Playing Food Monopoly

We now find out that Amazon has bought ‘Whole Foods’. This may be important for them in America but in the UK ‘Whole Foods’ has made consistent losses and have a share of the food market that is so small as to be imperceptible.

It is therefore a source of some surprise that the board of NISA, the independent grocers’ buying group, cite this as a the reason that they might be willing to be bought by Sainsbury and thus happy to lose their independence!

Much more likely is that they are fearful that Tesco (the UK’s largest food retailer as well as the largest internet grocer in the world) and Booker (the UK’s largest food wholesaler) will get the go ahead for a merger.

If they do it will be a scandal.

There is no benefit to the public at all. There is little synergy between food wholesaling and retailing and there is a clear conflict of interest. The only synergy that would result is an ability to screw the suppliers as Tesco/Booker would be easily the biggest UK grocery ‘route to market’ as the jargon goes.

In fact a Tesco/Booker or Sainsbury/NISA merger would reduce the diversity of the market so significantly that it is surely something that the Competition and Markets Authority (CMA) cannot fail to understand?

If Amazon is such a threat the CMA could prevent the purchase of any other UK food trader. Otherwise Amazon does as it is wont to do – just spend money and wait. There might be scope for an eventual change of mind on Amazon Food, but so far, in the UK, Amazon Food have been extraordinarily quiet about progress.

I think we can take that as a sure sign that food is not books.

 

 

 

Comments

  1. Jeni Parsons aka havantaclu -

    And once again, very little in the MSM about this and other threats to food producers (though admittedly the BBC had quite a bit about strawberry farming during their peak season!).
    My farmer cousins, on the Welsh border, have been working out what their income is likely to be post-Brexit. At the moment, they’re thinking of selling off the valley land for small-holders (though that will mean converting barns and other farm buildings into small bungalows). And the really rough pasture above 300 metres? Will have to revert to scrub.

  2. Sean Danaher -

    Another worry that was talked about on the Today program this morning was the introduction of variable pricing. I’ve seen electronic price tags in French supermarkets. The idea is apparently at times of high demand such as for ice cream during a heat wave one can dynamically alter pricing.

    1. Peter May -

      Tesco have tried this and found it wasn’t a successful experiment. Electronic price tags don’t stop you having to fill the shelf manually. But maybe there’s another scheme. They have to be careful they charge the shelf price on display at the till. I strongly suspect they don’t get it right now with a manual change. If prices fluctuate according to the time of day/weather with more changes it will be all the more difficult to get the correct price charged at the checkout.

      With regards to Brexit a lot of farmers seem to have voted in favour so many have given themselves a problem. It always seems to me there is scope for more and better farmers coops because the money is made, not by the retailers who have wafer thin margins because there is so much competition, but by manufacturers who transform what the farmers produce. Farmers really need to try and get into the business of converting their commodity into something people will buy, which will give them more control, more profit and more security.

      1. Sean Danaher -

        Indeed Peter
        things could get very difficult for farmers, co-ops are definitely the way to go. One of the few good things about the DUP deal is that with farming so central to the NI economy it will not be ignored in the Brexit discussions. I do worry about sugar beet farmers as Davis would like cheaper cane sugar unless he has changed from his time in Tate and Lyle.

      2. Nile -

        That’s technically challenging, but not impossible.

        I can foresee a day when ‘barcodes’ on the goods for sale are RFID chips, and the the store’s software will know exactly when each item is removed from the shelf and placed in the customer’s basket or trolley.

        I don’t think that the costs involved have fallen far enough, yet, for that to be viable today.

        The current state of technology (static barcodes on the goods) would support a 30-minute ‘grace period’ in which the customer pays the lowest price displayed at the shelf-edge in the past half hour.

        There are costs associated with that, too, including a risk to reputation and customer relations.

        But it can be done.

  3. Nile -

    This is very, very dangerous in an economy where the bottom decile of households are occasionally (and, sometimes, repeatedly) dependent on food banks.

    For the avoidance of doubt: forty percent of all requests for Trussell Trust food banks’ assistance come from a household with an adult in paid employment.

    An abusive monopoly in food is a starvation threat.

    1. Peter May -

      Agreed. Although I don’t think either Booker or Tesco would set out to be abusive, their mere size and dominance in the ‘route to market’ make it an abuse because it reduces choice for farmers and food producers. (To be fair I should probably add that Tesco currently has more product listings by some margin, than any other supermarket.)

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