ACS Study Exposes Supermarket Dominance over Suppliers
08 May 2007
The Association of Convenience Stores (ACS), the campaigning voice of over 33,000 local shops, has shown in a study that supermarkets are systematically obtaining cheaper buying prices than competitors and provides the strongest indication yet that buyer power of the Big 4 is distorting competition in the UK grocery market.
The study directly counters the view expressed by the Competition Commission (CC) in its Emerging Thinking that no differential exists between supermarket buying and the rest of the market.
The study, which probed over 300 products sold in both large and small stores, has indicated that 10% of the products sold on a supermarket shelf are cheaper than the buying price that a wholesaler supplying the independent trade can buy from the supplier.
Furthermore 74% of the items sold in supermarkets are sold by supermarkets at a price that suggests they obtain lower buying prices than the independent sector.
ACS Chief Executive James Lowman said: “This study shows that in 1 in 10 of cases a small shop cannot buy products from their wholesaler cheaper than they could off the shelf in a supermarket. This is the single most compelling proof that there is a severe competition problem in the market and shows how important it is that the Competition Commission goes further in their probe of relationship between supermarkets and their suppliers.
“Supermarkets obtain preferential buying terms that are generated not from their volume and efficiencies but from the ability to dominate their suppliers. This market is not working effectively. If the Competition Commission does not act the situation will continue to worsen, small competitors will struggle to remain competitive and consumers will lose the choice and diversity that is vital to a strong grocery market and to communities throughout the country.
“We were astonished when the Commission’s Emerging Thinking suggested there is no systematic differential in favour of supermarkets. This was a reflection of the failings in their early evidence gathering rather than a reflection of what is actually happening in the grocery market. Our study reinforces that view, and it is now up to the Commission to probe further and more thoroughly into the evidence.”
Mr Lowman, reiterated ACS’ commitment to the supporting the Inquiry:
“This Inquiry is a once in a generation opportunity to ensure a sustainable future for a diverse and competitive grocery market. We will continue to provide every support we can to the Inquiry. We will also be consistent in pressing the Commission to be thorough and persistent.”
Contact:
Shane Brennan Public Affairs and Communications Manager
01252 515001 / 07921 372978
Rachel Lawson Communications Co-ordinator
01252 515001
Michael Saxton Grappa PR
020 74864448
Notes to Editors:
1. ACS is the convenience store champion, helping local shops thrive through lobbying, insight, information and commercial services.
Methodology
2. The exercise compared the buying prices of three wholesalers supplying the independent sector (gathered in March 2007) with the supermarket selling prices as contained in the online shopping sites of Tesco, Sainsbury and ASDA (gathered in early February 2007)
3. The analysis covers 317 items in 30 categories. ACS does not claim that it represents a typical shopping basket. It is more complete in some product categories (alcohol, soft drinks and confectionery) and less complete in others (bread and dairy products). But it a reasonable basis for comparison. The Competition Commission comments in Emerging Thinking are based on looking at 70 items.
4. Of the 317 items there are 32 line items (10 per cent of the sample) where the average wholesale price was higher than the average supermarket retail price measured in February 2007.
5. Of the 317 items, 236 (or 74%) indicate that if the supermarkets bought products at the same average price as the wholesaler they would be taken a reduction in the gross margin associated with that category.
6. The CC deals with the issue of buying price differentials in paragraph 116 of the Emerging Thinking as follows “A preliminary analysis of price data for 15 suppliers of major branded goods does not indicate the presence of price differentials that are consistently in favour of the larger grocery retailers.” http://www.competition-commission.org.uk/inquiries/ref2006/grocery/pdf/emerging_thinking.pdf.
The study directly counters the view expressed by the Competition Commission (CC) in its Emerging Thinking that no differential exists between supermarket buying and the rest of the market.
The study, which probed over 300 products sold in both large and small stores, has indicated that 10% of the products sold on a supermarket shelf are cheaper than the buying price that a wholesaler supplying the independent trade can buy from the supplier.
Furthermore 74% of the items sold in supermarkets are sold by supermarkets at a price that suggests they obtain lower buying prices than the independent sector.
ACS Chief Executive James Lowman said: “This study shows that in 1 in 10 of cases a small shop cannot buy products from their wholesaler cheaper than they could off the shelf in a supermarket. This is the single most compelling proof that there is a severe competition problem in the market and shows how important it is that the Competition Commission goes further in their probe of relationship between supermarkets and their suppliers.
“Supermarkets obtain preferential buying terms that are generated not from their volume and efficiencies but from the ability to dominate their suppliers. This market is not working effectively. If the Competition Commission does not act the situation will continue to worsen, small competitors will struggle to remain competitive and consumers will lose the choice and diversity that is vital to a strong grocery market and to communities throughout the country.
“We were astonished when the Commission’s Emerging Thinking suggested there is no systematic differential in favour of supermarkets. This was a reflection of the failings in their early evidence gathering rather than a reflection of what is actually happening in the grocery market. Our study reinforces that view, and it is now up to the Commission to probe further and more thoroughly into the evidence.”
Mr Lowman, reiterated ACS’ commitment to the supporting the Inquiry:
“This Inquiry is a once in a generation opportunity to ensure a sustainable future for a diverse and competitive grocery market. We will continue to provide every support we can to the Inquiry. We will also be consistent in pressing the Commission to be thorough and persistent.”
Contact:
Shane Brennan Public Affairs and Communications Manager
01252 515001 / 07921 372978
Rachel Lawson Communications Co-ordinator
01252 515001
Michael Saxton Grappa PR
020 74864448
Notes to Editors:
1. ACS is the convenience store champion, helping local shops thrive through lobbying, insight, information and commercial services.
Methodology
2. The exercise compared the buying prices of three wholesalers supplying the independent sector (gathered in March 2007) with the supermarket selling prices as contained in the online shopping sites of Tesco, Sainsbury and ASDA (gathered in early February 2007)
3. The analysis covers 317 items in 30 categories. ACS does not claim that it represents a typical shopping basket. It is more complete in some product categories (alcohol, soft drinks and confectionery) and less complete in others (bread and dairy products). But it a reasonable basis for comparison. The Competition Commission comments in Emerging Thinking are based on looking at 70 items.
4. Of the 317 items there are 32 line items (10 per cent of the sample) where the average wholesale price was higher than the average supermarket retail price measured in February 2007.
5. Of the 317 items, 236 (or 74%) indicate that if the supermarkets bought products at the same average price as the wholesaler they would be taken a reduction in the gross margin associated with that category.
6. The CC deals with the issue of buying price differentials in paragraph 116 of the Emerging Thinking as follows “A preliminary analysis of price data for 15 suppliers of major branded goods does not indicate the presence of price differentials that are consistently in favour of the larger grocery retailers.” http://www.competition-commission.org.uk/inquiries/ref2006/grocery/pdf/emerging_thinking.pdf.