Thursday, November 10, 2005

Superstore that's on a roll

Britain's biggest supermarket, Tesco, is being accused of trampling over local councils when pushing through its retail developments. Nick Mathiason reports

Sunday September 25, 2005
The Observer

Has Tesco got Britain's planning system in its pocket? As the supermarket posted another set of record-breaking results last week, evidence seen by The Observer appears to show that the country's most powerful retailer is routinely pushing Britain's planning system to breaking point.

In its determination to control Britain's high streets and shopping malls, Tesco is accused of 'overweening arrogance' for attempting to build stores on land not zoned for retail developments and wilfully taking councils to costly appeals in a high-stakes game of poker aimed at getting its schemes through the planning system. In addition, campaigners say Tesco has built larger stores than councils allowed and then retrospectively applied for new permissions.

And the store is embroiled in a number of 'conflict of interests' rows. These involve planning consultancies, which have worked extensively for the supermarket giant, being commissioned by councils to undertake independent retail impact assessments to determine whether Tesco stores should be built.

There are no suggestions that Tesco or the consultants have done anything illegal but, taken together, campaigners claim these incidents appear to show the supermarket is 'trampling' over planning law.

Robin Webster, Friends of the Earth supermarket campaigner, said: 'We are not talking about illegal activities but there are a welter of ways through which Tesco persuades local authorities and influences decisions which trample democracy.'

· In Liverpool, Tesco bought playing fields from the university to build a supermarket on a greenfield site. This is in contravention of the city's development plan. The council refused an initial planning application but Tesco is taking the case to appeal, which is costing the cash-strapped council £500,000. It has also submitted another planning application and is accused of pulling out of meetings with local communities.

· In Stockport, Tesco built a 120,000 sq ft outlet, some 18,000 sq ft over the agreed amount, causing a welter of complaints among businesses. Tesco is retrospectively applying for a new planning consent. Campaigners claim this is not the first time Tesco has done this.

· In Castle Douglas in Dumfries and Galloway and Berwick in Northumberland, planning consultants working for Tesco have been commissioned by councils to determine what effect a new store will have on the local economies. Opponents have written to the Royal Town Planning Institute outlining concerns.

The row over conflicts of interest, which has not arisen from anything Tesco has done, centres on two consultancies: GVA Grimley and England & Lyle. GVA said: 'We abide by a strict code of conduct ensuring that clients are never compromised. We always ensure that there are no conflicts of interest to any instruction that we may receive.'

England & Lyle partner Ian Lyle said: 'We abide by the Royal Town Planning Institute Code of Conduct and we don't believe there's any conflict in the way we conducted our business.'

Throughout the country there are cases where councils are facing long planning disputes with Tesco. In Sheringham, Norfolk, one of the only towns in England without a supermarket, the council last week rejected Tesco's plans after a protracted battle that has infuriated local businesses. In Gerrards Cross, Buckinghamshire, John Prescott overruled the local authority and gave permission for a supermarket despite a local referendum which resulted in a vote of over 90 per cent against the superstore. The project has attracted further controversy after the train tunnel over which the store was being built collapsed.

Tesco says it always engages with communities and that it does not choose planning consultants used by councillors. In response to claims that it deliberately bombards councils with expensive appeals, it added that the planning regime is the same for all businesses and that it builds most of its stores on brownfield sites which help regenerate hard-pressed inner cities.

Tesco's competitors, who are trailing in its wake, envy the store's landbank of more than 185 sites and fear that if these are developed the firm will have more than 4.5 million sq ft of new retail space.

Tesco enjoys strong links with the Labour party. It paid Philip Gould, a trusted Blair aide, to help reorganise its publicity, media and lobbying machine. It has hired David North, Blair's former private secretary and a specialist in rural affairs, as its director of government affairs and corporate social responsibility. The firm's company secretary and director of group corporate affairs, Lucy Neville-Rolfe, was a key Cabinet Office mandarin for many years. And lobbying firm Lawson Lucas Mendelsohn, which has close links to Tony Blair, helped Tesco defeat government proposals to introduce a tax on supermarket car parks when it first came into power.

