>>The demise of wholesaling is a real threat, says John Murphy, director general, Federation of Wholesale Distributors
Old habits die hard and one of mine is that the Lex column in The Financial Times is required reading. Its analysis of companies may be dry, but it provides enough impartial and authoritative commentary to keep you abreast of the wider financial world in one short read.
Recently an item on Sainsbury included this nugget: “According to Citigroup, based on Competition Commission data, Tesco pays at least 3% less for branded products than Sainsbury does. This can then be passed on to customers in lower prices.”
This begs a question or two, but let us focus for the moment on wholesaling and the impending report from the All Party Parliamentary Small Shops’ Group (APPSSG) into the state of high streets in 10 years’ time.
Chaired by Jim Dowd MP, the group has taken a lot of evidence from across the spectrum, including the OFT and consumer groups as well as wholesalers and retailers. The report will be published in a couple of weeks and it is emerging that the wholesale mechanism will feature prominently.
MPs are reported to have concerns about the viability of the traditional grocery wholesale sector if it continues to lose volume due to small shop closures. If true, this is encouraging because it means this influential group of MPs has responded positively to the written and oral submissions given to it by the FWD.
Less welcome is that MPs say the multiples will be given a clean bill of health.
It would be a huge disappointment to those who have campaigned for fairness in a skewed marketplace if the big four escape criticism simply on the grounds that they provide low prices and wide ranges.
However, any spotlight the APPSSG puts on the need to defend the future of the wholesale industry will transform the debate. It is now
likely to centre on the FWD and its members’ critical role in maintaining the existence of the non-multiple sole trader and family-run retail businesses.
We did not mince our words when we put our case. We simply told the MPs that if superstore abuse of buying power remains unchecked, it would lead logically to a nightmarish scenario for our members and their customers where the retail side of the sector could collapse. If volumes diminish, the terms from suppliers are bound to reflect this in higher prices to wholesalers and the independent channel, thus creating a vicious circle making the sector ever
less competitive. The decline may take some years and would probably begin on a regional basis, but the demise of grocery wholesaling is a very real threat and the more movers and shakers who take the matter seriously now the better.
Wholesalers are smart and innovative survivors who compete like hell. They are not looking to the regulators for some convoluted form of positive discrimination to ensure they survive - they simply want to achieve that overworked cliché, the level playing field, before it is too late.
The FWD wants the OFT, or better still the Competition Commission, to compare prices obtained from suppliers by wholesalers with those extracted from them by the multiples.
During the recent review of the supermarkets code of practice, we renewed an offer to the OFT that we would organise access to wholesalers’ books so its auditors could construct such a comparison. Our proposal could have provided clear evidence of any supermarket abuse of buying power. It turned the offer down.
This brings me back to a question raised by the FT’s Lex column. On what Competition Commission data did Citigroup base its assertion that Tesco pays 3% less for major brands than Sainsbury? It was the Commission’s last report on supermarkets dated 2000, of course. There was a great differential between wholesalers’ buying prices and those of Tesco at that time and a lot has happened in the intervening five years to ratchet up the problem. It’s time the Lex column quoted 2006 data.
Old habits die hard and one of mine is that the Lex column in The Financial Times is required reading. Its analysis of companies may be dry, but it provides enough impartial and authoritative commentary to keep you abreast of the wider financial world in one short read.
Recently an item on Sainsbury included this nugget: “According to Citigroup, based on Competition Commission data, Tesco pays at least 3% less for branded products than Sainsbury does. This can then be passed on to customers in lower prices.”
This begs a question or two, but let us focus for the moment on wholesaling and the impending report from the All Party Parliamentary Small Shops’ Group (APPSSG) into the state of high streets in 10 years’ time.
Chaired by Jim Dowd MP, the group has taken a lot of evidence from across the spectrum, including the OFT and consumer groups as well as wholesalers and retailers. The report will be published in a couple of weeks and it is emerging that the wholesale mechanism will feature prominently.
MPs are reported to have concerns about the viability of the traditional grocery wholesale sector if it continues to lose volume due to small shop closures. If true, this is encouraging because it means this influential group of MPs has responded positively to the written and oral submissions given to it by the FWD.
Less welcome is that MPs say the multiples will be given a clean bill of health.
It would be a huge disappointment to those who have campaigned for fairness in a skewed marketplace if the big four escape criticism simply on the grounds that they provide low prices and wide ranges.
However, any spotlight the APPSSG puts on the need to defend the future of the wholesale industry will transform the debate. It is now
likely to centre on the FWD and its members’ critical role in maintaining the existence of the non-multiple sole trader and family-run retail businesses.
We did not mince our words when we put our case. We simply told the MPs that if superstore abuse of buying power remains unchecked, it would lead logically to a nightmarish scenario for our members and their customers where the retail side of the sector could collapse. If volumes diminish, the terms from suppliers are bound to reflect this in higher prices to wholesalers and the independent channel, thus creating a vicious circle making the sector ever
less competitive. The decline may take some years and would probably begin on a regional basis, but the demise of grocery wholesaling is a very real threat and the more movers and shakers who take the matter seriously now the better.
Wholesalers are smart and innovative survivors who compete like hell. They are not looking to the regulators for some convoluted form of positive discrimination to ensure they survive - they simply want to achieve that overworked cliché, the level playing field, before it is too late.
The FWD wants the OFT, or better still the Competition Commission, to compare prices obtained from suppliers by wholesalers with those extracted from them by the multiples.
During the recent review of the supermarkets code of practice, we renewed an offer to the OFT that we would organise access to wholesalers’ books so its auditors could construct such a comparison. Our proposal could have provided clear evidence of any supermarket abuse of buying power. It turned the offer down.
This brings me back to a question raised by the FT’s Lex column. On what Competition Commission data did Citigroup base its assertion that Tesco pays 3% less for major brands than Sainsbury? It was the Commission’s last report on supermarkets dated 2000, of course. There was a great differential between wholesalers’ buying prices and those of Tesco at that time and a lot has happened in the intervening five years to ratchet up the problem. It’s time the Lex column quoted 2006 data.
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