Safeway battle sparks new fears of supplier 'bullying'

30 January 2003
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30 January 2003 | Robin Parker

The battle to buy Safeway's supermarkets has reignited calls to clamp down on the UK's biggest grocers' "bullying" buying tactics.

Smaller retailers and suppliers fear further consolidation will increase the bigger chains' buying power at their expense.

Since Morrisons announced a bid for Safeway earlier this month, Sainsbury's, Wal-Mart, Tesco, US venture capital firm Kohlberg Kravis Roberts and BHS boss Philip Green have expressed interest in the 480 stores, which could sell for £3 billion.

Whichever firm wins, three-quarters of the UK's £103 billion grocery market is likely to be owned by just three chains. A successful bid from Sainsbury's or Tesco could potentially command significantly more than the 25 per cent market share identified by the government as the limit for fair competition.

The Office of Fair Trading (OFT) will judge by the end of February whether the bids should be referred to the Competition Commission.

Environmental pressure group Friends of the Earth has condemned what it calls buyers' "bullying tactics" in dealing with the UK's 160,000 farmers.

Its comments echo prime minister Tony Blair's claim in 2000 that supermarket giants had suppliers in an "armlock".

The OFT's code of conduct, which forces the big chains to meet certain fairness criteria in their negotiations with suppliers, came into force last year.

A spokesman for the Fair Deals Group, which represents 10 supplier associations, said the loss of Safeway, the fourth largest UK supermarket chain, would bring such disputes into sharp relief.

A spokesman for the Association of Convenience Stores, which represents 30,000 neighbourhood stores, said: "Whichever company buys Safeway, they will be able to pay less to their suppliers, which will be subsidised by higher prices among our members."

Waitrose is urging the OFT to look into the impact of further consolidation on suppliers.

Steven Esom, its managing director, said safeguards should be introduced to protect the suppliers.

"The loss of a major food retailer should be offset by a real effort to preserve and stimulate competition in the food sector," he said in a letter to the OFT.

"A homogenised market will curtail choice and quality and would not be in the interests of customers, farmers or suppliers."

SMjan2003

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