Sir Peter Davis, group chief executive of J Sainsbury plc, said Morrisons purchase of Safeway, which now looks imminent, will herald a lengthy and in some cases damaging battle for high street supremacy for the UK’s leading multiple retailers.
Speaking at a meeting in London yesterday, Sir Peter said: “I think we’re in for a fiercely intensive period of competition for the next 12 to 18 months. There is a real danger that it will prove counter-productive.” He added that the basis of Morrisons submission to the competition commission - to cut prices in Safeway stores by a minimum of five per cent, and more in many stores - would pressurise Morrisons into swift action and accelerate price reductions across the marketplace.
Sainsbury’s recently announced that it would be launching a price-based campaign this summer. Speaking as part of a panel at The Curry Commission - two years on, Sir Peter admitted this was not necessarily the news the audience would wish to hear. “What we will see if we’re not all careful is an escalation of moves overseas to purchase a lot more commodity products,” he said. He also believes that competitive pressures will overshadow all issues in the 12-18 months in question.
Sir Don Curry, head of the commission, which has as its major objective the creation of a sustainable trading and working environment for UK producers, said: “What Sir Peter says is obviously a real concern. If we are going to see intense price pressure on suppliers, the challenge to the industry is to deliver the kind of structural change we talked about in the report. The big questions are how can this be implemented at a much faster pace than this industry has historically changed? And how do we communicate that if we fail, price competition will have a devastating effect on our industry?”
Amid discussion of potential legislative change to curb the move towards overseas purchasing and favour domestic producers, Sir Peter said: “There are some areas of government that don’t seem too worried about a sustainable production base in this country. They can’t make people deal with producers in this country if it is cheaper to buy in Thailand or Brazil.”
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