Archived press release

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 Tuesday 8th July [1], 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 [2].

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 released today [3] 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 [4]. 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 [5].

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.

Sandra Bell, Food and Farming Campaigner for Friends of the Earth said:

"Control over our food chain by the biggest supermarkets has gone far enough. 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".

Michael Hart, Chairman of the Small and Family Farms Alliance said

"Supermarkets already have farmers in an armlock, according to the Prime Minister. 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"

Kathryn Tulip from Grassroots Action on Food and Farming said

"If one of the other big supermarkets buys Safeway, it will be bad news for consumers. 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".

Notes

[1] Safeway AGM, Tuesday 8th July, 11am, Dorchester Hotel, Park Lane

[2] Commenting on the takeover bids In its Annual Report Safeway Chairman David Webster promises shareholders that "We will continue to work for an outcome which is in the best interests of our shareholders and other stakeholders"

[3] Available from FOE

[4] Competition Commission, `Safeway merger inquiries: remedies statement', 24th June 2003

[5] KPMG data in New Economics Foundation press release

If you're a journalist looking for press information please contact the Friends of the Earth media team on 020 7566 1649.

Published by Friends of the Earth Trust