The more it changes, the more it stays the same. So goes the old French proverb.
That’s certainly true of the grocery trade over the 150 years since this journal was founded. The structure of the industry, the level of competition, the relationship between grocers and their suppliers and the regulatory regime within which they operate have all changed dramatically, yet some issues have woven a thread through successive editions of The Grocer from its foundation to the present day.
In the first edition, dated 4 January 1862, the editor declared that the grocery trade “constitutes one of the most indispensable wheels of the great machinery of the social life of civilised nations” - a description that can hardly be bettered. The journal’s mission was to “advocate the interests of the trade, advise them on their business operations and defend them from unjust attacks”. And so it has remained.
Like many 19th-century trade publications, its purpose was to educate its readers in depth on every issue facing their industry and it did, with a command of English grammar, style and vocabulary that reminds us what the Victorian education system could achieve.
The trade itself was highly localised until well into the middle of the 20th century. Every town and district had its own grocers’ association, organised loosely within the National Federation of Grocers, and until the 1940s The Grocer carried detailed reports from 20 to 30 such associations in every edition, highlighting key speeches from local dignitaries.
Gradually, these associations dwindled and disappeared. Advertising, virtually non-existent in the earlier decades, made its first appearance in the 1920s and occupied 30 pages by the 1950s. Editorial comment simultaneously dwindled to a mere shadow of what it had once been. Thankfully, recent editors have revived the didactic Victorian tradition.
As one might expect, issues relating to prices and profits have never been absent from The Grocer. In the first edition, the editor exhorted readers to “abstain from underselling and all other miserable trade tricks and decoys to attract a spurious and unwholesome custom”.
The latter half of the 19th century, however, saw retail food prices fall by more than 40% as imported commodities became cheaper and the arrival of mass production cut manufacturing and distribution costs. Although the small independent grocer remained the dominant force in the trade, the drive for lower costs gave birth to the multiple retailers and boosted the co-operative movement.
Retail price competition increased and, in parallel with the brewers’ drive to own the pubs that sold their beers, food manufacturers extended their control over pricing in grocery, all in the interests of “fair play” for the grocers, of course.
Everyone in the industry benefited from price maintenance except, needless to say, the consumer, but by 1900 the long period of deflation had already ended and prices were rising nicely again, so nobody worried too much about that. Indeed, in 1920 the Parliamentary Standing Committee on Trusts declared that retail price maintenance was most definitely in the interests of the consumer because it guaranteed familiarity and prevented retailers from getting higher prices.
It did not, however, prevent renewed price-cutting as deflation and depression set in over the following years, emphasising yet again the advantages of scale. The Grocer bemoaned this state of affairs and condemned the “ingenious methods and tricks” that price-cutters were using to wheedle promotional bonuses out of conniving manufacturers, but the practice continued.
In the end, retail price maintenance was so shot through with anomalies and loopholes that when Edward Heath abolished it in 1964, notwithstanding a noisy campaign by one national daily for the retention of “fair trade”, only three manufacturers’ trade associations raised much opposition. The appeal for “fairness”, however, raises the question - fairness for whom? In this context, it was merely a code word for the preservation of the small grocer’s profits. The interests of the consumer appeared secondary. As The Grocer observed, by the 1960s it was “hard to convince the housewife that paying what appears to be a higher price is really good for her”. But how would she know what a real saving was and that a bargain was as good as it looked? That, one might say, is still a work in progress.
In the early years of this journal, it was customary for aspiring young grocers to pay a premium to a master grocer for a five or seven-year apprenticeship, but later in the century this practice declined. One reason was that shop hours were unregulated and many staff were over-worked. There was an inherent conflict between the grocer’s need to compete by maximising trading hours and his employees’ need for periodic rest.
000In 1875, the editor called on parliament to prevent shop owners from “wearing out their clerks and apprentices with constant devotion to Mammon.” Long hours and relatively low pay, set against the appeal of an engineering apprenticeship or a career on the footplate, discouraged many able and ambitious young men from entering the grocery trade, with the result that its social status declined.
A formal training scheme was started in 1909 by the Institute of Certificated Grocers, yet the trade remained open to entrepreneurs throughout these years, as the success achieved by John Sainsbury and others demonstrated (see left). Indeed, as manufacturers’ branded products gradually replaced the grocer’s own offerings, the technical barriers to entry fell, allowing buy-and-sell merchants such as Jack Cohen to build successful businesses.
Traditionalists looked down their noses at the incursion of these “traders who called themselves grocers” and who, worse still, were addicted to cutting prices. Some called for a registration scheme “to elevate the status and calling of the grocer”, but the calling itself was gradually changing and nothing was done. As late as the 1960s, an editorial noted that retailing was “frowned on socially” and good quality managers hard to attract. However, the growing size and reputation of the big players in the industry - particularly M&S, Tesco and Sainsbury’s - subsequently transformed their status and that of other leading retailers as destination employers.
Between 1950 and 1990, the multiples increased their share of grocery from 20% to 57%, while the co-ops and the independents, once so mighty, were reduced to 9% each. By 2007, the top half-dozen retailers had increased their share to 79%.
The innovation that triggered this transformation was the self-service supermarket, imported from the US and which, from the mid-1950s, facilitated a revolution in grocery retailing. The number of supermarkets reached 6,500 by 2000 and simultaneously more than doubled in size as the 25,000 sq ft-plus superstore became dominant. With more space came a wider and deeper range of foods, an increasing number of non-food products and a variety of services never previously associated with grocery stores, such as coffee shops, travel agencies and pharmacies.
