In the week that the Competition Commission described wholesalers as having no "problems in terms of their economic viability", The Grocer's Big 30 survey reveals that almost half the UK's leading wholesalers are functioning on profit margins of 1% or less.
Our third annual wholesaler survey revealed annual combined profits of £293.3m for the UK's biggest wholesalers. Analysis by The Grocer shows that last year, Tesco would have taken just seven weeks to rack up the same amount.
The picture was by no means gloomy. Sales rose by 5.3% to £19.4bn while pre-tax profits were up 7.2% overall, which helped margins to inch up from 1.48% to 1.5%.
These figures support the Commission's view, contained in its Emerging Thinking on the groceries inquiry, published this week, that the market had not reached a "tipping point".
But closer examination reveals 12 of the 30 companies operate with margins of 1% or below, including the two largest wholesalers, Palmer & Harvey McLane and Booker.
The Emerging Thinking document contains figures for the 16 largest wholesalers demonstrating that between 1994 and 2005 operating margins have fluctuated around the 1% mark. It also concludes there did not appear to be any sign of declining margins in the sector.
On the basis of this evidence the Commission suggests that "even if the customer base for grocery wholesalers was to reduce, either through acquisitions by grocery chains or by market exit, we consider it unlikely that a tipping point will be reached".
This conclusion in effect refutes the arguments put forward by the FWD and the ACS.
"We never said this was imminent, but that it was the logical conclusion of long-term loss of customer base," FWD director general John Murphy said. "This could be the last chance in a generation to act so it is worth examining now."
For the time being, though, turnover is going up for all but six of the companies. The fastest-growing wholesaler is Woodward Foodservice (see box). It completed a merger with DBC Foodservice last October and won a major MoD supply contract from rival 3663 First For Foodservice in July.
These events have pushed turnover up 205.6% to £550m. Woodward MD Ed Hyslop said that the plan now was to integrate the three separate companies and gain economies of scale.
Behind Woodward, Blueheath's turnover jumped 88.5% to £132m following the first full year of trading after completing the takeover of CTN Wholesale and AC Ward & Sons in 2005.
The fastest-growing wholesaler based on organic growth was Elbrook Cash & Carry. A 26.6% growth in sales took the specialist drinks wholesaler to 25th position with sales of £93.3m.