review

The good news for wholesalers is that our industry is in great shape and can look to its future with confidence. Most everything else in the total grocery market is hunky dory as well, with consumers in particular getting a really good deal. There are one or two things that could be improved, however, such as making it easier for the big players to increase the population of medium/large supermarkets, and by beefing up the Supermarket Code of Practice so that it actually works after seven years of ineffective existence.

This was the essence of the Competition Commission’s long-awaited Provisional Findings in its Grocery Market Inquiry, announced on October 31. The bad news for wholesalers is the CC has not uncovered conclusive evidence of the unfair pricing differentials we believe exist, where the major supermarkets extract much more favourable prices from suppliers than wholesalers achieve on like-for-like large purchases.

This is not altogether surprising, because its findings are based on just 29 suppliers and 141 SKUs – far less that the sample it looked at during a previous inquiry in 2000. Thus, the CC finds no evidence of abuse of buyer power. It says: “The largest grocery retailers, given their size, will have buyer power in relation to more of their suppliers than smaller grocery retailers and wholesalers. However, we consider that the buyer power of even the largest grocery retailers may be offset by the market power of their suppliers, particularly the market power of suppliers of the most prominent branded goods.”

The CC analysis shows price differentials of 12.5% to 16% between the Big Four supermarkets and small wholesalers, but it does not draw a conclusion on whether these are excessive.

While welcoming some of the proposals, the Federation of Wholesale Distributors is worried that the CC has not given this aspect of the investigation sufficient emphasis. We do not understand this failure, as this information is critical to ensuring that the wholesale/independent channel can compete effectively in a fair marketplace.

The Competition Commission has identified local markets where consumers suffer from weak competition and it is likely to intervene to redress the situation. However, easing the introduction of even more supermarkets would work totally against wholesalers’ interests, and those of the independent convenience retailers they serve, by sucking ever more consumer spending away from the wholesale/independent channel.

What is certain is that FWD will continue to fight the wholesalers’ cause through to the inquiry’s end early next year.

Get Our E-Newsletter - Wholesale News stories in your in-box, delivered weekly.
Will be used in accordance with our Privacy Policy
Share.

About The Author