Buying Power

I140912_180953_12159598oTextTRMRMMGLPICT000046157861oBy Margaret Cuthbert and Jim Cuthbert

The potential power of supermarkets and large high street stores over our lives was brought into sharp focus in the run up to the referendum, when a number of them pointed out what they (and Downing Street) saw as the benefits of voting No: Marks and Spencer, B&Q, Asda, John Lewis, Timpson’s, all weighed in.

Campaigns against the power of supermarkets – in their establishing land banks, in supermarkets crowding out small retailers, and in the low prices they pay to farmers – have been waged for many years.

This note looks at another aspect: how these large retail businesses affect the whole of the supply chain and create vulnerability in the food supply chain in Scotland. It shows how we in Scotland have passively allowed large distributors of goods and services to have power over our economy. It suggests that we as customers have been too weak in demonstrating our collective buying power so that the resulting bargain Scotland gets out of its relationship with large stores and supermarkets has been too much in their favour.

The size of the grocery market (excluding fuel) in the UK in 2013/14 is estimated by the trade itself at £174.5 billion, with sales in Scotland estimated at just short of £15 billion. This is sizeable, and it is reasonable to ask how it affects the Scottish economy.

So, first, where do we spend it? Primarily in the large chains: the big four of Tesco, Sainsburys, Asda, and Morrisons, followed by Marks and Spencer, Iceland, Farmfoods, and the Co-op, with big incursions in market share in recent years by Lidl and Aldi. According to ONS, 80% of spend in the UK on food and non-alcoholic drink is through supermarkets with a further 4.2% of the total over the internet.

And, of course, there are benefits: reasonable quality, variety, convenience, and so on. (The overall shopping model and its competitiveness is however being challenged fairly successfully by discount stores like Lidl and Aldi).

But what we are concerned about here are some of the less obvious effects on the Scottish economy – effects on the supply chain that we could do something about.

Take Tesco for example: it is Scotland’s largest grocery retailer. In the Spring of 2013, Tesco wrote to the Scottish Government that “In 2012/13, sales of Scottish products totalled over £320m in Scottish stores and over £2.1bn in UK stores.”

Tesco website reveals that they have around 180 Scottish suppliers providing 1600 lines to their nearly 200 stores in Scotland. Since May 2013, for example, this includes 100% Scottish chicken sold right across Scotland, produced by over 20 Scottish farmers: and since February 2014, Tesco has been selling the full range of Scottish beef across all stores in Scotland. (However, this only covers fresh meat. Its own label frozen and ready meals are made with meat from Irish and British farms.) But seen against the bigger picture, this performance is not so impressive.

For example:

  • During the financial year, 2012/13, Tesco reported UK sales of £48.216 billion. (Annual Accounts). So just over 4% of its sales in the UK are of Scottish produce: and note too that several of its Scottish lines will be expensive malt whiskies giving a false impression of the penetration of Scottish goods, particularly as over 80% of the price is tax.
  • A large Tesco supermarket carries 40,000 or more lines in total. Against this, the total number of Scottish product lines sold in Tesco’s Scottish stores is 1,600. It is also interesting to note that in Poland, Tesco sells more than 9,700 regional products.
  • Tesco’s share of the Scottish market is now 30.2%. Using the above estimates of the size of the grocery market, this would imply sales of around £4.5 billion in Scotland. However it sells only £320 million of Scottish produce in Scotland: this implies just over 7% of its sales in supermarkets in Scotland are actually coming from Scotland.

And on to Sainsbury’s: Sainsbury has 16.8% of the UK grocery market with £26.6 billion sales in 2013-14. (Scotland does not merit a separate mention in the Annual Report and Accounts.) Information from Sainsbury’s (Jan 2012) tells us that they source 1,500 product lines through 140 Scottish suppliers at a value of £600 million. According to Sainsbury’s that makes them “a huge supporter of the wider Scottish economy”. But given that a Sainsbury’s supermarket will commonly carry around 30,000 product lines, their sales of Scottish produce actually look quite modest.

And Asda: Asda has 59 Asda and two distribution centres across Scotland, employing around 20,000. Since 2013, Asda has been engaged in working with local Scottish suppliers to improve the amount of Scottish food and drink it sells, (supported in the costs of so doing by the Scottish government and Scotland Food and Drink).As a retailer, Asda says it is totally committed to the Scottish food and drink sector, but for all these words, it currently stocks less than 1,000 Scottish products from 89 suppliers.

The food retailing arm of John Lewis, Waitrose, has been expanding its reach in Scotland but, according to one of the six supermarkets they have in Scotland, its team of buyers includes only two with a remit to seek out Scottish suppliers.

