The Competition Commission has suggested a supermarket ombudsman / watchdog as a possible remedy to the problems identified in its lengthy investigation into the UK’s grocery market. The proposal has been welcomed by farmers and other supermarket suppliers, but starkly opposed by most of the large retailers.

The NFU-actionaid ad makes clear the breadth of support for tighter control of supermarket buying practices, from both domestic and global producers. The accompanying press release reports independent research by Professor Roger Clarke, Professor of Microeconomics at Cardiff University, that finds that an ombudsman would result in higher prices for consumers, as claimed by some supermarkets. Professor Clarke explains:

The remedies, if effectively enforced, are likely to lead to lower prices in some cases, like agricultural products.

Even very small price reductions and other benefits are likely to result in consumer benefits that far outweigh the modest cost of an ombudsman. A supermarket watchdog would not only benefit consumers but also be, arguably, in the interests of the supermarkets themselves.

The text of the ad is worth quoting in full:

Fairer deal for farmers, workers and consumers

Wherever this asparagus is grown the problem is the same. The abuse of market power by retailers means that farmers and growers in the developing and developed world are subject to unreasonable demands. This means they are less able to invest and innovate for the future, which results in consumers losing out as choice is reduced.

The 11 largest UK supermarkets have just 48 hours left to sign up to the new Ombudsman proposed by the Competition Commission. A strong supermarket code of practice policed by an Ombudsman is in consumers’ best interest. A recent Yougov poll showed that 8 out of 10 shoppers back an Ombudsman.

To date only Waitrose, Marks & Spencer and Aldi have said they do not oppose further regulation. Tesco, Sainsbury’s, Morrisons, Asda, Iceland, Somerfield and Lidl are refusing to support the Ombudsman, while the Co-op remains undecided.

ActionAid and the NFU are calling on all supermarkets to sign up in the next 48 hours.

Responsible retailers have nothing to fear from an Ombudsman. So, who will be first to sign?

So, well done Waitrose, M&S, Aldi! Shame on the rest of you if you can’t bring yourselves to accept policing of your business practices.

Related posts:

1. Supermarkets and the Prevention, Distortion and Restriction of Competition
2. Fairness for farm workers too
3. Twittered morsels for 2010-01-13

British prices have risen over the last 18 months as retailers followed encouragement to concentrate on British sourcing. It looks as though the higher prices have proved too much for some retailers to stomach, with several retailers, including Tesco and ASDA, now importing a larger proportion of their beef. Tesco’s sales of British beef have dropped from 98% to 90% since 2007, while just 60% of ASDA’s beef is British. Anyone wishing to buy British beef should certainly avoid Netto, which imports all its beef.

A few retailers stand out for their continued commitment to British beef farmers, sourcing 100% of their beef from the UK: not just the upmarket Waitrose and Marks & Spencer, but also the Co-op, Budgens and Morrisons. Discounter Lidl follows with 96% British beef.

How are these sourcing policies reflected in the retailers’ prices? Comparing prices of around 500g of standard own-label beef mince at Tesco, ASDA, Sainsbury’s and Waitrose some surprising results emerge: Waitrose is cheapest at £3.98/kg followed closely by ASDA at £4. Tesco and Sainsbury’s are both pricer at £4.40. Clearly, Waitrose is able to meet its commitment to source only British beef while still offering a very competitive price to its customers.

(Prices checked with Tesco’s own price check and mysupermarket.com.)

Related posts:

1. Twittered morsels: close brassicas, sustainable supermarkets? sustainable meat?
2. Milk – what does it cost and where is it from?
3. Supermarkets and the Prevention, Distortion and Restriction of Competition

It all went rather quiet with the publication of the commission’s final report in April 2008, by when they’d concluded that:

We did not find that grocery retailers were engaging in holding undeveloped land (landbanking) as a strategy to impede the entry by rival grocery retailers into local markets

although 90 controlled land sites were identified where there was an “adverse effect on competition”.

There’s a related question about the supermarkets’ interest in land: to what extent are they interested as property developers rather than simple retailers?

