from John Bowden, Wholesale Confectionery & Tobacco Alliance
Sir; The Alliance is concerned at the latest developments in the Office of Fair Trading’s analysis of the Sainsbury/Jacksons purchase (The Grocer, November 6, p4). It appears the ruling has more or less wiped out any opportunity for major trade bodies, such as ourselves, to progress the principle of securing a moratorium on any further purchases of retail businesses by major multiples.
In the case of Jacksons, the OFT stated that the size of the business purchased would not necessarily affect or give undue advantage to Sainsbury, as its purchase of the retail company only affected 0.7% of Sainsbury’s business. It was, therefore, ruled as having no major effect on supplier negotiations.
There was also a general ruling that the number of retail stores that existed within the general Jacksons locality would not be undermined by this purchase, as the marketplace for the consumer demonstrated there was plenty of choice available, which would not be inhibited on a local basis.
In all of these instances, the one area that the OFT has overlooked is the leverage these organisations are able to apply for their smaller stores. The differentials that exist over terms between independent wholesalers and retailers and major multiples means their smaller stores will have terms and profit advantages on an operational basis far in excess of independents.
One question we should all ask is: should there be a cost differential between one full lorry-load ex-factory delivered to an independent as opposed to a multiple? The cost of picking, loading and delivering the wagon is the same for both, yet multiples have created substantial differentials which undermine independents.
We would call on the OFT, as part of its overall review, to investigate the terms differentials between these trading sectors, and terms abuses at multiple level. We believe this will be a better way forward, as the WCTA thinks it unlikely the OFT will change or re-interpret many of the rulings it has already put in place. The WCTA therefore calls upon the OFT to look more closely at terms differentials, which will enable the independent sector to fight the multiples on a comparable profit and operational basis.
Sir; The Alliance is concerned at the latest developments in the Office of Fair Trading’s analysis of the Sainsbury/Jacksons purchase (The Grocer, November 6, p4). It appears the ruling has more or less wiped out any opportunity for major trade bodies, such as ourselves, to progress the principle of securing a moratorium on any further purchases of retail businesses by major multiples.
In the case of Jacksons, the OFT stated that the size of the business purchased would not necessarily affect or give undue advantage to Sainsbury, as its purchase of the retail company only affected 0.7% of Sainsbury’s business. It was, therefore, ruled as having no major effect on supplier negotiations.
There was also a general ruling that the number of retail stores that existed within the general Jacksons locality would not be undermined by this purchase, as the marketplace for the consumer demonstrated there was plenty of choice available, which would not be inhibited on a local basis.
In all of these instances, the one area that the OFT has overlooked is the leverage these organisations are able to apply for their smaller stores. The differentials that exist over terms between independent wholesalers and retailers and major multiples means their smaller stores will have terms and profit advantages on an operational basis far in excess of independents.
One question we should all ask is: should there be a cost differential between one full lorry-load ex-factory delivered to an independent as opposed to a multiple? The cost of picking, loading and delivering the wagon is the same for both, yet multiples have created substantial differentials which undermine independents.
We would call on the OFT, as part of its overall review, to investigate the terms differentials between these trading sectors, and terms abuses at multiple level. We believe this will be a better way forward, as the WCTA thinks it unlikely the OFT will change or re-interpret many of the rulings it has already put in place. The WCTA therefore calls upon the OFT to look more closely at terms differentials, which will enable the independent sector to fight the multiples on a comparable profit and operational basis.
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