So, altogether, although Lidl and Aldi are carrying a fairly big number of Scottish products, the others have a shamefully low percentage of Scottish goods on their shelves. Add this to minimum wages, split shifts, the need for working tax credits to bolster wages, and in some cases zero hour contracts, and one has to ask whether the benefits of the big four supermarket chains outweigh their disadvantages as far as the whole Scottish economy is concerned.

Now, of course, we are not saying that all of Scotland’s food products should end up being marketed as distinctively Scottish brands or lines. Naturally, a lot of what we produce will be bulk, generic products, which will be sold in the international food market, (like bulk grain), and will not be obviously “Scottish” when they finally reach the consumer. But on the other hand, if you want to have a healthy agricultural and food industry, and a healthy economy, there are great advantages in having a healthy number of products which are sold as distinctively Scottish lines. The advantages include:

  • Since the processing of Scottish branded products takes place in Scotland , this increases Scottish employment and value added.
  • Having Scottish branded products helps to retain in Scotland the intermediate processing facilities without which parts of the sector might suddenly find themselves at risk. A good example of the importance of processing facilities is pork. When Scotland lost its major pork processing facility in 2011, the NFU described this as being catastrophic for pig farmers in Scotland.
  • Having distinctive Scottish products gives opportunities for brand imaging and marketing which can encourage growth – and the opportunities for growth are not just in food production, since raising Scotland’s profile has wider benefits, for example, in tourism.
  • And there are environmental benefits too, like reduced road miles.

Unfortunately, as we have seen, the practices of the big supermarkets, with their emphasis on standardisation and centralised buying, militate against all these advantages. Unless the situation is addressed, we will continue to lose out badly.

This situation is very unlike that in the Irish Republic. There, supermarkets whether Irish or not make considerable effort to boost the sales of Irish products. Aldi Ireland, for example, sources over 50% of its products from Irish suppliers. Its sales of Irish products are marked on a customer’s receipt with IRE**. A similar system operates in Dunnes stores and in the SuperValu- Superquinn chain of stores, with the total spent split into Irish and non-Irish subtotals. Promotional events are frequently held to increase awareness of Irish products. The Tesco Ireland website has a distinct food cupboard section covering Irish sourced groceries.

Despite their hype, it is very unlikely that, on their own initiative, supermarkets in Scotland will support Scottish products in the same way that Irish supermarkets support Irish products. However, we, the customers, do have power to force change – because supermarkets have to respond to demand. We can exercise that power by, individually or in groups, demanding Scottish products – and by patronising those stores which respond.

Let’s look forward to the day when we have a supermarket that can say the equivalent of SuperValu:

“SuperValu has a long and proud history of supporting Irish producers as much as possible. 75% of products in our stores are produced and sourced locally in our communities:” (6th August 2014).

And this doesn’t mean that SuperValu loses out: SuperValu has 25.2% of the Irish grocery market, and has almost caught up on Tesco’s 26%.



Categories: Commentary

29 replies

  1. As I noted on an earlier post, when dealing with organisations who only count value in pounds, you have to fight them in pounds. Shareholder activism or an economic boycott would work wonders.

  2. If you have the choice, go to local independents for your shopping. A little greengrocer, butcher or baker often competes favouribly with supermarkets on price and quality.

    Yes it takes effort to find good places but the rewards are to make your shopping part of the community rather than part of an international industrial system.

  3. I live in Ireland and would add one more comment. The public WANT to buy Irish ! People are always asking “Is it Irish ?”. Even in restaurants – and they will walk out if it isn’t. One neighbour of mine, who only shops in Supervalu, says she does so ” to support Irish jobs and the Irish economy”. That is the mindset which the Scottish consumer needs ! We’re all in it together. Its not about saving me a few pence. Its about your country and your community.

    • Labour Party in Scotland would call that narrow Nationalism. If you like something Scottish or want Scotland to do well and be a success then you get accused of being a Nationalist, by their rhetoric success must be in the context of Britain and not Scotland alone. Scotland is not allowed to compete with other parts of the UK on any major level. We’ve been beaten under that stick for decades neatly packaged as ‘The Cringe’, or to be embarrassed by success and identity.

      • It shouldn’t be about nationalism though, for its own sake.
        Why don’t people understand that supporting local producers helps the local economy – and that has a trickle through effect. More jobs and more money circulating around should result a better quality of life that effects everybody in that area.

        If Scotland does get control of income tax and a share of VAT etc, then this will be even more pronounced.
        I remember seeing posters in Irish halls encouraging people to Shop Irish.
        It would be nice to see something like this from the Scottish Government.