Reading Carolyn Steel’s superb survey of the relationship between food and cities,
Hungry City: How Food Shapes Our Lives, I was struck by this quote:

We’re now thinking a lot more like a developer and not just like a retailer
(Tesco’s corporate affairs manager, 2005)

Yet when Terry Leahy, Chief Executive of Tesco, was asked by the Guardian about the existence of landbanks he was quick to assert that Tesco was simply a retailer:

Yesterday Sir Terry denied that Tesco had any sort of landbank. “Why would we do that?” he said. “We are a retailer.” He insisted he did not know how many sites Tesco owned.
(Guardian report on Competition Commission enquiry into grocery market, 26/4/2006)

So just how much is Tesco thinking and acting as a retailer and how much as a developer? The company’s 2008 accounts give little away on where Tesco is spending its money, but the increase in group capital expenditure to £3.9 billion is attributed in part to:

investment in new mixed-use development schemes

while the report states elsewhere:

The complexity of many of our property developments is increasing, especially the growing number of mixed-use schemes.

Mixed-use means not just retail, so Tesco’s interest in development beyond that required for simple retailing appears to be growing.

Is Tesco still just a retailer?

Related posts:

1. Supermarkets and the Prevention, Distortion and Restriction of Competition
2. A fungus on the retail landscape
3. Obama v Tesco

The co-op is different from other retailers. It’s owned by its customers (the 2.5 million who have elected to become members) and has a long commitment to quality, healthy food and to the environment and animal welfare. This is a momentous development in British retail.

The Big Four becomes The Big Five?

The take-over would give the Co-op an 8% share of the grocery retail market, catapulting it into the league of the “Big Four” retailers – Tesco (with 31% of the market), ASDA (16.8%), Sainsbury’s (15.9%) and Morrisons (11.4%). Waitrose would be a distant sixth with 3.9%.

With a focus on smaller convenience, community and rural stores, the Co-op already has more outlets than any other retailer. Somerfield’s 880 stores would give the Co-op over 3,000 in total, even after an inevitable sell-off of 200 or so for local competition reasons.

Providing quality food

From the earliest days of the Rochdale Pioneers, the co-operative movement has been committed to providing its members with pure, unadulterated food.

In the 19th century, adulteration of food with cheaper bulk substances was widespread. Alum and chalk were often added to flour, while loaves were bulked out with pipe clay and sawdust. Other adulterants were intended to improve flavour cheaply but were often toxic, such as the bitter mixtures containing strychnine added to beer.

Working in the interests of consumers, rather than purely in pursuit of profit, the early co-operative movement sold food its customers could trust and led the way for reforms in food law.

Pioneering ethical trade and animal welfare

More recently, the Co-op has led further improvements in the standards of food and drink, with a strong and clear ethical policy.

In 1995, the Co-op started to label eggs from battery chickens as “Intensively produced”, despite such honest labelling being strictly illegal. The law was changed, all eggs are now more transparently labelled and the move towards wider use of free range eggs continues. (Hellman’s are currently running and advertising campaign to promote their recent move to free range eggs.)

The Co-op has also been ahead of the pack on ethical trade, switching all its own-brand block chocolate, then its coffee and now tea, to Fairtrade. Besides the widest Fairtrade range of any retailer, the Co-op’s Sound Sourcing Code of Conduct supports reasonable working conditions, living wages, no child labour and trades union membership.

Led by its members

Of course, the Co-op is not a perfect retailer and has plenty of room for further improvements in the quality and sustainability of its food. Most importantly, though, the Co-op is owned and led by its members. The acquisition of Somerfield will widen the opportunity to have real ownership of the food we eat.

Related posts:

1. A fungus on the retail landscape
2. Obama v Tesco
3. Is Tesco just a retailer?

The Guardian reports that Barack Obama has written to Sir Terry Leahy, Chief Executive of Tesco, to urge him to engage with the US trade union representing workers at Tesco’s new US venture, Fresh and Easy.

Without union engagement, the union claims that Fresh and Easy’s workers are stuck with no written contract of employment and working conditions that compare unfavourably with Tesco’s employees in Britain.

“Talk to us!”

The possible future US president’s intervention is a success for the United Food and Commercial Workers (UFCW) union, which has been campaigning to encourage Tesco to talk to them. Despite Tesco’s strong relationship and partnership with USDAW, the British union representing 85,000 of its workers, they’ve so far reportedly refused all invitations to engage with UFCW.

Global standards or double standards?

Tesco assert that their workers are free to join the union and that they’ve “engaged with community leaders”, but it’s a far cry from their partnership with USDAW in Britain. Elsewhere, the trades union movement has raised questions about labour relations in some of Tesco’s other oversees operations, such as Tesco Lotus in Thailand.

