Tesco accused of manipulating supply to drive down prices

Tesco is deliberately encouraging overcapacity of supply to drive down prices, claimed Bill Grimsey, chief executive of the Big Food Group, which owns the Iceland retail chain and Booker wholesale business.

Grimsey, a leading campaigner for a review of competition rules, told the recent Federation of Bakers' annual conference that "urgent action was needed by regulators"

"They [Tesco] will engineer overcapacity in your market because it will drive down price," he warned plant bakers. "It is a deliberate move to ensure they can buy cheaper -- and it is smart."

Tesco's increasing share in the convenience sector, where it owns Adminstore and T&S, has enhanced its position, giving it "a 30-40% basic price advantage in buying terms", claimed Grimsey. "It brings huge buying power into the convenience sector and it could affect your margins."

Grimsey argued that regulation should conserve competition, increase consumer choice, increase access to grocery stores and create a vibrant retail sector, but the regulators' "flawed" split of the market into supermarkets and convenience stores meant that regulation was clearly failing, he said.

"The competition authorities continue to give Tesco the green light in its convenience store acquisitions," he said.

Unless action was taken, a further 10,000 independent retailers would shut up shop by 2007 on top of the 25,000 that have ceased trading since 1992, he warned.

Tesco's "virtual stranglehold of the grocery market" and its aggressive purchasing policies meant "no independent can compete on price"

The Big Food Group's new terms and conditions for suppliers include what was described as an "ethical code of practice for a sustainable supply chain"