  4. It was revealed yesterday that Tesco lied about its profits and are being investigated by the fraud squad.

  5. What is it about Scots that they don’t have the pride that the Irish often have? From produce to the arts and other contributions to the world the Irish far surpass us in promoting their culture and rightly so of course. But Scotland to has a heritage too worthy of pride and support. I’ve often thought it must be because of the separation of the land mass but that’s probably a bit simplistic on my part.

  6. What a wonderful note on the attitude of the Irish. But then, they fought to be their own boss. Scotland let that slip by and that tells me a lot about attitudes and my frustration levels.

    What is interesting, to me, is that the lack of faith in themselves that produced the fear and apron-string mentality that produced the No vote, is mirrored in the way Scotland deals with foreign companies.

    Glenrothes, for example, signed up a number of high tech companies by offering several years free rental perks and gave them buildings in which to operate. The contracts must have been very poorly thought out – after the ‘free’ period these companies packed up and went back to America or wherever. Cumbernauld did the same, I understand.

    Why hasn’t Scotland insisted on a minimum percentage of Scottish produce that has to be sold in Tesco, Morrisons, Sainsburys etc. I agree with Ms Cuthbert that it appears the Scots have been told for so long that they need outside help that they have stymied their own power.

    I have boycotted all four of the big supermarkets, in particular Asda. I use my local Co-op, Spar, Lidl and Aldi and my local butcher. There is little I can’t get from these stores and, since IndyRef, I have become quite vigilant. Morrisons gets an occasional visit, but not often.

    And I am not even a Scot!! Probably my adoption of Scotland as my home has given ma a fiercer protective attitude – familiarity has not bred contempt in this wee Aussie.

  7. This is something that I have said numerous times. Here is where I saw another bonus for Indy and our home producers. In the event of English supermarkets some suggested ” perhaps” putting investment on hold and even “hinting” to reduce in Scotland. Then the ” threat of higher prices”.

    Does anyone really think this would have happened?, I do not, simply because they have too much to lose.
    24 hrs a day lorryies trundle from England and up our roads to deliver their products.
    If you have ever wandered the shelves of Morrison’s, Asda, Marks, Sainsburys and Tesco. It will be a challenge finding Scottish produce. Few items will be found among the thousands on their shelves. We are a cash cow to them.They should be compelled to buy in a min 50% of their produce from Scotland.

    If they did not, then supermarkets from Europe may be pleased to take up the slack. However the big bonus is the big increase in Scottish home produce. Farmers and producers would have to ramp up to serve the home market, more jobs, for the government more tax via more workers.
    This article shows well the situation we have allowed to happen, at the end of the day, to the detriment of Scotland as we keep English producers ever busy.

    I do not know how, as Indy did not happen this time, but somehow we need to have a boost to Scottish agriculture and food production, rather than relying on English produce, we produce great quality foods,
    We need to make things work better, so that we are not so reliant on others resulting on less power for them to blackmail us at Westminster’s request.

    • I agree, Les Wilson. If these supermarkets had left Scotland, there would have been plenty more to take their place and undercut them. They are in a competitive market place and it is a dog eat dog world. I doubt if there is a big enough shareholding in these supermarkets in Scotland to affect share value, but we should use our consumer muscle by moving to the supermarkets that stayed schtum during the referendum campaign.
      It is time to take a stand against big business trying to influence democracy. We have enough lying ‘Londonised’ MPs deceiving the weak, old and vulnerable without business interfering. (Remember also the banks who threatened to move). Death to any company operating in Scotland who tries to interfere with our democracy.

    • Scotland is a “cash cow! for the UK. The UK is a cow. Its head is in Scotland and its udder is in London.

  8. Tesco, Asda and Marks & Spencers use #workfare, so I would suggest they are NOT contributing as much in respect of jobs as their employment figures suggest.

    Everyone should think about using their buying power as much as possible. We might not have much money, but we still have buying power!

    Local shops are great, since they are more likely to be paying proper taxes. However, since supermarkets are a fact of life, can I suggest Aldi, who pay their workers a living wage, as well as carrying a number of Scottish lines?

  9. Good article, thanks. Like most people, I do shop in the big supermarkets but I try to buy Scottish when there’s a choice. It’s not easy though.

    The article states that Tesco sells only Scottish-produced chicken in Scotland but I fear that’s no longer the case. I heard on the radio the other week – maybe on Radio Scotland’s weekend business programme – that many chicken suppliers had gone out of business in Scotland so supermarkets were sourcing more from down south and abroad.

  10. I do most of my shopping at SuperValu (other than what I can get from the local fishmonger or butcher) and I agree they are great shops. They also have a tie in with the GAA and sell tickets for them and are definitely seen as the ‘Irish’ supermarket though as has been said others such as ALDI make a big effort on selling Irish produce as well.

    Another good example of a local supermarket is Booths in the north of England who make a big effort to use local suppliers where possible and I think are being very succesful with it. If we are to have supermarkets is there space in the market in Scotland to have something more akin to Booths or SuperValu.

