Is Tesco spin on Safeway takeover a joke?

5 February 2003

The battle for supermarket chain Safeway took a new twist when Friends of the Earth and other "stakeholders" received a letter from Tesco claiming that its bid would be the best for customers, employees, local communities and suppliers. In the letter to Friends of the Earth's Executive Director Tony Juniper, Tesco sets out a list of "key benefits of a successful Tesco bid". Friends of the Earth today described the claims as an "absolute joke". Tesco's claims, as laid out in the letter, are easily dismissed:

Customers
"More customers choose to shop at Tesco than any other retailer" (our emphasis). "Expanding Tesco's coverage of the UK would offer this choice to many more customers... On local choice, the Safeway portfolio of stores is largely complementary to Tesco's own estate. As a result Tesco believes it should be able to retain around three-quarters of Safeway stores while ensuring competitive local markets".

Friends of the Earth says: Tesco is the UK's biggest retailer so many people do not have the choice other than to shop at Tesco. A Tesco takeover of a rival supermarket would reduce choice further particularly in areas where both Tesco and Safeway already have a large market share. For example, in the South East and East Anglia a combined Tesco/Safeway deal would give Tesco 60 per cent of the grocery market and in Northern Ireland 86 per cent. A monopoly is defined as one company controlling 25 per cent of the market. Selling of just a quarter of Safeway stores will make little difference to choice or competition.

Communities
"Our broad range of products - from Value to Finest - and our differing store types - from small neighbourhood convenience stores to hypermarkets - underlines our commitment to serve all communities and consumers"

Friends of the Earth says: Tesco stores do not serve "all communities". A recent report by Demos showed that the growth of supermarkets at the expense of smaller local shops has been detrimental for low-income households. One low-income customer said that although bargains could be found at Tesco, "I couldn't do a weekly shop there". Supermarket low prices don't seem to extend to healthy food. A recent survey by Friends of the Earth found that supermarkets are the most expensive place to buy apples, with market stalls and greengrocers beating the supermarkets, including Tesco, on price. A survey for Sustain in 2000 found that fruit and vegetables were around 30 per cent cheaper at market stalls than supermarkets. The Competition Commission found that supermarkets, including Tesco, put prices up in areas where they don't have strong competition. The proposed takeover of Safeway would reduce competition among supermarkets but is also likely to lead to further closure of local shops which better serve local communities.

Farmers and suppliers
"Tesco has 2,700 suppliers in total and many recognise how supplying Tesco benefits them... Tesco is the biggest indirect customer of UK farmers, and has a strong interest in a successful UK agriculture" and "We are working with our farmers, particularly using our knowledge of customers to help farmers produce what consumers want"

Friends of the Earth says: The Competition Commission found that the big supermarkets including Tesco enter into unfair trading practices with their suppliers. Supermarkets are squeezing prices to farmers, with, according to the Competition Commission, Tesco paying the lowest prices. A recent opinion poll found that 84 per cent of shoppers want supermarkets to give preference to British produce when it is in season. A Friends of the Earth survey found that at the height of the UK apple season less than half of the apples on offer in Tesco were home-grown.

"Tesco really is having a laugh. This supermarket chain already has British farmers and consumers in a stranglehold - now they want to squeeze even tighter. Their claims defy belief," said Friends of the Earth Director Tony Juniper. "It really is time for the Secretary of State for Trade and Industry to step in and demand an investigation by the Competition Commission. A Tesco monopoly over our food supply is bad news for consumer choice and bad news for farmers in this country and abroad."

Friends of the Earth has written to the Office of Fair Trading (OFT) and the Secretary of State for Trade and Industry calling on them to refer all the proposed takeover bids by rival supermarkets to the Competition Commission for a detailed investigation, including an assessment of the potential impact on consumers, farmers and local economies.

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