UFCW has dubbed Tesco the “Wal-Mart of Britain”. It’s a confusing turn of phrase, as another British supermarket, Asda, is actually owned by Wal-Mart. And while Wal-Mart’s attitude towards unions is notoriously uncooperative (except in China), Asda, like Tesco, has a rather good relationship with British unions.

The different approaches taken by companies around the globe demonstrate the importance of labour laws and established workers’ rights. Britain is no longer a cushy environment for trades unions and their workers, but it’s a lot more comfortable than America and other countries.

Easy facts?

UFCW has teemed up with “grocery workers, food industry professionals” to create freshandeasyfacts.com, also known as freshandqueasy.com, to publicise their campaign against Tesco. Don’t bother trying these links to the Fresh and Easy Facts homepage from the UK. It’s blocked to UK-based browsers, presumably for legal reasons.

Other pages are accessible, though, such as “Get the Facts“, which summarises and links to various stories, mostly in the British press, about Tesco’s environmental record and infringement of food safety laws.

Hard facts?

Strangely, there’s no mention of working conditions or labour terms. It seems USDAW, apparently disappointed and frustrated by Tesco’s failure to talk to them, have chosen to mount a broad attack on Tesco’s record.

There’s even a video questioning just how “easy” Fresh and Easy is, whose entire argument is based on the absence of leading brands from the shelves, where own-label products dominate. Another video – an extract from a BBC Whistleblower documentary – exposes undercover footage of apparent breaches of food safety laws.
Frightening and entertaining they may be, but these videos are hardly relevant to the issue of labour standards.

For a serious analysis of Tesco’s relations with the unions, at home and abroad, read UCFW’s report, The Two Faces of Tesco (pdf, 4.25Mb).

Here, the hard facts about working conditions in Fresh and Easy are compared with those in Tesco at home in Britain. “No written contract of employment”, “Fresh & Easy employees are allowed only 60 hours paid time off [a year], and this must be used for time off sick as well as for holidays”, “Fresh & Easy only guarantees 20 hours of work per week”? It doesn’t sound right.

Related posts:

1. Fairness for farm workers too
2. Is Tesco just a retailer?
3. More Co-operative Retail

Early reporting on today’s long awaited publication of the provisional findings of the Competition Commission’s 17-month (and counting) investigation into the groceries market gave the impression that the Commission (CC) had given the major mulitiple retailers a clean bill. “Competition inquiry to reprieve supermarkets” pronounced the FT.

There is real criticism of supermarket practices in the CC’s provisional findings, with suggested remedies that might just tackle some of the problems. But the CC also suggests changes to the planning system which would be nothing less than a bonanza for the larger retailers and spell further disaster for town centres and the small independent operators.

Uncompetitive Features

Read the report and you’ll find the CC stating clearly that “there is an adverse effect on competition”, identifying a number of uncompetitive “features” (a sanitised expression for damaging practices) of the market:

• “A significant number of local markets have high levels of concentration, and these high levels of concentration have persisted over a number of years”
  ie there are “Tesco Towns” (and Sainsbury suburbs etc) whose inhabitants suffer from a lack of choice of food shops
• “The control of land in highly-concentrated local markets by incumbent retailers acts as a barrier to entry”
  ie the supermarkets are in possession of landbanks that restrict the development of competing stores
• “the exercise of buyer power [...] through the adoption of supply chain practices that transfer excessive risks and unexpected costs to [...] suppliers [...] prevents, restricts or distorts competition”

ie the supermarkets do treat some of their suppliers unfairly

These are strong criticisms and bear out accusations that the supermarkets have repeatedly denied.

Landbank? What landbank?

In their submission to the CC’s enquiry, Tesco strongly denied the existence of strategic landbanks. Answering the suggestion of “deliberate investment in undeveloped assets – the so-called ‘landbank’ – to be held against the competition, rather than for the purpose of grocery retailing”, Tesco states clearly, “There is not”. Tesco’s Chief Executive, Sir Terry Leahy, denied the existence of any sort of landbank to the Guardian, protesting “Why would we do that? We are a retailer”.

Further Complaints

Many would have like the CC to have gone further, but’s it’s hardly surprising that many of the complaints lodged with the enquiry haven’t made it into the provisional findings. As James Hall points out in the Telegraph’s Tales from the High Street Blog, the CC has a very narrow remit to investigate – surprise, surprise – issues of competition, and not “to stick up for the little guys, defend inefficient farmers” etc.

