Memorandum submitted by the Federation
of Wholesale Distributors (SFS 17)
Re: Securing food supplies up to 2050: the
challenges for the UK
This input to the above inquiry is from the
Federation of Wholesale Distributors on behalf of the UK grocery
wholesale industry that represents an indispensable supply channel
to some 50,000 smaller retailers (mainly convenience stores)
and approximately 350,000 catering and foodservice outlets.
Our comments, therefore, focus on the demand side of the food
industry rather than the supply side.
In 2007, the Institute of Grocery Distribution
(IGD) valued our sector at £24.1 billion, split between
cash and carry wholesalers (£9.5 billion), delivered
grocery wholesalers (£8.3 billion) and delivered foodservice
wholesalers (£6.3 billion).
1. In a current UK food retail market that
is precariously (in our view) dominated by four large supermarkets,
wholesalers provide the only sizeable alternative supply channel
of food and drink—and in logistical terms this reality should
be appreciated as an important "strength" in the UK
food system.
2. The wholesale mechanism, as represented
by the membership of the FWD, is recognised by the principal suppliers/manufacturers
of grocery products in the UK as their only effective route to
the diverse independent retail and catering markets.
3. It is important to note that these producers
no longer possess the capacity to deliver their products directly
to the thousands of smaller retailers and caterers of all types
themselves. Wholesalers provide this important function far more
efficiently.
4. A serious "weakness" in the
UK food system was revealed in year 2000 when fuel price
protests took place that blockaded oil refineries. The disruption
to the "just in time" supermarket supply chains that
ensued from shortages of petrol and diesel fuel nearly brought
the country to its knees, and delivered a sharp wake-up call of
this danger to Government.
5. Therefore, the FWD believes it is imperative
to safeguard a robust and competitive wholesale sector that maintains
the supply chain to the smaller, local and rural stores that are
mainly located a short walk away from where most of our population
lives.
6. We see the greatest potential weakness
to the UK food system as the growing over-reliance on out of town
superstores, together with a continuing decline in the number
of local food shops.
7. This on-going trend is perpetuated by
an inequity in the buying price differentials enjoyed by the major
supermarkets over grocery wholesalers.
8. A supermarket buying price advantage
was clearly revealed by the Competition Commission in year 2000 in
its Supermarkets Inquiry. Similar evidence came to light when
the CC concluded its Inquiry into the UK Grocery Market last year.
9. Its final report published in April 2008 showed
that wholesalers suffered up to a 15% buying price disadvantage,
but the CC signally failed to make any critical comment on the
matter. In terms of levelling the playing field for the UK's independent
convenience store operators and the wholesalers who provide their
supply channel, the CC delivered a resounding zero.
10. The FWD believes it is imperative that
this imbalance is corrected—in particular, for the bulk
purchasing of grocery products—in order to ensure a diverse
UK grocery market in the long-term.
11. Wholesalers should be able to achieve
parity, or near parity, on price for their largest purchases (i.e.
full lorry loads of a single product). The FWD recommends therefore
that the Government should take immediate action to achieve a
transparently fair grocery marketplace.
12. In further relation to the retail situation,
we endorse and commend to you the remarks and recommendations
made to your Committee by the Association of Convenience Stores
(ACS). That trade body represents convenience retailers that FWD
members supply and therefore we very much share the concerns that
they have raised.
13. In particular, we believe it is of prime
importance to the UK's food security that a pro-active Ombudsman
is quickly established to develop and enforce the Grocery Supplier
Code of Practice that was recommended by the Competition Commission
in April last year.
14. Equally, we support the view that future
food security will be enhanced if access to food from shops within
easy walking distance for most of the population is maintained.
In this respect, the FWD believes that ensuring a fair and vibrant
grocery market that does not disadvantage smaller players should
be a consistent, on-going Government priority.
15. Five years ago, the Federation of Wholesale
Distributors launched its "My Shop is Your Shop" activity.
This campaign is a consumer and marketing platform that helps
independent c-stores, newsagents and rural shops by emphasising
their unique role in the community they serve. It promotes the
genuine value to the local community that the personal interface
of the owner of the local shop provides. Full details are available
on the MSYS website at www.myshopisyourshop.co.uk.
16. One very relevant aspect of the campaign
to your inquiry is that in the next few weeks MSYS will re-launch
its Walk & Shop activity. This gives independents a real and
positive, money-saving proposition for their communities. The
two-pronged message that this campaign delivers encourages shoppers
to ditch the car and shop locally, just in time for their daily
grocery needs.
17. The cost saving aspect is simple to
propose and easy to comprehend—it is, avoid wasting food
by over-buying at the superstores and also save on petrol costs.
Additionally, Walk & Shop gives independents a unique environmental
platform through the related reduction in carbon emissions.
18. The foodservice and catering industry
is another important customer component of the wholesale marketplace.
Despite the current economic conditions, we anticipate a growing
need to serve the out-of-home eating requirements of the nation.
The overall trend is that we are spending less of our time eating
at home and more time eating out.
January 2009
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