Its acquisition of Mills shouldn’t be waved through simply because it plans to use One Stop name, says James Lowman
There are two questions that have to be addressed following the agreement for Tesco to purchase Mills Group.
Firstly, is it good for consumer choice for Tesco to continue to grow its grocery market share? Secondly, it is right for it to do this through its shadow brand One Stop?
We are concerned about the competition authorities' ability to ask these questions, after a Competition Commission inquiry failed to tackle the One Stop issue, and a series of acquisitions in the convenience sector were waved through.
As Tesco and other grocery giants become bigger, their power over suppliers grows, and as the Competition Commission found out, that can lead to the transfer of risk to those suppliers, which in turn leads to a loss of diversity and innovation. Tesco c-stores with their tighter range also limit choice. Furthermore, local price flexing, where new stores steam in with cross-store promotions no independent retailer could possibly match, then stop them once the competition has closed, undermines choice and long-term competition.
But the point with the Mills takeover is that these stores won't be run as Tesco Expresses, they will operate as One Stops. There is some confusion I think deliberately created about One Stop in the minds of the competition authorities.
On the one hand, Tesco's reaction to the acquisition repeated the view of the OFT from 2002. It concluded that Tesco buying One Stop would lead to lower prices for consumers. Has it? Numerous surveys have noted that products in One Stop are more expensive than in other parts of the Tesco business. That's why the first agenda item for the OFT has to be a comprehensive, neutrally conducted price comparison.
It's not just price where One Stop operates differently. For evidence of poorer standards, look no further than (often Tesco-funded researcher) Professor Neil Wrigley of Southampton University. He found that across a number of stores in Hampshire more than half of customers felt that cleanliness, range, layout and quality of fresh produce were worse in One Stop than in a Tesco Express. Of course this research was put forward to prove the benefits of a Tesco Express, but it works in proving the comparative weakness of the One Stop offer.
So does One Stop operate as a separate business? Tesco should come clean to the OFT and explain whether it is bringing the buying might of Cheshunt to the table but with the downside of yet more Tesco stores in a market it already dominates, or whether it is making a truly different offer to the consumer without the centralised buying power. Both these things can't be true.
I'm not arguing that we should see 77 new Tesco Express stores instead of One Stops, just that we should be clearer about how these fascias relate to one another. I suspect Tesco has worked out that if it was seen to be adding 77 stores to an estate of 1,700 there would be no question that competition scrutiny would be required.
It's at times like this, when bad weather strikes and people look for support networks in their communities, that local shops really come into their own. That's why this acquisition can't be glossed over by the OFT.
Whatever their answer on the Tesco/Mills deal, the questions are too important to ignore.
James Lowman is chief executive of the Association of Convenience Stores.
There are two questions that have to be addressed following the agreement for Tesco to purchase Mills Group.
Firstly, is it good for consumer choice for Tesco to continue to grow its grocery market share? Secondly, it is right for it to do this through its shadow brand One Stop?
We are concerned about the competition authorities' ability to ask these questions, after a Competition Commission inquiry failed to tackle the One Stop issue, and a series of acquisitions in the convenience sector were waved through.
As Tesco and other grocery giants become bigger, their power over suppliers grows, and as the Competition Commission found out, that can lead to the transfer of risk to those suppliers, which in turn leads to a loss of diversity and innovation. Tesco c-stores with their tighter range also limit choice. Furthermore, local price flexing, where new stores steam in with cross-store promotions no independent retailer could possibly match, then stop them once the competition has closed, undermines choice and long-term competition.
But the point with the Mills takeover is that these stores won't be run as Tesco Expresses, they will operate as One Stops. There is some confusion I think deliberately created about One Stop in the minds of the competition authorities.
On the one hand, Tesco's reaction to the acquisition repeated the view of the OFT from 2002. It concluded that Tesco buying One Stop would lead to lower prices for consumers. Has it? Numerous surveys have noted that products in One Stop are more expensive than in other parts of the Tesco business. That's why the first agenda item for the OFT has to be a comprehensive, neutrally conducted price comparison.
It's not just price where One Stop operates differently. For evidence of poorer standards, look no further than (often Tesco-funded researcher) Professor Neil Wrigley of Southampton University. He found that across a number of stores in Hampshire more than half of customers felt that cleanliness, range, layout and quality of fresh produce were worse in One Stop than in a Tesco Express. Of course this research was put forward to prove the benefits of a Tesco Express, but it works in proving the comparative weakness of the One Stop offer.
So does One Stop operate as a separate business? Tesco should come clean to the OFT and explain whether it is bringing the buying might of Cheshunt to the table but with the downside of yet more Tesco stores in a market it already dominates, or whether it is making a truly different offer to the consumer without the centralised buying power. Both these things can't be true.
I'm not arguing that we should see 77 new Tesco Express stores instead of One Stops, just that we should be clearer about how these fascias relate to one another. I suspect Tesco has worked out that if it was seen to be adding 77 stores to an estate of 1,700 there would be no question that competition scrutiny would be required.
It's at times like this, when bad weather strikes and people look for support networks in their communities, that local shops really come into their own. That's why this acquisition can't be glossed over by the OFT.
Whatever their answer on the Tesco/Mills deal, the questions are too important to ignore.
James Lowman is chief executive of the Association of Convenience Stores.
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