Be Satisfied with Supermarket Shelves

But, even within the confines of such a remit, the CC takes a somewhat desultory view of what’s best for consumers, apparently believing that a choice between two or more local supermarkets is all the choice we might want.

This is why the loss of small and independent retailers goes on unchecked. As far as the CC is concerned, it’s not diverse neighbourhood shops but sufficient supermarket shelves that are necessary for the good of consumers.

Drivetime

The CC repeatedly defines the accessibility of alternative stores in terms of “drivetime”. There’s passing mention that only 16% of people walk to the shops, while 10% take public transport, but this quarter of the population is then disregarded. In any case, confidence in these figures is undermined by the bizarre companion statistic that only 36% of the population report driving to a supermarket (the figures are referenced to an IGD report priced £595).

The CC seems willfully blind to the fact that many people – in both urban and rural areas – can’t, don’t or won’t drive. It betrays their vision of a society in which we drive from superstore to hyperstore to superstore, enjoying the manifest choice of the rows of gleaming shelves.

Remedies

Still, there’s some hope in the CC’s notice of possible remedies to the problems they’ve identified. Some of the supermarkets’ most uncompetitive practices might be more tightly restrained in future. The CC talks of curbing the control of land, and of strengthening and more tightly enforcing the Supermarkets Code of Practice.

What Future for Town Centres?

Against this, there’s the very worrying prospect that planning laws might be relaxed to facilitate competition amongst large retailers, at the continuing expense of local stores and town centres as a whole.

The suggestion of recommended “changes to the planning system that would facilitate greater availability of land for development outside the town centre” is surely the best news the large retailers could have hoped for. Hardly surprising that Tesco shares closed up almost 3.5% on the day.

Related posts:

1. Is Tesco just a retailer?
2. A fungus on the retail landscape
3. We want a supermarket watchdog

Check prices now

Check today’s price of milk in Tesco / Asda / Sainsburys / Waitrose – Ocado with mySupermarket.co.uk

The Rising Price of Milk

Two weeks ago, Tesco was widely praised in the media for announcing two initiatives: To increase the price UK dairy farmers receive for milk, while not raising the price of standard milk to consumers; and to introduce a higher priced “localchoice” milk from smaller local producers.

But yesterday’s Guardian attributed the surprise rise in UK inflation, at least in part, to the rising price of milk.

Have consumers already swallowed the price rise that will pay for desperately needed higher returns to farmers, while the supermarkets take all the credit?

And Tesco’s PR department must be delighted with all the publicity for something that other supermarkets are already doing. ASDA, Sainsbury’s, M&S and Waitrose already have direct or close relationships with farmers supplying their milk, while the East of England Co-op is just one example of a retailer selling milk from specific local farms at reasonable prices.

So what is the price of milk?

Tesco’s own on-line price check reports that the main supermarkets (Tesco and its rivals Sainsbury’s, ASDA and Morrisons) are all charging exactly the same for standard, own-label milk. This is unsurprising as milk is a classic known value item, one the few things we all know the price of and judge supermarket prices by.

[Quoted prices all for April 2007] The supermarkets are charging 35p for a pint, 66p for 2 pints, £1.15 for 4 pints and £1.68 for 6 pints, equivalent to between 62p and 49p a litre, of which Tesco has announced it will increase the price paid to farmers to 22p a litre (the Milk Development Council urges caution at comparing this price with existing prices, as the exact pricing structure is still unclear). These prices have crept up recently: Tesco quietly put prices up from 33p a pint in March, while ASDA was charging 32p a pint a year ago.

Tesco charges as much as 80p a litre in some of its shops. My local One Stop (owned by Tesco) is charging a massive 40p for half a litre (in a bottle that looks like a pint but is significantly smaller) while the local Co-op charges just 67p for 2 pints of milk from local farms (the East of England Co-op’s Exclusively East Anglian milk).

Tesco’s announcements come rather late for UK farmers from the retailer responsible for 27% of all the milk sold in the UK. But the news should be welcomed and will certainly benefit around 1000 farmers. Let’s just not let the hype obscure the availability of good, locally sourced and fairly priced milk elsewhere. The East of England Co-op’s milk is an excellent example of true provenance – their website provides a list of the farms producing it.

Trace your milk

It’s rare to be able to trace your milk back to the farm, but you can easily find out the dairy that’s produced it. Just find the EU identification code on the packaging (it may be in an oval or printed next to the use by date) and look it up on this list of UK dairy processors.

