The Commission's monopoly report on supermarkets published in 2000 divided the market into one stop' and convenience'. I was not in the food industry at the time, but in my opinion the conclusions from the inquiry opened the door for the majors, such as Tesco and Sainsbury, to re-enter locations they had previously deserted for out-of-town superstores. It has turned out to be a terrible yardstick for subsequent decision-making ­ such as waving through the T&S acquisition by Tesco without any referral.
The point is that consolidation has an impact on the whole grocery market. Not least on the £21bn spent in small convenience and neighbourhood stores. We must view grocers as one market during important decisions that impact the industry structure. Failure to do so now will allow the already dominant multiples to bring their strength back into the high streets and local neighbourhoods, eventually working against the interests of shoppers, suppliers and the livelihoods of the smaller independent.
Since 1992, 25,000 neighbourhood stores have closed. A further 10,000 are predicted to close by 2007 and this will have a dramatic effect on the communities they serve. C-stores are often situated in areas where multiples won't trade. Their customers live close by and include the elderly, the less well off and people who lack transport. So such closures have a real impact on the social and economic structure of small communities where local independent stores are often the backbone of local society. They will also, in the long term, limit consumer choice and potentially lead to higher prices as competition eventually diminishes. Suppliers and consumers will face a world dominated by two or three companies.
These closures were largely due to pressure from the multiples through out-of-town superstores. The most significant change came through the changes to Sunday trading legislation which enabled the superstores to compete with the neighbourhood stores on the one day they were the only service available. To then argue that the two are separate markets is ludicrous. It's now possible that through this further change in the industry's structure existing Safeway stores could become a Tesco, Sainsbury, Asda or Morrisons. There is no doubt that small stores will be affected by this change which would further accelerate the rate of c-store and neighbourhood store closures.
I believe a true assessment that covers all Safeway stores, and takes into account these smaller stores, would show that a change of fascia to one of the top three would have a huge impact on c-store operators.
With planning permission more restricted, and the one stop market mature, multiples are now investing heavily in convenience. This began by stealth with bigger players opening convenience formats as sites became available. They had no other alternative because their overall size in the grocery market meant any major acquisition would be referred, unless they could persuade a government that there were two separate markets. Hey presto! The 2000 inquiry finds in their favour and the door is opened.
The OFT decided not to refer the Tesco and T&S merger on the basis that Tesco has only a small share of the convenience market while it has a massive share of the one-stop market. This is completely wrong. The major operators regard the various formats they operate as complementary routes to the same grocery market.
It is very important that this is not allowed to happen again and to ensure that this latest inquiry doesn't leave a legacy that can then be used to support the previously flawed decision. We are asking the Competition Commission to take this opportunity to re-open this question. There may not be another time to do so. The Big Food Group welcomes competition because we all must continue to strive to improve for the benefit of our customers, suppliers, employees and shareholders. All we need is a level playing field and we can compete with the best. This is why the government has a Competition Commission and the OFT. Now it is time for them to do their job.