The strength of the pound, the collapse of commodity markets and the fact that there are too many farmers all chasing the same slice of the action are all issues that must be addressed. But they do not fall within the retailers' remit and certainly have little to do with how profitable Tesco, Asda, Safeway or Sainsbury might be.
Maintaining healthy margins is a question of businesses improving their operational efficiencies. Healthy returns are also to do with a greater proportion of the more profitable own-label products being developed by the retailers. In the UK, own label represents about 45 per cent of supermarket activity compared to 25 per cent in the rest of Europe. Supplier prices are only one small part of the business equation.
Few statistics bear out the perception that, in spite of this profitability, UK consumers pay much more for their food than those on the continent. Products such as milk, bread and baked beans are commonly sold at knock- down prices that bear no relation to the cost of production.
Grocery retailing is a harsh business. Any complacency between mainstream retailers would quickly be exploited by other operators such as when the continental discounters successfully entered the market in the 1980s.
Until now, the Office of Fair Trading has considered the expansion of the big four supermarkets to have benefited consumers "in terms of amenity, choice and, most crucially, price".
The British Retail Consortium welcomes this inquiry and sees it as a great opportunity to clear the air.Reuse content