Ministers tolerate Tesco for helping to keep inflation down and employing tens of thousands of people. Recently John Prescott appeared to play into supermarkets' hands by watering down tough rules clamping down on out-of-town shopping development after a campaign by top retailers including Tesco.

But as the diversity of high streets and survival of small businesses - the lifeblood of Britain's economy - appears increasingly under threat, growing opposition to the firm may force ministers to trim the supermarket's wings.

Local farmers protest against supermarkets.

Galloway News report 10 November 2005

Castle Douglas Tesco Letter 's Page Galloway News 10 November 2005

Dear Sir, how long will Tesco last in Castle Douglas? Or will they be forced to up sticks and move out before the paint has even dried on their new store?

I ask the question in all seriousness. Last week, the Association of Convenience Stores won a legal ruling against the Office of Fair Trading over unfair competition by big supermarkets. And next month, an all-party report by MPs will recommend an end to below- cost pricing by the big supermarket chains. Tesco's attempt to take over the 'convenience store' (small, high street supermarkets like Spar and Costcutter) sector is also likely to be blocked.

But the threat which is really worrying Tesco is 'divestment'. This is a legal term used for breaking up a monopoly. Only the Competition Commission have the power to do this. It would mean Tesco having to sell-off some of their stores. The argument is that with 30% (and rising) market share, and with plans to create 1200 convenience stores by 2015, Tesco are getting too big for the free-market economy.

Asked if it would be in the public interest if Tesco had to sell-off some of their stores, Lucy Neville -Rolfe, Tesco's company secretary and director of legal and public affairs, has said it would be a bad idea. But if push comes to shove, Tesco will have do what the Competition Commission tell them to. The interesting question is: which stores will Tesco choose to sacrifice if forced into 'divestment'?

I suggest Tesco would rather not lose their Dumfries mega-store, since Dumfries is the main shopping centre for Dumfries and Galloway. However, as one of their smaller stores, the Castle Douglas Tesco would be expendable and could be offered up to the Competition Commission as a sacrificial 'divestment'.

Of course this is all pure speculation. Tesco may well have enough economic and political clout to see off any such threat to their bid for total market dominance. But just in case the Association of Convenience Stores' David manages to score a direct hit on the Tesco Goliath, perhaps we should start thinking about an alternative use for the Castle Douglas Tesco site.

Possibly another supermarket chain might want to take the site over, but the economic return would be marginal. On any rational economic grounds, Castle Douglas is too small to justify a supermarket on the Tesco site. And as GVA Grimley advised the Council, it is also in the wrong place - the Wallets Mart site was the one Grimley's advised on planning law and practical economic/ access grounds.

Luckily, Tesco haven't yet constructed their sacrificial store. Before they bang it up, there is still the chance for reason and public opinion to prevail. The obvious solution to Tesco's 'divestment' problem is : sell off the site for a new garden centre!

Wednesday, November 09, 2005

26 February 2006 opening date?

Meanwhile deconstruction continues: work in progress at Ccastle Douglas Tesco site.

Monday, November 07, 2005

Tesco may have to sell off stores: Business section of Observer, 6 November 2005 on "Divestment. "

What in interesting word. I wonder if Tesco's urgent need to create a store in Castle Douglas is linked to this threat?

Foes home in on Tesco Criticism of the high street giant's expansionist behaviour is growing, writes Nick Mathiason Sunday November 6, 2005The Observer

They've crushed the competition. But now Tesco is facing its biggest-ever challenge. Everywhere it looks, Britain's biggest retailer has enemies. Not only are they growing by the day, but there's a fair chance they will succeed in cutting the giant down to size.

