UK retail landscape set for shake up

By Simon Pitman

- Last updated on GMT

Related tags: Wal-mart, Supermarket

Recommendations made by the UK's Competition Commission (CC) could
mean that competition in the country's supermarket sector could be
set for a shake-up, a move that could spell significant changes for
food and drink manufacturers.

A provisional report from the CC, undertook 550 submissions and included 65 hearings pertaining to 14,000 grocery stores points to concerns over aspects relating to the way retailers deal with their suppliers - the majority of whom are major players in the food and drink industry. CC Chairman Peter Freeman pointed out that, if left unchecked, this could damage both consumers and suppliers. The reason for this, the report points out, is that unexpected costs and excessive risk might affect suppliers' ability to invest, in turn affecting both product quality and innovation. The report goes on to point out how the CC intends to consult both retailers and suppliers on the best approach to tackle this problem in an effort to build on the current code of practice, which was established in 2000. One line of enquiry that the organisation says it does intend to follow is the idea of forming an independent supermarket ombudsman - a body that could serve as a mouthpiece for both the supermarket industry and its suppliers. Another likely recommendation to come is that supermarkets are will be forced to sell land they own in areas where there is not deemed to be enough competition, freeing up opportunities for other retailers. Such a move is also likely to lead to conditions that would give suppliers greater choice, allowing them the possibility to stretch their supply reach beyond the big four retailers. Currently the supermarket landscape it dominated by a handful of large players that operate on a national basis. Those players include the UK's largest retailer, Tesco, with the biggest competition coming from three other large chains, namely Sainsbury's, Asda and Morrisons, Tesco currently commands 30 per cent of retail sales in the UK, amounting to £42.6bn in 2007, and is now the world's third largest retailer, behind the US-owned Wal-Mart and France's Carrefour. However, the report dismisses claims that Tesco is too strong, stating that there is still room for competition from the other major players and also underlining the fact that the competition continues to expand. In line with this stance, the report singles out that in most areas UK grocery stores are delivering a fair deal for UK customers. However, Freeman said he was concerned that retailers may be using their position to block other retailers, particularly smaller ones. Supermarkets have been given the chance to respond to the findings of the CC report before final recommendations are published in March 2008.

Related topics: Policy

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