Siân Harrington
Morrisons is the overwhelming first choice of suppliers in the battle to win control of Safeway.
Brand manufacturers and own label suppliers contacted by The Grocer expressed deep concerns about the power of Sainsbury and Wal-Mart/Asda should either succeed in a bid.
Both major global players and small local producers had the same reservations.
"Morrisons is the one we would like to do the deal in order to level the playing field," said one international packaged goods company.
"Four good size players are preferable to three much larger retailers asserting more influence.
"This would result in competitive disadvantages for the food manufacturer."
One small Scottish supplier agreed. "I would prefer to see Morrisons take it over. At the moment we do not have much clout. But it could be beneficial for us if Safeway got taken over as it is an opportunity to get greater coverage nationwide."
Morrisons has identified cost savings of at least £250m a year, of which £75m will come from better buying terms.
In its submission to the Office of Fair Trading this week the company said: "Suppliers will not be adversely affected; indeed smaller suppliers are likely to see higher sales from the merged group's commercial strategy."
In comparison Sainsbury believes it can deliver over £300m in synergies, with £125m coming from sourcing.
Chief executive Sir Peter Davis said he was confident that manufacturers and farmers would prefer a Sainsbury win. "I am absolutely sure most would want a bid for Sainsbury to succeed.
"We are not talking about taking four to three but strengthening the number two to put more pressure on Tesco."
Asda has yet to reveal details of the savings it expects should it go ahead and table a formal bid for Safeway.
This week suppliers were working out models based on all potential outcomes. A key issue is where offloaded stores will be located (see right). "We are especially strong in the north west and crossover here will be an issue for us," said one major brand owner.
Another thinks the likely outcome is acquisition by a private equity company and the subsequent break up of Safeway.
This looked more likely this week when Credit Suisse First Boston quit as Safeway's broker after 10 years, citing a potential conflict of interest.
This raised speculation it was working for another client, possibly US private equity giant Kohlberg Kravis Roberts.
As one supplier concluded: "What ever happens there will be inevitable pressure on margins and a retendering process."
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