Fat cats fight over Safeway, consumers and farmers are real losers

8 July 2003

Friends of the Earth, the Small and Family Farms Alliance and Grassroots Action on Food and Farming will be at the Safeway AGM on 8 July, highlighting the real losers in the battle to take over the supermarket chain. At the AGM, campaigners will be asking Safeway how they intend to ensure that the outcome of the bidding war for Safeway will be in the best interests of shareholders and other stakeholders, as promised in their Annual Report.

The three organisations have launched a campaign to stop the Safeway takeover. Friends of the Earth, SFFA and GAFF are urging the Government to block all the takeover bids. In a new report about the proposed takeover, Friends of the Earth warns that if Safeway is taken over by a rival supermarket:

• Consumers will lose out because prices may go up and quality may go down as competition is reduced. The Competition Commission has warned about these outcomes in its recent 'remedies' report on the merger inquiries. Choice will also be reduced not just by the loss of a major supermarket chain but more importantly as more local shops go out of business and smaller suppliers are squeezed out of the market in the face of increased supermarket power.

• Farmers will lose out because a greater concentration in the market will enable supermarkets to squeeze prices further and continue to demand unreasonable trading terms. The Competition Commission's remedies report reveals that the Supermarket Code of Practice, introduced in March 2002 to stop unfair trading practices, is not working.

• Local shops will lose out as it will get even harder to compete with the big supermarkets in an even more concentrated market. Industry figures show that currently about eight independent shops close every day.

• Even shareholders are likely to lose out if Safeway is taken over. According to KPMG the majority of mergers do not benefit shareholders - 53 per cent actually destroy shareholder value and a further 30 per cent bring no measurable benefit.

A Safeway takeover would mean that just four companies would control three quarters of grocery shopping. Friends of the Earth, SFFA and GAFF believe that this would be a step too far in handing over control of the food chain to corporate giants.

"Control over our food chain by the biggest supermarkets has gone far enough," said Friends of the Earth's Food and Farming Campaigner, Sandra Bell. "If Safeway is taken over, just four companies will control three quarters of our food sales. And they are also increasing their share of many other goods from magazines to clothing. If the Government allows the takeover, it will be helping to line the pockets of fat cat supermarket bosses and city bankers at the expense of consumers, farmers and local communities".

"Supermarkets already have farmers in an arm lock, according to the Prime Minister," said Michael Hart, Chairman of the Small and Family Farms Alliance. "Any further concentration at the retail end of the food chain, with even fewer supermarkets, will put farmers in a disastrous stranglehold. If Safeway is too small to survive with a 10% share of the market everyone with less will also go, leaving only three or four supermarkets controlling the retail end of the food chain. Safeway must remain as an independent supermarket."

"If one of the other big supermarkets buys Safeway, it will be bad news for consumers," said Kathryn Tulip from Grassroots Action on Food and Farming. "A 'price war' has already been threatened by the supermarkets vying to takeover Safeway which will make it even harder for small businesses to compete, giving us less choice where to shop. Increased concentration will reduce competition and is likely to force up food prices in the medium to long term".

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