TALKING POINT

23 April 1999




TALKING POINT

The tables are turned at

last as the free-

wheeling big multiples

face full investigation,

says Robert Forster

IT had to happen because their arrogance was beyond belief. Just three years ago the four biggest multiples were trampling over the agricultural supply industry with apparent impunity.

Now they are to face a full inquiry into their profits from the toughened up Competition Commission. Farm leaders who responded to the first grass-roots protests with the claim that it was a mistake to criticise the largest buyers of domestic farm products, preferring instead to lick the boots that were kicking the industry in the teeth, have been shown to be utterly wrong.

It also means that the supermarkets super-slick PR machines were able to fool all of the people some of the time and some of the people all of the time. But thankfully the self-serving nonsense they spouted failed to fool all of the people all of the time and has now been recognised as paper-thin.

Livestock farmers were among the first to spot this. And if a food industry historian ever decided to identify the point at which it was first suspected that the emperors in charge of the multiples might not be wearing any clothes, he would focus on the night the fishes in Holyhead Harbour dined on Tesco beefburgers. He would also pick out the afternoon when the same companys chief executive told the Oxford Farming Conference his £13bn a year outfit made no money out of beef.

When Tescos spin kings spotted, late in 1997, that the tide of good will was beginning to move against them, they tried to secure the high ground. They began claiming they recognised the damage caused by plunging prime cattle prices and volunteered to suspend Irish imports.

The incredulity that greeted claims that Tesco made no money from beef hardened into a slower, more determined fury when a series of media exposures underlined that it was unlikely, if not impossible. A report commissioned by Tesco to support its statement was branded a whitewash.

Now that a Competition Commission inquiry looms, farmers and their supporters can be pleased that the multiples are at last in the dock and the substance of their pleas of innocence will be tested in the cold light of a formal examination and not by skilful hyperbole and carefully targeted spin.

But they must also hope that the commission is not persuaded to push too hard for lower retail prices. And it should conduct a full examination of the impact of predatory purchasing on the businesses that make up the food supply chain.

The commission should recognise that the greatest of all supermarket skills is to take the same sized income slice for itself even if the economic cake is smaller. Unless it checks the supermarkets, their inevitable response will be to push all potential losses back to their suppliers, and then the commission will have failed to curb the menace.

Instead it must force the retail giants to acknowledge they must cease being dividend machines for their shareholders and assume wider responsibilities such as the protection of rural structures.

Companies as big as Tesco, J Sainsbury, Asda and Safeway are too big to career around inside the UK economy like loose cannons. Their capacity for selfish damage can be curbed only if they abandon single-minded profit taking and accept that the sheer scale of their enterprises forces them to assume much wider obligations as well.

If a food industry historian ever decided to identify the point at which it was first suspected that the emperors in charge of the multiples might not be wearing any clothes, he would focus on the night the fishes in Holyhead Harbour dined

on Tesco

beefburgers.


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