Some local markets are already dominated by a single supermarket chain. That grip could tighten as new stores are built, writes Ben Laurance.
The Competition Commission’s language was formal and measured: “The weight of evidence to date supports a finding that the relevant geographic market for the supply of groceries is local, rather than national.” When the commission last month presented its first broad ideas - its “emerging thinking” - after the launch nine months ago of an inquiry into the grocery sector, this single sentence was arguably more important than any other in setting the framework for the investigation’s next steps. It showed the commission’s determination to cut through nationwide data to focus on local markets in trying to establish if consumers are well served by the grocery retail industry.
Today, The Sunday Times can disclose the results of a new investigation that pinpoints the areas of the country where individual supermarket operators hold their tightest grip - and where that grip is likely to become even tighter. It shows that in some places one company is likely to control an astonishing 60% or more of large-supermarket retail space. These areas are likely to be the focus of the watchdog’s most intense scrutiny.
At one level, the commission was merely stating the obvious: people living in Devon don’t do their shopping in Doncaster. The watchdog has now formally signalled that, during the coming months, it will be examining the position facing consumers in every locality in the UK. In the words of the commission’s chairman, Peter Freeman: “We need to see what choices shoppers have in particular areas.” He is careful not to suggest that Tesco is the target of the inquiry. But nobody disputes that Tesco is the giant of the UK supermarket industry, with grocery sales almost double those of J Sainsbury or Asda. Tesco’s land bank - the sites it controls but where it has yet to build - is far bigger than those of its competitors. Although the commission acknowledges that Tesco controls more undeveloped land than anyone else in the UK, both in absolute terms and as a proportion of existing retail space, it is not giving details.
An investigation for Channel 4’s Dispatches has identified the areas where individual supermarket operators already have a strong grip on existing space. And by scrutinising data from the Land Registry, planning applications, company announcements and other public sources, it has pinpointed areas of Britain where a single chain will gain a predominant position by developing new sites and extending existing stores. The investigation has looked at supermarkets of 15,000 sq ft or more - known as “one-stop shops”, outlets big enough to do an entire weekly shop for a family. The evidence suggests that nationally, Tesco controls sites that would allow it to build as much one-stop space as all its competitors put together. Asda accounts for about a quarter of the potential new space on sites earmarked for development. Sainsbury and Morrison each account for less than 10%. This reinforces the picture of Tesco’s unparalleled success over the past decade in identifying development sites and snapping them up. As disclosed by The Sunday Times in December, Tesco accounted for more than half the net increase in UK retail space - both food and nonfood - in 2006. Sainsbury, overtaken as Britain’s biggest food retailer 12 years ago, has been distracted by trying to sort out its internal problems while Morrison has had its hands full grappling with the botched integration of Safeway since a £3.2 billion takeover three years ago. Even Asda, so skilfully revived by Archie Norman and Allan Leighton in the early 1990s, has faltered under the ownership of Wal-Mart. Far more importantly, given the commission’s newly declared “local” approach, it is the size of land banks in particular areas rather than the national picture that is now coming under scrutiny. The research highlights the mainland Britain postcode areas where a single operator has 40% or more of the existing one-stop grocery shopping space. Tesco is the biggest in 21 areas, Sainsbury in six and Asda in one. Stores in the pipeline mean that Tesco is likely to control more than 40% in 22 areas once it has developed its land bank. Asda will be above the 40% mark in three — Bol-ton, Sunderland and Kirkcaldy. The expansion plans of rivals will mean that Sainsbury is likely to see its relative position eroded in Bromley, to the southeast of London, but the company will still have at least 40% of one-stop space in five areas. In some postcode areas a single operator is likely to have a hugely dominant position. Sainsbury is enormously strong in southwest London, where it is reckoned to have 63% of one-stop grocery retail space. Expansion plans of its rivals will chip away at that share. But based on public data, Sainsbury will still have 60% of space. Tesco has managed to secure sufficient land in areas where it is already strong to make it even stronger. Developing its land bank in the Cambridge area will put it on target to have 61% of one-stop space. In Dum-fries and Galloway, its share could hit 68%, and in both the Uxbridge and Inverness postcode areas its share could hit 76%.
The commission is aiming to publish its provisional findings in June. Already Freeman’s words must be worrying some people in the grocery giants. He said: “We’re not here to punish the success of individual retailers, but we’re concerned with whether Tesco, or any other supermarket, can get into such a strong position, either nationally or locally, that no other retailer can compete successfully.”
The Supermarket That’s Eating Britain will be shown on Channel 4 at 8.00pm tonight.