from C John Smith, chairman and managing director, Greyfriars
Sir; Following the publication of the Office of Fair Trading report on the supermarkets code of practice, Tesco’s appointment of a code compliance officer and the announcement of some details of the Buyers Charter, one might be forgiven for thinking suppliers are the victims of a nanny state with its regulatory machinery set to ‘overkill’.
In reality, all this will turn out to be very much a waste of time and effort - further exercises in smoke and mirrors.
If the OFT does not make the effort to speak to cowed suppliers, how many are likely to speak to Tesco’s ombudsman and which buyer is going to take a blind bit of notice of a voluntary code when his performance-related bonus and career path are at stake?
Clearly, none.
No, something much more fundamental is now required of which ever government comes into power in May.
It is time to reset competition levels among retailers and to curb the potential for supplier abuse. It is no good arguing that recent trends have been in consumer interests - that’s more smoke and mirrors - and actually not true. How can it be that Morrisons is castigated for making a profit of around £380 million on a £4 billion asset base - i.e. a very reasonable 9.5% return while Tesco can be applauded for an estimated £2 billion profit on a £9 billion asset base - a whopping 22% return? Meanwhile, Plimsoll reports that of the 1,000 leading horticultural companies in the UK, 294 are in serious financial trouble. This is madness, and a situation clearly out of control.
All the empirical and actual evidence is that some supermarket power has got out of hand and that UK and many foreign suppliers are without recourse or defence.
A strong case can be made for limiting supermarket market share, increasing supplier customer options and for making supermarkets compete for margin through their creativity, marketing strategies and distribution efficiencies, rather than through bullying their suppliers and plundering their margins.
It’s time the Competition Commission and the OFT lived up to their names and justified their existence by putting forward a comprehensive strategy for this market sector.
Sir; Following the publication of the Office of Fair Trading report on the supermarkets code of practice, Tesco’s appointment of a code compliance officer and the announcement of some details of the Buyers Charter, one might be forgiven for thinking suppliers are the victims of a nanny state with its regulatory machinery set to ‘overkill’.
In reality, all this will turn out to be very much a waste of time and effort - further exercises in smoke and mirrors.
If the OFT does not make the effort to speak to cowed suppliers, how many are likely to speak to Tesco’s ombudsman and which buyer is going to take a blind bit of notice of a voluntary code when his performance-related bonus and career path are at stake?
Clearly, none.
No, something much more fundamental is now required of which ever government comes into power in May.
It is time to reset competition levels among retailers and to curb the potential for supplier abuse. It is no good arguing that recent trends have been in consumer interests - that’s more smoke and mirrors - and actually not true. How can it be that Morrisons is castigated for making a profit of around £380 million on a £4 billion asset base - i.e. a very reasonable 9.5% return while Tesco can be applauded for an estimated £2 billion profit on a £9 billion asset base - a whopping 22% return? Meanwhile, Plimsoll reports that of the 1,000 leading horticultural companies in the UK, 294 are in serious financial trouble. This is madness, and a situation clearly out of control.
All the empirical and actual evidence is that some supermarket power has got out of hand and that UK and many foreign suppliers are without recourse or defence.
A strong case can be made for limiting supermarket market share, increasing supplier customer options and for making supermarkets compete for margin through their creativity, marketing strategies and distribution efficiencies, rather than through bullying their suppliers and plundering their margins.
It’s time the Competition Commission and the OFT lived up to their names and justified their existence by putting forward a comprehensive strategy for this market sector.
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