An alliance of government ministers, MPs across the political spectrum, campaign groups, suppliers, independent retailers and rival supermarkets are increasingly uneasy at the supermarket's overwhelming dominance of a British grocery sector worth £76 billion. Tesco controls 30.8 per cent of it and its stranglehold is tightening.

It sounds crazy to question the future of Britain's most powerful retailer when it accounts for more than one in every eight pounds spent by UK consumers, but the next six months could see significant efforts to clip its wings.

Next month, a report from an all-party group of MPs into the future of the high street is likely to recommend an end to below-cost pricing of key goods, and curbs to stop supermarkets in general, and Tesco in particular, buying more convenience stores. The recommendations will be closely watched by the Department of Trade and Industry, which appears sympathetic to the anti-Tesco bandwagon.

Last Thursday Gerry Sutcliffe, the DTI minister for competition and consumer affairs, outlined his concerns about the dominance of supermarkets to MPs taking evidence for the high street inquiry. 'I do have concerns that there is an imbalance at the moment and that we need to find ways to rebuild that balance, but I think it is a very difficult and complex area in terms of the structure of the markets .... There is definitely an issue there; the way the DTI has to deal with it is through the competition structure but we will be closely monitoring what takes place.'

Meanwhile, it is increasingly likely that the Office of Fair Trading will order a full-scale probe into the UK grocery sector in the New Year that could eventually see MPs' recommendations become reality. Last week, the fair trading watchdog was ordered by an appeals tribunal judge to 'urgently' reconsider its decision on whether to recommend a full inquiry into the groceries market. Sir Christopher Bellamy, president of the Competition Appeals Tribunal, told the OFT that its intention to take a further eight months to decide whether a full inquiry into the market was necessary was 'unreasonable'.

For the OFT, this represents a double humiliation. The previous week it was forced to cave in to demands by the Association of Convenience Stores to launch an inquiry after it admitted it had made mistakes in an 18-month investigation.

The result spells bad news for Tesco, whose market dominance will be the chief subject occupying the minds of investigators.

'I don't think people are going to let this one lie,' says Robin Webster, food campaigner at Friends of the Earth. 'There is a momentum building towards targeted action - action that will rein in the Tesco juggernaut and prevent further abuses of the system.'

One Whitehall insider says: 'There is top-level political concern about this issue. The all-party inquiry didn't happen overnight, or for no reason. This is now going through the process that everyone hoped for.'
Tesco is expert at giving consumers what they want: a wide choice at low prices, with free parking to boot, something town centre shops cannot offer. Lucy Neville-Rolfe, Tesco's company secretary and legal and public affairs director, cites evidence from Southampton University that the store has been instrumental in rejuvenating town centres and boosting employment.

But its huge land bank, below-cost pricing and aggressive tactics against planning authorities - which see the firm repeatedly issue planning appeals to wear down cash-strapped local authorities and get the stores it wants - have forced both its own suppliers and small shops out of business. Critics say that this ultimately reduces consumer choice.

Rivals despair that Tesco is now also the second biggest non-food retailer in the country. Small shops are aghast at how the competition authorities have allowed Tesco to buy up large chains of convenience stores, forcing them out of business. From scratch, Tesco has built up a chain of 600 convenience stores, with plans to at least double that figure in 10 years.

At the same time, 7,377 independent stores, more than 20 per cent of the total, closed between 2000 and 2004.

And MPs are also reacting to disquiet among small businesses in their constituencies when a Tesco opens on the local high street. Labour MP Jim Dowd branded the company 'disgraceful' for the predatory pricing tactics it adopted - dropping prices on some goods by as much as 40 per cent - to put an independent supermarket firm out of business in Yorkshire.

Tesco's Neville-Rolfe warns against public policy being made based on what she terms isolated incidents, but the problem for Tesco is that there is a growing list of complaints at Tesco's strong-arm tactics. Furthermore, Dowd is responsible for writing the MPs' report into the future of the high street that will appear next month. This could be the start of a process that will see the company, led by Sir Terry Leahy, face a number of sanctions.

