Archived press release

Tesco growth must be checked

12 April 2005

Tesco's unchecked growth is putting small shops and British farmers out of business, and reducing public choice of where to shop, Friends of the Earth warned today. The warning comes as the supermarket giant announced record end-of-year profits of more than £2bn and an unprecedented share of the UK retail market [1].

Despite having a clear monopoly with 30 per cent of the market (a monopoly is defined as above 25 per cent), Tesco's growth has not been checked by competition policy designed to protect consumers. The £2bn profits have been at the expense of farmers and other suppliers who have had to cope with falling prices, and small shops losing local market share. Tesco is now one of the world's largest retailers with over 2,300 stores worldwide.

Friends of the Earth is calling on the Government to protect suppliers, consumers and smaller retailers. The environmental campaign group is calling on the Department of Trade and Industry to amend the supermarket Code of Practiceso that it protects suppliers from the bullying behaviour of big supermarkets, as well as to stop any new mergers and acquisitions in retailing until the full impact has been investigated. Recently introduced planning policy guidance on town centres must be used by local authorities to protect local shops and local economies rather than let in any more multiples onto the high streets.

Friends of the Earth's Senior Food Campaigner Vicki Hird said:

"These outrageous profits are a testament to Tesco's ability to squeeze suppliers and smother competition. Its uncontrolled growth is destroying our town centres by putting local shops out of business and leaving the public with less choice on where to shop. Its thirst for profits is causing many British farmers to go out of business.The Government must introduce stronger protection for suppliers and call a moratorium on any further takeovers. Without action there will be fewer local shops, less farmers in business and little hope for a more sustainable future for UK food and farming".

Recent consumer polls show that people still value local shops and have greater trust in the food sold by small specialist shops than by giant supermarkets. These are exactly the kind of shops threatened by Tesco's expansion plans. Eighty two new stores are planned this year, including 17 out-of-town hypermarkets, plus many more stores overseas [2]. Tesco's sales of non-food goods were even stronger than food sales over the Christmas period, posing a new threat to high streets retailers in town centres.

Friends of the Earth has asked the Office of Fair Trading to open a new investigation into the impacts of supermarkets rapid expansion into convenience store sector and non food goods. [see10]

Friends of the Earth is part of an alliance of 15 organisations calling for a strict Statutory Code of Practice to protect supermarket suppliers and an independent Retail Regulator to enforce it.

The negative impacts of Tesco's dominant position include the following:

• Local traders are being pushed out of business by new Tesco stores reducing consumer choice and damaging local economies [3]
• Tesco fills its shelves with imported produce instead of supporting UK farmers; surveys by Friends of the Earth have shown that at the height of the UK apple season well over half the apples on offer in Tesco stores were imported [4]
• Farmers in the UK and overseas are being bullied by Tesco buyers as the company passes costs and risks back down the supply chain [5]. Only 0.2% of Tesco lines are fair trade.
• As alternative shops are lost, access to healthy food could be affected. Tesco performed poorly in a recent rating of major retailers contribution to healthy diets carried out by the National Consumer Council [6]
• Some workers overseas growing and packing food for Tesco and UK homeworkers assembling goods for Tesco are not getting basic employment rights [7] [8]
• Tesco, like other big supermarkets, causes environmental damage by transporting food long distances, overpackaging its food, and building stores which are highly inefficient in terms of energy use [ 9 ].

GOVERNMENT ACTION NEEDED

Friends of the Earth is part of an alliance of 15 organisations calling for a strict Statutory Code of Practice to protect supermarket suppliers and an independent Retail Regulator to enforce it. The new code would replace the existing weak and voluntary code introduced in 2002. The Office of Fair Trading reported in March on an audit of compliance with the code which revealed that the supermarkets had not changed their practices. In addition, the lack of data showed that an independent ombudsman is clearly needed so that suppliers can complain in confidence without fear of losing their contracts. The `Breaking the Armlock' alliance says that it is clear the existing code is not working and it must be changed without further delay. [10]

New national planning policy guidance about town centres (Planning Policy Statement 6) was published in March. It has a welcome commitment to town centres, but leaves the door open to multinationals by requiring authorities to provide large format stores sites in town - despite strong evidence that such stores take away trade from existing town centre shops. Friends of the Earth is calling on the Office of the Deputy Prime Minister to remove this bias in favour of big supermarkets from the statement and to encourage more diverse retail provision instead.

The environment group also wants a moratorium on any further takeover of other chains by Tesco. Over the last two years Tesco has been allowed to take over the T&S and Adminstore convenience store chains with no investigation by the competition authorities. It is growing its market power in this way and further reducing consumer choice. Along with the Association of Convenience Stores, the National Federation of Women's Institutes and FARM, Friends of the Earth has called for a new investigation into new trends in the grocery market including the impacts of the big four taking over convenience store chains [11].

Notes

[1] ACNielsen's Tradetrak data shows that Tesco has added almost a full percentage point to its share of the grocery retail market in the last three months to cut itself a record 30.2% slice of total trade, Grocer 8 April 2004

[2] Evening Standard, Tesco Planning 82 new stores, 17/01/05, and The Grocer reports that Tesco is planning to open more than 40 stores in Central Europe this year. 11 April 2005.

[3] Examples of the negative impacts of new Tesco stores are available from Friends of the Earth or see www.foe.co.uk/resource/briefings/pps6_damage_town_centres.pdf (PDF)

[4] www.foe.co.uk/resource/briefings/apples_short_supply.pdf (PDF)

[5] www.foe.co.uk/resource/briefings/every_little_hurts.pdf (PDF)

[6] Rating Retailers for Health; how supermarkets can affect your chances of a healthy diet, National Consumer Council, December 2004

[7] www.actionaid.org.uk/1578/tesco_profits_at_expense_of_poor.html, ActionAid April 2005

[8] Homeworking in Britain: Flexible working or exploited labour?, National Group on Homeworking, 2004

[9] A survey has shown that large superstores are the most energy inefficient buildings in the retail/light industrial sector. It would take more than 30 corner shops and greengrocers to match the carbon dioxide emissions form a single superstore. (Supermarkets and environmental impacts, forthcoming briefing by Friends of the Earth)

[10] ] OFT fails to act on unfair supermarket practices

[11] Call for New Investigation into Big Four

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Published by Friends of the Earth Trust