• Overview: Supermarkets sweep up
• The Cheap Food 'Mantra' - Stack it high! Sell it low!
• Encouraging industrial agriculture and destroying small farms world-wide.
• A spoonful of organo-phosphates - Dangerous chemical usage in food & farming
• Bye-bye High Street - The destruction of communities and jobs
• Apples from Africa and pears from Peru - Food miles and climate change
• Oiling the trolley wheels - Undue influence on government
• Redefining 'safe' - The manipulation of health and safety requirements
• The plastic smile - Shop and farm workers rights
• 'Rip-Off Britain' - The Competition Commission enquiry
• 'Mummy, mummy, can we buy the Barbie spaghetti shapes?' - promoting unhealthy processed food.
• Choice? Convenience? Value?
• And for dessert…What can you do about it?
• Credits
• References

Overview: Supermarkets sweep up

The supermarkets we know today started in Britain with the Co-operative Movement in the 19th century. This was a group of independent local retailers controlled by its consumer members, who sold unadulterated foods at prices working people could afford. It was in post-war Britain, though, that the supermarket revolution really took off. With the 1948 Agriculture Act, the Government initiated the 'cheap food' policy that is still with us today. With new technologies and government subsidies to farmers, food production rocketed.

The golden age of supermarkets began in 1964, with the abolition of Retail Price Maintenance. This was the mechanism that had allowed manufacturers and suppliers to dictate their prices. With market liberalisation, the supermarkets began to dictate prices back to the suppliers, offering bargains and 'loss leaders' to entice customers. The falling cost of global transportation has helped supermarkets source abroad more cheaply in their quest for ever-increasing profit margins. The supermarkets have undoubtedly benefited from the advent of the 'weekly shop', made possible through a massive increase in car ownership.

During the last three decades, the United Kingdom has been transformed from what Napoleon described as a 'nation of shop-keepers', with innumerable small businesses, to a supermarket culture dominated by a handful of large retailers. Their formula for success is simple - they operate efficiently, they provide a one-stop shop and they enjoy consumer confidence. Today they wield immense influence over the way we grow, buy and eat our food. They are shaping our landscape, our health and the way we interact socially, and these changes are going unchallenged because of our fast food lifestyles; consumers want quick access to a wide choice of goods at low prices. But, as this briefing will illustrate, such 'choice' has come at a price…

The UK grocery market is controlled by the supermarket multiples, virtually all of which are household names. The top five are Tesco, Sainsbury's, Safeway, Asda and Somerfield. In addition there are some more expensive supermarkets focusing on the 'quality' niche market, such as Waitrose (owned by the John Lewis Partnership) and Marks and Spencer and smaller or regional operations such as Budgens, Iceland, Booths or W.M. Morrison. At the cheap end are the German bulk discounters, Aldi and Lidl and the Danish chain, Netto that stock smaller ranges of mainly imported goods. The Co-op is unique as it is a consumer-owned business, part of the wider Co-operative Group that includes the Co-op bank, Travelcare, Farmcare and CG property.

There is also a whole sector of conveience stores, that are not classified as 'supermarkets' due to smallerfloor area. These range from small independently-owned cornershop to Costcutter, a federation of 1200 independent shops, and nationwide stores such as T&S stores who own One Stop and Nite and Day. The 'convenience' sector is rapidly blurring with the supermarket sector, as the 'Big Four' move into this sector and have rapidly acquired existing chains or built alliances.

Consolidation in the food retailing industry

In 2000, food sales through supermarkets and superstores reached £76.78bn - a growth of 4.5% from 1999, and a growth of 30% since 1995.2 A report by industry analysts, Keynote, estimates that in value terms the retail sale of food through supermarkets will increase by 16% between 2001 and 2005.3

According to the Institute of Grocery Distribution in 2001, the major supermarket multiples make up k60% of the market share, convenience retailers make up 20%, the smaller specialists make up 13%, Co-operatives make up 5% and hard discounters 2%.4 market analysts, Taylor Nelson Sofres, who calculate market share by measuring shopping habits in 15.000 households, would put the figure for the big five supermarket multiples in the UK much higher at around 75%.

The trend towards consolidation looks set to continue. In late 2000, analysts suggested that there was not really room in the sector for all of the large retailers. Verdict Research predicted that 'Within the next five years, the five major UK grocery players are likely to be down to three, possibly two'.

The supermarkets are involved in fierce battles for market share. Tesco with the highest market share has been considered by some analysts as invincible. 'Tesco's strategy is far ahead of Sainsbury - it has grown a strong UK core and then rapidly developed international stores, built good non-food sales, expanded into retailing services and exploited eCommerce successfully' said
leading food analyst Datamonitor.5

Sainsbury and Asda make a close second and third position. Over Christmas 2002-2003, Asda, with its aggressively cheap pricing, came close to the second position and only concerted advertising by Sainsbury using TV chef, Jamie Oliver, kept them in the number two slot.6 Asda is now officially in the number two slot.

One of the most effective ways to boost market share is to gobble up your rivals. In December 2002, Tesco surprised its rivals by acquiring convenience store chain, T&S stores which owns more than 850 stores. It plans to convert 450 of these to the Tesco Express format, selling off the rest. This deal came just days after the Co-operative Group acquired convenience store chain, Alldays.

