Industry figures are once again calling for the government to review its division of the UK grocery sector into two markets: one-stop and convenience.
Speaking at the UK Federation of Bakers’ AGM yesterday [Wednesday], Big Food Group chief executive officer Bill Grimsey argued that the market definition as laid down by the Competition Commission in its 2000 report was both outdated and intrinsically flawed. He argued that there is only one grocery market; the same customers buying the same or similar products in the same postcode areas.
The definition of the grocery sector as two separate markets had allowed the major multiples to build up a monopoly, Grimsey argued. For example, market leader Tesco has bought T&S and Adminstore, while Sainsbury’s has acquired Bells. Such dominance affords the major retailers huge buying power which creates an uneven playing field for smaller rivals and an insurmountable barrier to entry for new players.
Such buying power also undervalues products sold. British bread is among the cheapest in Europe, and although prices have risen recently, they remain under pressure. At the bottom of the product range this erodes profit margins for all stakeholders, while it prevents the full achievement of profitability at the top end, Grimsey argued.
While consumers may be enjoying low prices now, delegates at the AGM heard from several speakers that consumers’ long-term interests are not best served by an ever-shrinking number of players in this key industry sector.
To view Catherine’s blog comments on her day at the AGM, click here.