The first is an end to below-cost pricing, as adopted by Tesco and the three other leading supermarkets; second, curbs on future acquisitions; and third - and most extreme - demands that Tesco sell off some of its outlets to encourage more diversity in the high street. This has echoes of the 'Beer Orders' of 1989 that forced brewers to sell off pubs - and, of course, like the beer orders, could have unintended consequences.
'There's certainly a case for divestment,' says Andrew Sims, policy director at the influential New Economics Foundation. 'It's the logical place to go. The muffled cries you can hear is the sound of the marketplace being strangled by the big four.'

Conservative MP Philip Hollobone, who is a leading member of the all-party inquiry into the future of the high street, says: 'The minister says the consumer is king, but you get to a point in free markets [where] driving down price limits choice for the consumer as well as reducing opportunities for suppliers to sustain a business in the long term.

'The big question is what percentage cap should be imposed, and if [they] are currently above that then divestment is a logical consequence. You have to think about the long-term interest of the consumer. It might be in the short-term interest to drop prices to the lowest possible level, but this is having serious long-term consequences on suppliers and I would hope that the OFT would want to see a sustainable retail market.'
Neville-Rolfe says that, as a dominant player in a high-profile industry, Tesco is used to public scrutiny and will vigorously fight any attempts to dismantle its empire.

But as concern grows across the political spectrum over the social and economic effects of Tesco's utter domination of the British retail landscape, it will need all its battling qualities to fend off the threat.

Sunday, November 06, 2005

November 4th and 6th Press Clippings

D and G Standard and Mail on Sunday

Thursday, November 03, 2005

Farmers Strike Highlights Need For Fair Trade

Consumers and politicians are being urged by Scotland’s farming union to join the campaign to tackle the increasing power of the supermarkets. NFU Scotland is reiterating its call for urgent political action as some Scottish farmers start taking strike action and withholding produce to protest at unsustainable farmgate prices. A three-day strike has been organised by Farmers For Action starting today.

For a year now, NFUS has been urging Government and the Competition Authorities to tackle the imbalance of power within the food and drink supply chain which has seen supermarket margins increase on the back of reducing prices to farmers. NFUS is calling for a further Competition Commission investigation into the retail sector and the introduction of an independent watchdog to police fair trade between UK supermarkets and their suppliers.

NFUS has emphasised that some supermarket and supplier relationships work very well, but there is too much fear in the supply chain and there is no means of tackling abuses of power.

NFUS meetings with politicians at Holyrood start tomorrow and come ahead of action on Saturday when farmers will be speaking to shoppers around the country. Farmers will be in supermarkets highlighting the growing gap between the shelf price and the price paid to them (see notes for examples). Farmers will also be at some farmers markets thanking shoppers for their support for the markets and local produce and urging them to put pressure on politicians to address the power of the supermarkets.

NFUS President John Kinnaird said:
“As supermarket margins have grown, farmers have faced a destructive squeeze on their own businesses. Farmers are now saying enough is enough. It has now got to the point that farmers are starting strike action; withholding produce to protest at the unsustainable prices they are being paid. Many farmers are simply not in a position to take part in a strike as it adds to an already serious financial situation and causes real problems for those committed to supply contracts. Yet, the fact this is even being talked about should be a clear message that the current situation cannot continue.

“If supermarkets want to continue to increase their margins at farmers’ expense, they could destroy much of our local food industry. We are already seeing local food processing facilities close and the financial squeeze which has seen a quarter of Scotland’s dairy farms quit in the last five years is now being felt across all sectors of agriculture.

“The First Minister has recognised this problem and has already highlighted to supermarkets that they will be starved of supply if they starve farmers of a fair price. We now need action. I have already discussed this issue with Mr McConnell and tomorrow I begin a series of meetings with the major political parties.
“Around 80 per cent of the food and drink produced in this country is sold through the major supermarkets and the misuse of power must be addressed if we want to secure the future of Scotland’s world famous food industry.”