Signalling the first aggressive move by one of the smaller multiples into c-store territory, the deal elicited the expected cries of anguish from the remaining independents fearful for the future of the sector.
Their deepening pessimism will not be assuaged by the results of our latest reader panel of The Grocer Top 50 independents, which shows that most of them feel that they are not equipped to compete with the multiples.
But is the outlook as bleak as it appears? The Grocer team asked sector players what the current frenzy of mergers and acquisitions in the sector means to them; who they think the losers will be in the long term; and whether they believe there is a realistic future for the independent retailers not on the multiples’ shopping lists
Stephen Thompson, marketing director, Morning Noon & Night, no24 in Top 50 and supplied by Aberness
It’s just another independent that’s gone. You can’t waste time fighting the multiples, you must just get on with running your own business. The question now is, who is next? There are more rumours now than ever. Many wholesalers are worried as they could lose large chunks of their business. If this carries on, in 20 years there will be nothing but three or four multiples and no-one else. You just don’t have that sort of situation abroad.
Edwin Booth, chairman, Booths, no3 in Top 50
There is a feeding frenzy taking place at the moment. As far as the grouping of independents is concerned following the Aberness sale, Somerfield is also a member of Nisa, so there is still plenty of play left in terms of trading.
The nature of the convenience business is changing and the grocery landscape as a whole. It is not a question of losers, everyone wins in a different way.
Philip Horsfield, commercial manager, Leathley’s Quality Fare, no31 in Top 50
Our reaction to the Aberness sale to Somerfield is despondent resignation.
The Grocer’s Top 50 independent list seems to be a shopping list for the multiples. Another good operator has gone.
I don’t know if the multiples’ move into convenience is good long-term strategy. I want to know exactly how the economies of running small convenience stores will work out for them.
We can make our estate work because we do not have the huge costs of the multiples in running a head office, and we have a tight management team.
Many of Leathley’s stores are ex-multiple, disposed of because the multiples did not feel they were lucrative.
What has happened to make these sorts of stores attractive all of a sudden?
We are going to see more pressure on prices. However, the multiples will shed some of the stores they acquire, which will be good for independents.
It’s always been tough and I’ve been in grocery since I was nine years old. But there is always a future for entrepreneurs; this is a very dynamic industry.
Eoin McGettigan, executive chairman, Musgrave UK
The invasion of the independent sector by the multiples is a vote of confidence in high street retailing. As a business that both serves independent retailers and operates its own stores, Budgens is confident in our ability to compete with the newcomers.
However, alongside feeling flattered by their attentions, we should be wary of the motivations of the suitors.
The fact that the OFT has been forced to conduct an audit into the operation of the code of practice because it acknowledges that suppliers are too wary of supermarket power to speak out against unfair trading terms, starkly demonstrates the power that the multiples are now able to wield. There is no reason to suppose that the multiples will not use the same tactics when operating through their convenience fascias.
And with Tesco able to buy from suppliers at prices 11.5% lower than independent retailers can get, it is difficult to talk about fair competition in the sector.
Budgens will be working with other independent convenience operators within the ACS and with the FWD to keep the pressure on policy-makers to remove this unfairness.
Alan Toft, director general, Federation of Wholesale Distributors
The ramifications of this deal are quite scary. The acceleration of consolidation in the small store sector is becoming self--fulfilling. This great wave of acquisitions and mergers is the last wake-up call for wholesalers. What they must do now is call for an emergency moratorium imposed by government. The small store sector is under siege. The only way it can provide consumer choice is by persuading the prime minister that he’s got to act and act urgently.
Organisations like the NFU and Friends of the Earth are starting to lobby aggressively for curbs on the multiples by asking the OFT to reinforce the code of practice. Someone inside government realises the situation because the OFT ‘price police’ have been approved. But if this consolidation continues, consumers will lose out.
John Cox, MD, Rusts, no50 in Top 50 We are moving up The Grocer’s list! A lot of independents will disappear as the multiples come into the sector.
Survival is a case of finding what you are good at. You have got to find ways to complement the superstores.
But every time another convenience operator gets swallowed up, it makes it that much more difficult for suppliers dealing with small stores to find critical mass.
We have had approaches from the multiples in the past, and our chairman John Emeny has always made it vehemently clear that we are not for sale.
Leo Gillen, MD, Nisa-Gillens supermarkets, Hartlepool
The larger multiples are feasting on the independent sector. Everyone’s losing out, including the consumer, because prices will have to go up to meet integration costs. Large multiples will find it hard to make much profit from stores they buy. Staff at Bells and Aberness will want the same contracts as those at Sainsbury and
Somerfield. Loyalty to local suppliers will be lost in the bureaucracy of a multimillion pound business. Independents need suppliers’ support, otherwise the best stores will go to the multiples and the independent sector will decline.
It’s time for the Competition Commission to ensure fair play on pricing. Independents need to buy products at margins as cheap as the multiples get. Otherwise they will continue to suffer.Mike Sherwood, owner of 10 convenience stores in the Norfolk and north Suffolk area
Consolidation poses no problem for our sector if people do the job required by the community.
When a retailer gets to a certain size, it becomes a target. This is a thriving sector. Why would major retailers ignore it? And if I got up to 50 stores and was approached by one of the big retailers, I wouldn’t have to think for too long before saying yes.
Alan Toft, director general of the Federation of Wholesale Distributors, wants a moratorium on acquisitions. Can you really see the government telling Tesco, Sainsbury and Somerfield they can’t have a piece of the pie in an election year? Be realistic. I’m afraid Mr Toft is not going to get what he wants. All I would ask for is transparent selling and a ban on predatory pricing.
Richard Lancaster, trading director, Jacksons, no5 in Top 50
It is always sad to see another good independent operator like Aberness disappear. However, the sale was hardly a surprise, though perhaps the purchaser was. It won’t affect us as we are in c-store retailing for the long term. We have a very well-defined offer, good level of profitability and a clear vision of the future.
I don’t really see consumers losing out unless the c-store market consolidates into much fewer hands. All operators will need to become more professional in the future.
There is a future and a very bright one for the independent sector. But for this to be so, we have to have a more level playing field on the cost price of goods to allow better retails - a clear challenge to our suppliers.