The supermarkets can see off recessionary economic conditions by driving volume and absorbing cost hikes. Smaller operations will find survival a lot more difficult
Are we heading for a recession or not? As in the initial stages of previous downswings, we hear the argument that if we will all kindly stop talking ourselves into a recession, it won't happen.
"They conquer who believe they can," said the essayist and philosopher Ralph Waldo Emerson. But the grinding experience of a prolonged downturn, whether technically a recession or not, can easily erode that belief.
Superficially, of course, the grocery market doesn't look too bad yet. The big supermarkets are still turning in respectable like-for-like sales growth, although it is somewhat flattered by food inflation. Volume growth looks much more modest.
Compared with the housing-related and clothing sectors, however, they're not doing too badly.
The real challenge for the grocers and their suppliers is cost-push inflation, not lack of demand. As Verdict recently reported, the big multiples are working flat out to shield their customers from the full impact of commodity inflation.
But this will itself come at a price - namely more pressure on supply costs and further consolidation of the supplier base.
"Adversity comes with instruction in his hand," says the old Welsh proverb. I suspect, however, that this time round it will mainly reinforce what we already know.
Retail is a scale business and, when trading gets tough, the big players with strong brands and scale economies tend to win through.
The mortality rate among smaller chains and independents will rise sharply as consumers focus even more on low prices and discounts.
And if you happen to be a small retailer in the catchment area of one of the new shopping developments that together will, over the next two years, add at least 15 million square feet of new space to the industry, you will be either very astute or very lucky to survive.
Talk of a suppliers' backlash against supermarket bargaining power is fanciful. Over the next few years the main drivers in the grocery market for retailers and suppliers alike will be maximising volume throughput and fighting cost inflation.
Competition inquiries come and go but nothing they can devise will buck this market. n
Kevin Hawkins is an independent retail consultant