    Also is there any scope to tax supermarkets additionally based on say the floor space used or at a national level based on number of stores? Or link the maximum allowable size to the local population? I went up to Keith a few years back for a Scottish Cup Tie and there’s an enormous Tesco there which had quite plainly killed the town.

  11. I shop locally whenever I can and as much as I can. It is not as hard as I thought it would be. Also, it as I am single it makes more sense – I buy only what I need. Supermarkets are still focused on the mythical “hard working family”.so beloved of Cameron. That is no more than 30% of households – tops – and probably closer to 15%.

    Why not try a month of no supermarkets?

  12. This is an important issue throughout the developed world generally speaking. A couple of points in response:

    1.
    RE: “Since May 2013, for example, this includes 100% Scottish chicken sold right across Scotland, produced by over 20 Scottish farmers…”

    This mentions but does not delve into a related – and no less important – issue, namely not just local production per se, but the type of production. Think: only 20 farmers are producing for Tesco throughout Scotland. Granted there should be more of them and less from abroad, but it sounds to me that those 20 producers are no doubt factory-farm type, which are a sort of mini-supermarket themselves in that there emphasis, through using modern factory efficiencies, is on providing the highest volume possible and lowest price possible which has the effect of WIPING OUT much smaller, local enterprises leaving them with large market share and relatively little competition, but, more importantly, the ability to factor in transportation costs and thus source product lines from all over the place, including abroad without ending up being that much more than the local people (and often they are less of course). So I am saying that having a whole slew of factory chicken farms in Scotland – say 100 instead of 20 -, though possibly an improvement, is not really the ideal.

    2.
    Although the article implies it, it fails to spell out graphically just how pernicious is the effect of the big box retail model (not limited to supermarkets though they are the most important ones). Simply put – and I would love to read more well written article presenting the numbers – for every dollar they send out of the region which therefore does not re-circulate in the local economy, and for every dollar of produce they import via their distribution systems, their goes another job in the local economy. Further, local / regional people lose skills: increasingly hardly any of us know how to grow food properly, make clothes, build houses, make machinery and so forth. All of which would provide local, skilled employment with the money remaining in the local area.

    The current system – intentionally or not – seems designed to undermine local and regional community culture and economies. One of the main weapons, if you will, is the supermarket system.

    The Irish have it right, albeit again I wouldn’t be surprised if they are becoming increasingly dependent on the factory farm model (I didn’t bring organics etc. into it, though that is my personal prime interest). I suspect that if you chaps in Scotland simply turned off the BBC for ten years that you would get it right too!

  13. Tesco and Asda have destroyed local retailing in the Highlands. Local producers and shops are all struggling. Its one of the most depressing aspects of globalisation and now we see it falling apart. When Tesco goes down how able will the the likes of Dingwall and Thurso recover their centres and High Streets from charity shops, bookies and take aways?

  14. Good article and long overdue. Asda and the rest that threatened price increases if we voted for independence were liers and would never have given their competitors a gift like that. Aldi and Lidl which are foreign own already sell products at cheaper prices so exactly why would Asda have had to raise prices. And you are right we should demand more Scottish produce in these stores or boycott them.
    Funny there is no mention by these companies or the MSM about the dangers of England taking the UK out of the EU.

  15. A really educational and helpful post. Thank you.

  16. Fantastic information, will there be a follow up post giving ideas on alternatives? Polling our resources in much the same way as a tactical vote or orchestrating boycotts?

  17. I was impressed by the respectful attitude of Lidl -they didn’t get involved in the scare politics but just got on with trading. Aldi was even clearer about their ability to serve an independent Scotland.

    Fed up (!) with the big supermarket scare stories, I tried out Lidl recently and was very impressed by the amount of Scottish produce. Incidentally, there is no beef in the world that can compare with Orkney beef, I’ve struggled to find it since I moved south from Orkney a few years ago. Our local Lidl sells it at a very reasonable price -I’ll be going back.

  18. I have shopped In Asda only once and at Tesco very occasionally( I find They concentrate too much on any thing rather than groceries) As for Asda I doubt if I shall ever shop there again(After the referendum view)I use mainly Morrisons or M& S.Others Co-op<Iceland or Aldi.

  19. I learned from a post about 3 weeks ago by Farming4Yes, that supermarkets have particular abbatoirs they use. So one Scottish farmer’s lambs were sold to Sainsbury, who trucked the lambs for slaughter in Wales! I’m too stupid to understand the logic.

  20. Probably because of the bigotry and sectarianism that has been allowed to flourish in scotland over the years, by unionist parties, that has stripped us of our pride and sense of nationhood.

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