In early January 2003, Morrisons announced its intention to acquire Safeway making a £3 billion offer. This caught their supermarket rivals on the hop as they too had been eying the ailing Safeway for some time. The Morrisons' announcement led to further bids by Tesco, Asda-Wal-Mart, Sainsbury, KKR (US venture capitalists) and the Philip Green consortium (who also own BHS and Top Shop amongst other high street names). In February 2003, all the bids were referred to the Office of Fair Trading to judge whcih bids would take which supermarets over the 25% market share that classically constitutes a monopoly. If Sainsbury or Tesco win, for example, this may result in some of the stores having to be divested or sold off.

Analysts cannot underestimate the significance of this development. According to Julian Hunt, editor of the Grocer, UK grocery is on the verge of 'seismic change'.7

If Asda- Wal-Mart, the bookies favorite with its bottomless pocket, were to win this would in effect create two unsurpassable forces in UK grocery retailing - Tesco and Asda. What is certain about these recent acquisitions is that the writing is on the wall for the traditional independent cornershop who will no longer be able to compete on price and range.

Another area of growth is overseas markets. In response to Wal-Mart's acquisitions in the European market, the pan-European grocery titans are reshaping the retail landscape. The mega-merger of French grocery corporations , Carrefour and Promodes in 1999 created a clear second place to Wal-Mart in Carrefour. Carrefour now has a presence on 32 countries, compared to German Metro with a presence iin 27 countries and Dutch Ahold in 23 countries. 8 Ahold today generates 82% of its turnover outside its home country. 9 Tesco, the eighth largest international grocery retailer10, has stores in Ireland, but is mainly focusing on expanding into Central and Eastern Europe. Tesco is the market leader in Hungary and has 144 stores in Czech Republic, Hungary, Poland and Slovakia. Tesco has also expanded into the Far East, with the Tesco Lotus brand name.

Wal-Mart will undoubtedly seek further mergers across Europe. With global sales of $218 billion in 2001, it is the retail equivalent to a superpower. According to Fortune magazine, in 2002, its profits exceeded Exxon Mobil to become the biggest company in the world. 11

The only obstacle to this global consolidation will be institutional constraints such as governmental regulation of retail and service activity and restrictions on land ownership. This has led to major supermarket chains pushing their governments towards global deregulation. All eyes are now on the General Agreement on Trade and Services (GATS) agreement, a WTO agreement that is intended to realise further liberalisation in the retail sector. 12

IFor in-depth profiles on major UK supermarkets, see Corporate Watch's web-site: wwwcorporatewatch.org.uk/profiles.

In-store strategies to woo customers

Since 1995, the strategies of the major chains to increase footfall into their sotres have swung between intense price competition and loyalty schemes, as well as constant in-store innovation on products and the 'in-store' experience'.

However, Wal-Mart's entry into the UK through its acquisition of ASDA in 1999 has dictated new strategies. The Wal-Mart formula is based on low prices and a whole range of products besides food. Wal-Mart's profits are five times higher in non-food sales than food sales.13

In response, many supermarkets are also becoming entertainment centres, clothes stores, newsagents and petrol retailers. Retail analysts Verdict say that a massive £14.5bn was spent on non-food items in supermarkets in 2000 and that it is a potential growth area, especially for Asda and Tesco.14

Parallel or 'grey' imports are another growth area, with supermarkets importing designer goods direct from factories outside the EU, rather than through authorised wholesalers; thus undercutting authorised retailers. In a recent court case Levi Strauss successfully preventing Tesco selling Levi jeans at cut price.15

The increase in the number of people 'eating out' is a challenge to the supermarkets. They have responded by increasing the number of ready meals, especially luxury own-brand ready meals.

They are also increasing the amount of processed organic food available. Organic food has been identified as a large area of growth for supermarkets. Many organic enthusiasts question whether the supermarkets' general policy of importing organic produce from monocultures in the global South is true to the original social and environmental aims of the Organic movement.

Some supermarkets are developing in-store juice and sushi bars, with Starbucks coffee outlets appearing in Sainsbury's.

The effect on specialist retailers and restaurants will be dramatic, as the supermarkets will be able to out-price them. Pharmacies, dry cleaners and post offices are beginning to appear in superstores, further shrinking the role of the high street.

Supermarkets have also entered service areas such as insurance, banking, internet service provision and soon even divorce finalising and will-writing.16

In September 2001, tesco.com announced it was on the verge of profitability,17 but many consumers are still unconvinced by internet shopping, not wanting to rely on a third party to choose food, and not really knowing what they want until they enter the supermarket.

To challenge home shopping, the major retailers are striving to improve the 'instore' experience and to promote shopping as an enjoyable leisure activity. From Asda's in-store chaplains and MP's surgeries, to nail-polishing  and pizza spinning, retailtainment is fast becoming part of the supermarket shopping experience.

During Summer 2001, Asda hired trained actors to work as store greeters18, in a bizarre full circle which has seen shopping move away from the genuinely personal service of many small stores, through the impersonal experience of superstores, and back to a cheesy fake version of personal service again.

This time, however, the experience is carefully orchestrated by 'customer relationship management' to make the customers feel like more than the sum of their intimate shopping records, collected in data warehouses.

In November 2001, Sainsbury's released a story about lovers found kissing beside a chiller cabinet.19 In other supermarkets, there are reputed to be 'singles nights'. As Marketing online reveals, this is a concerted PR strategy to make supermarkets sexy, and combat the alienation that shoppers undoubtedly feel beneath the strip lights and endless aisles, overwhelmed by strangers, and shelves stacked high with products.20

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