Buyer power in the U.K. groceries market

Grocery purchases represent a sizeable proportion of consumers' total expenditure. In 2005, sales of grocery products in the UK amounted to L124 billion, representing some 16% of total UK consumer expenditure. Concerns about growing retailer power has led to increasing interest by the UK competition authorities. The purpose of this article is to review the arguments and evidence that have been presented in these investigations on the extent and implications of buyer power exercised by the leading retailers over their suppliers. To remedy anticompetitive effects, the UK Competition Commission (CC) recommended that a code of practice with suitable provision for dispute resolution should be drawn up governing relations between grocery retailers and suppliers to ensure that buyer power was not exploited. The CC found that at a sector level, profitability levels, measured in respect of return on capital employed and net margins, had if anything slightly increased over recent years, but with variation across supplier types.