Related posts:

1. Supermarkets mixing British and imported beef
2. UK Dairies / Milk Processors – East of England
3. UK Dairies / Milk Processors

I was reminded of this comparison of books and eggs, and the telling assumptions implicit, on a recent rare visit to my local Tesco (looking at the labelling of their meat, on which more later). Many of the packs of meat carried photos of genial looking farmers surrounded by apparently happy animals in beautiful countryside. All very well, and I’m sure these pictured farmers are doing an excellent job, tending their livestock and the countryside, and producing good food.

But how much of Tesco’s meat comes from these pictured farmers? This is an illusion of provenance. Returning to the comparison with books, it’s rather as though a bookshop sold all its books under Jane Austen’s name, simply because she wrote some of them. We deserve to be told more about how our food’s produced and where it’s from.

In the opening paragraph of the Books are not Eggs piece, Philip Pullman unwittingly sets out much that is wrong with our food system:

Every week we go to the supermarket and buy a dozen eggs. We expect them to taste and look pretty well the same as last week’s lot. And we know that neither the hen who laid them, nor the farmer who collected them, had anything to do with deciding what price we should pay at the checkout, because that’s the job of the retailer; and we know that the price will have been worked out by balancing such things as the deal the farmer had to accept, the price the customer is likely to put up with, the wages of the shelf-stackers, and so on. Buying eggs is a transaction that takes place so often that we can tell at once if the price this week is twice what it was last week, or how much less the supermarket charges than the corner shop.

Note the assumption that eggs are cheaper in the supermarket. How happy this must have made the supermarkets, who spend millions of pounds persuading us that they’re cheapest. In truth, eggs, like potatoes, are often significantly cheaper in independent shops.

Related posts:

1. Milk – what does it cost and where is it from?
2. Twittered morsels: meat eaters, pig parts, knowing provenance
3. The making of Easter eggs: inside Cadbury’s Bournville factory

Over the last few decades, the rise of the major multiple retailers and the increasing share of the grocery market taken by supermarkets has dramatically altered our townscapes.

Rampant development of out of town stores in the 80s and 90s (www.fooddeserts.org reports that the UK had just 20 out of town shopping centres in 1976, but over 500 by 1998) drove food retail away from the high street. My native town, Bury St Edmunds, a Suffolk market town with a population of 35,000, now has no specialist greengrocer or fishmonger. Except on market days (Wednesday and Saturday – well worth a visit!), food shoppers can only choose between Marks and Spencer in the heart of the town, Waitrose on the edge of the centre or the handful of butchers and delicatessens.

In the last decade the supermarkets’ move into convenience retailing has seen a return to the high street, as well as extending their influence to village and neighbourhood stores. This has only increased the extent to which the major retailers dominate food retail.

Of all the retailers, none dominates the market quite like Tesco. Just how many Tesco stores are there in Norfolk, for example? By my reckoning, Norfolk has two ASDAs, four Morrisons, eight Sainsburys – and forty-five Tescos. And there are several more in the pipeline, including the notorious Sheringham store.

This extraordinary figure demands closer inspection. Of those 45 stores, 14 are standard Tesco supermarkets, one a city centre Metro, while 12 are smaller Express convenience stores.

The remaining 18 don’t carry the Tesco name at all, operating instead under the One Stop banner, with the slogan “Everyone’s Favourite Everyday Shop!”. There is, however, a familiar feel to the recently introduced own brand lines and marketing materials – everywhere you look in these shops, you’re told that the prices are low.

Tesco has been able to expand into convenience retailing unrestrained thanks to the Competition Commission’s declaration in 2000 that the UK grocery market is actually two separate retail markets – convenience and supermarket. Ironically, the Competition Commission refers to supermarket retail as “one-stop shopping”. Tesco may have passed the monopoly threshold as a supermarket, but it hasn’t – yet – as an operator of convenience stores.

The Competition Commission is once again investigating the grocery market in the UK. They’ve recently published their “emerging thinking”, with an indication that they’ll be looking closely at supplier, market structure and planning issues. Their final findings and recommendations are eagerly awaited – before its too late for many independent stores and their suppliers.

Related posts:

1. Supermarkets and the Prevention, Distortion and Restriction of Competition
2. Is Tesco just a retailer?
3. More Co-operative Retail