Whilst most families struggle to meet their bills, owners of shares in Tesco will be thrilled by today’s news. Britain’s biggest supermarket has announced pre-tax profits of £3.4 billion for the last 12 months – an astonishing rise of 10% on the previous year.
Tesco now has over 30% of the £130 billion a year British market, far ahead of its nearest competitor. Its profits are larger than its main rivals put together as Tesco’s takeover of the supermarket sector continues. Independent stores only have 2.4% of the market.
Naturally, Tesco has had more than a little help from the government and its light-touch planning regulations, as Helen Rimmer of the Tescopoly Alliance explains. “Weak planning and competition rules have allowed Tesco’s aggressive expansion to continue unchecked. Even when a new store is turned down, Tesco comes back again and again with an army of legal and planning consultants to try to force it through.”
Last year, Tesco won the backing of a tribunal when it appealed against the “competition test” set out by the Competition Commission. As a result, the chain was granted permission for a 7.390 sq metre shop to open in Yiewsley, west London, where there are already three superstores within a 10-minute drive. The decision made a mockery of the Competition Commission’s investigation into the £120 billion grocery market.
In addition to dominating the grocery trade, Tesco has built up a huge property division. This has enabled the company to cash in on the real estate market. Under its chief executive Sir Terry Leahy, Tesco has built up the biggest property portfolio of any European company with £28bn worth of assets.
Shane Brennan, public affairs director of the Association of Convenience Shops which represents more than 33,500 local shops, says that whilst his members “have a lot to learn from Tesco, the question arises how big is too big?” He says:
“While Tesco claims that it is the customers who decide, in many Tesco towns, customers have few alternatives. When a Tesco opens, there is massive pressure on other shops. The number of small shops has declined year on year in the last decade. Buying and owning land is one of the key elements in the Tesco success story. If they were to build on it, they would massively increase their size.”
Tesco’s tentacles are spreading much further than the retail and property markets. The Office of Fair Trading (OFT) is about to “reform” the way that property is sold in the UK. Whilst this may sound like good news for people who want to bypass estate agents by going straight to the Internet, it will allow giant companies like Tesco to muscle in on the market.
According to the consumer advice website Buy Association, “the granting of estate agency powers will create a monopoly itself; such is the marketing and loss-leading power of the Tesco brand. In many ways, the only competition that a Tesco property website would face would be from Google should it decide to also enter the property sales arena”.
Meanwhile, back in Pimlico where a new Tesco is about to open, taking the place of three local shops, the Lib Dems claim to have secured an undertaking from the company that deliveries will be at the front rather than the back of the shop! That’s alright then. All that remains is the small problem of the Tesco takeover of Britain.
A World to Win Secretary