The jury is out as the Co-op tries for the premier league

By Elaine Watson

- Last updated on GMT

Related tags Co-op group Somerfield The co-operative group

The jury is out as the Co-op tries for the premier league
Manufacturers' opinions are divided over the Co-op's proposal to acquire somerfield

Food manufacturers are sharply divided over whether the Co-operative Group's proposed acquisition of Somerfield is good news for suppliers.

The £1.57bn deal would give the Co-op Group more than 8% of the UK grocery market, propelling it into fifth place behind Morrison with 11%, Sainsbury and Asda with 16% apiece and Tesco at 31%.

There would inevitably be winners and losers among suppliers as ranges were harmonised, said one chief executive: "But on balance, this is bad news for suppliers in that it means a reduction in competitors, and more concentration of power in fewer hands."

He added: "The Co-op is also more difficult to deal with than Somerfield. Its costs and organisational structure mean that it needs keener support packages to enable it to compete with the more streamlined major multiples. It is an expensive account to service."

However, other manufacturers welcomed the deal. One own-label sales director said: "We supply both businesses, so we'll be under pressure for improved terms, but we'll also expect to get synergies through streamlining packaging and account management.

He added: "The Co-op Group is actually quite simple to deal with, and has certainly become more so since its national distribution centre in Coventry opened."

One commercial director said: "We supply the Co-op Group, but not Somerfield, so this is an opportunity for us. They've been preparing for this for months, so I feel pretty confident they have been looking at ranges for some time. We've had some outline discussions but nothing has been finalised yet."

But there have been no formal communications about how range harmonisation would be handled, said one branded supplier. "We're expecting they will demand better terms, even though we already supply both businesses and there aren't any benefits for us. We've been told our first meeting on this will not be for a number of weeks."

One own-label supplier added: "We understand agreements we have with Somerfield will be honoured, at least up to Christmas."

Another own-label firm, which makes products for both businesses from the same factory, said all current suppliers might be asked to re-tender prices. He added: "The Co-op has more experienced technical managers than Somerfield. It also appears to have an ethical side to it that is missing in Somerfield."

The Co-op Group said improved terms would be "one of the many benefits of running an enlarged business", but stressed: "We won't go in on the basis that everything we do or stock is right."

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