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Emerging thoughts on grocery retail

The UK's Competition Commission (CC) today published its Emerging Thinking as part of its inquiry into the UK grocery sector. This document forms the first significant output from the CC in a market inquiry and is intended to summarises the evidence the CC has heard and gathered to date. Whilst the inquiry is still likely to run for several more months the CC's current thinking is that:

  • the economic viability of food and drink manufacturers and wholesalers as a whole (and hence that of the supply chain to smaller retailers) is not in question;
  • there no evidence that supermarket buyer power is reducing supplier innovation;
  • there is no clear correlation between the size of buyers (measured by share of national retail sales) and better buying terms;
  • below cost selling is unlikely to be predatory;
  • retail profitability has been falling;
  • in the market for land, whilst Tesco holds most land, other retailers are actively increasing their holdings also; and
  • many of the suggestions it has heard about retailers abusing the planning system are unsupported.

The CC still needs to look in more detail at the nature of land holdings and the relevance to local catchments, the level of local competition and the degree to which some retailers vary their offer by location, whether markets are national or local and how consumers have benefited overall from retail competition.

Frontier (London) advises Tesco.