The scale economies of the superstore model drove a race for sites across the UK, which a relatively permissive planning regime facilitated. The same advantages of scale increased the level of concentration in the industry as smaller, regional players were absorbed by their bigger rivals. The abolition of retail price maintenance made the development of the retailers’ own brands more attractive and for the first time the branded manufacturers faced real competition on supermarket shelves and on quality as well as price.
The Grocer applauded these changes. In the early 1960s, an editorial opined that the grocers had fallen behind their Continental rivals on both quality and efficiency. Thirty years later, the UK’s food retailers were lauded as “the world’s leaders in organisation, distribution, marketing, sales and profit making”.
Over the same period, the number of butchers, greengrocers, bakeries and fishmongers fell from 105,000 to about 15,000. The master grocer in the white apron gave way to store managers “who are here today and gone tomorrow”, as one dyspeptic local trader complained. An increasing number of small independents turned themselves into convenience stores and sought shelter in large buying groups, but the demise of many others and the growth of dedicated suburban and out-of-town shopping centres hit many traditional high streets.
The battle to liberalise Sunday trading, successfully concluded in 1993, brought many of these emotions to the surface. In essence, it was a struggle between past and present, romanticism and realism - with only one possible outcome.
The downside of increasingly affordable food was that some consumers were getting fat on junk food and drinking too much cheap alcohol, while small farmers and growers were complaining loudly of low prices and supermarket “bullying”. This litany was subsequently augmented by the green lobby, who accused the big grocers of aggravating climate change by clocking up too many “food miles” via their sourcing and distribution systems.
Much of this hostile media coverage was ill-informed, but bad news sells newspapers. The “Rip-off Britain” campaign, launched in the Murdoch press in 1999, was a case in point. The core assertion, supported by some badly researched data, was that UK supermarkets enjoyed higher profit margins than their European and American counterparts, gained at the expense of consumers, suppliers and farmers. The considerably more generous margins reported by the multinational manufacturers who supplied much of what the supermarkets sold appeared curiously immune to critical scrutiny.
A similar ambiguity emerged in subsequent interventions by the competition authorities. On one hand, the big supermarkets have substantial market power which is open to abuse, yet on the other they are recognised as being among the few British world-class performers. Two investigations by the Competition Commission in 1999/2000 and again in 2006/2007 found no evidence of excessive profit-making by the leading retailers and concluded that they had done a good job in delivering value, choice and convenience for consumers, 90% of whom regularly shopped in a supermarket.
The only significant change, emerging from the first of these reports, was a code of practice for dealing with suppliers, mandatory for the big four but voluntary for the rest, which suppliers promptly declined to use. The chorus of criticism nevertheless swelled and in its second report, the Commission made the code of practice more onerous and put an adjudicator in place to determine complaints.
Whether aggrieved suppliers will be more inclined to use this new code has yet to be seen. One thing is clear, however: in a mature market in which no player can steal a march on its rivals for long, pleasing the customer will override everything.
Looking back over the past 150 years, one could reasonably say that this magazine has fulfilled the mission the editor succinctly proclaimed in the first issue. What of the future? The mission is as relevant now as it always has been but with one difference - the power of the state and its willingness to intervene in the food industry is far more formidable than it was for much of this journal’s history.
Adam Smith famously spoke of “a nation whose government is influenced by shopkeepers”. The challenge for The Grocer is - and will continue to be - to play its part in ensuring that such influence is effectively brought to bear.
The rise of the big four
● Founded by Jack Cohen in 1932, Tesco was the original “pile it high and sell it cheap” retailer. Had it remained so, it would not have survived. But the arrival of Ian MacLaurin in the mid-1970s marked the start of a transformation that 20 years later, under Sir Terry Leahy, made it the number one player. Its key advantage was its portfolio of stores in primary locations. Everything else - its brand strength, classless image, systems expertise and readiness to innovate - stems from the size and quality of its store base and its ability to attract high-calibre managers. Leadership has bred the confidence to expand overseas - unlike its rivals.
● Long-time market leader Sainsbury’s had more conventional origins as a family business with a strong reputation for quality, hygiene and efficiency. For many years rooted in the high street, in the 1980s it followed Tesco in the race for out-of-town sites, but remained an essentially southern business with a strongly middle-class customer profile. It was also slow to adopt the superstore format. These weaknesses were attributed to decades of family domination and a conservative, highly centralised management style. The loss of leadership to Tesco in 1995 failed to induce a strong fight-back and it was not until the appointment of Justin King as Chief Executive (from M&S) in 2004 that the slide was halted.
● Founded in 1965, Asda is the newest of the big four but was the first to develop the superstore/hypermarket format, a strong non-food offer and a price position aimed at younger, working class customers. During the 1980s, however, it lost its way and by 1991 was on the verge of bankruptcy. A new team led by Archie Norman revived the business by ditching its autocratic, hierarchical management style and treating everyone as “colleagues”. But Asda could not break out of its northern heartland and in 1996/7 a merger with Safeway was mooted. It came to nothing and in 1999, Asda was acquired by Wal-Mart.
● Morrisons started life in 1899 as a market stall in Bradford and remained a largely northern business until 2004, when it bought Safeway, which despite a brief revival under Carlos Criado-Perez in 1999/2002, had lost direction. Following the appointment of Marc Bolland as CEO in 2006 and the retirement of Sir Ken Morrison in 2007, the process of catching up began. But it is now in the same position as Safeway was - the number four player in a mature market where its rivals will be difficult, if not impossible, to overtake.