission. But in an interview in The Grocer just before Christmas, the OFT’s new chief executive Dr John Fingleton gave the strong impression that he was minded to do nothing because he believed the market was operating efficiently and consumers were benefiting from supermarkets’ low prices. He is also on record as saying it is the OFT’s job to look after competition, rather than competitors.
Wholesalers were naturally dismayed by his implied assumption that the UK grocery market currently operates on a fair basis, despite an unprecedented body of opinion, including the competition minister himself, that reckons something is seriously amiss. This unease is bound to increase when the All Party Parliamentary Small Shops Group’s report into the prospects for our high streets 10 years hence is published shortly (see page 4). Jim Dowd, chairman of this influential MPs’ group, said the report will question where consumers’ long-term interests lie if the domination of the big four supermarkets is allowed continued free reign.
Our expectation is the report will increase pressure on the government and competition authorities to consider some form of curb on the power of the big four supermarkets – especially in regard to preserving the wholesale channel.
What Dr Fingleton and his OFT colleagues should recognise is that FWD is simply calling for a level playing field – where wholesalers’ buying prices are not completely and damagingly out of line with those extracted by the multiples. We are not calling for any convoluted form of positive discrimination. He came closest to admitting the possibility of a problem when he conceded that if more than one in three independent retailers were buying stock from supermarkets for resale (as revealed in The Grocer), that it “raised questions” about the supply chain.
Too darn right it does, and those are precisely the questions the Competition Commission should be setting out to answer now before it is too late. Dr Fingleton has the remedy at his disposal; let us hope he can be persuaded to dispense it.