Supermarkets Seize Chance For Land Grab

[interestrateripoff]

Supermarkets seize chance for land grab

Britain's supermarkets are using the property crash to seize sites for new stores in a land grab that could redefine the retail sector for years to come.

The move will consolidate the supermarkets' stranglehold over the retail sector and alarm MPs, small businesses and green groups.

Tesco and Asda, the biggest retailers, are committed to opening 2.5m sq ft of new space this year, while Sainsbury's wants to add 2.5m sq ft - 15% of its floorspace - by March 2011. Morrisons is on track to open 1m sq ft by January 2011.

But the Observer has learned that all the major supermarkets are scouring retail parks where tenants have gone out of business, and buying empty high-street shops and pubs for new stores. Sainsbury's said recently it was raising £450m to buy distressed development sites.

Senior property executives believe local authorities might soon relax objections to new superstores as rising unemployment and lower yields from business rates become major concerns. Property companies say they are in a dilemma over whether to allow supermarkets to buy or lease land on retail parks for fear of antagonising existing tenants.

Property insiders say Tesco, in particular, is using intermediaries to buy boarded-up pubs that already have planning consents before passing them on to the supermarket giant. The big four supermarkets account for 75% of the UK's £120bn grocery spend.

"There seems to be a renewed space race," said one leading retail property executive. "There's a lot of testing of different small- and medium-sized formats. There's an increased investment online and, in some cases, on retail parks."

Labour MP Jim Dowd, whose parliamentary small shops group's report led to a Competition Commission investigation of supermarkets two years ago, said: "This is a matter of concern because it strengthens the position of supermarkets, making it harder for medium-sized stores to enter the market. And it is a matter of concern that local authorities, when confronted with derelict sites in these straitened times, are more likely to grant consent which, normally, would have faced more scrutiny."

Looks like the supermarket monopoly is going to get worse.

[Scunnered]

Supermarkets seize chance for land grab

Looks like the supermarket monopoly is going to get worse.

Conspiracy time. I reckon that eventually all the farmers in the UK will go out of business because of the supermarkets forcing their profits down. The supermarkets will help them on their way by buying up all the land, and then once the farmers are gone they'll open up huge industrial farms of their very own. They'll really have us by the balls then.

[cells]

Supermarkets seize chance for land grab

Looks like the supermarket monopoly is going to get worse.

It is not a monopoly.

Tesco has a profit margin of about 2% so for a weekly shop of £50 they make only £1 profit.

Supermarkets offer what people want compared to small corner shops. Let them expand as much as they like. Although if I was a supermarket shareholder I would question expanding because they already have 75% of the market. Getting a lot more would be v.difficult.

[bogbrush]

Conspiracy time. I reckon that eventually all the farmers in the UK will go out of business because of the supermarkets forcing their profits down. The supermarkets will help them on their way by buying up all the land, and then once the farmers are gone they'll open up huge industrial farms of their very own. They'll really have us by the balls then.

It's a good idea, but really they have no need to; it's not a strong value-adding activity and why buy it when you have it by the balls anyway? Exactly who else can the farmer sell his stuff to (directly or indirectly)? They can "own" it without having to lay out anything at all.

The sad thing is that they couldn't have done any of this without the crushing weight of legislation that destroys small competition. A giant corporation is easily beaten back from very localised, specific competition but when the state moves in and effectively outlaws that form of operation they can just mop up.

[cells]

Conspiracy time. I reckon that eventually all the farmers in the UK will go out of business because of the supermarkets forcing their profits down. The supermarkets will help them on their way by buying up all the land, and then once the farmers are gone they'll open up huge industrial farms of their very own. They'll really have us by the balls then.

These anti supermarket thoughts are misplaced.

They make a tiny margin. The smaller the margin the better value the end consumer gets.

Sainsbury has a margin of 1.33%

The corner shop probably has a margin of 25%.

Plus the biggest reason tesco and company can expand is because the local corner shops are crap in comparison.

[bogbrush]

These anti supermarket thoughts are misplaced.

They make a tiny margin. The smaller the margin the better value the end consumer gets.

Sainsbury has a margin of 1.33%

The corner shop probably has a margin of 25%.

Plus the biggest reason tesco and company can expand is because the local corner shops are crap in comparison.

There is much truth in this, apart from the highlighted bit.

[cashinmattress]

I say fvck the supermarkets. They give not one iota to your welfare and are wholly focused on maximizing profits.

Get your gloves out and dig up that back garden or local allotment. Even a small patch of land can grow a huge pile of food.

During WWII and the strict rationing, we Brits managed to grow about 10% of our own food in our tiny gardens!

Nothing tastes better than your own tomatoes, carrots, tatties, and beans I tell you. You can even have a free range chicken or two laying in the yard as well. They will eat all the critters and leave you eggs...although you have to search for them.

And of course, support your local farmers directly.

Edited June 28, 2009 by cashinmattress

[Lord D'arcy Pew]

Conspiracy time. I reckon that eventually all the farmers in the UK will go out of business because of the supermarkets forcing their profits down. The supermarkets will help them on their way by buying up all the land, and then once the farmers are gone they'll open up huge industrial farms of their very own. They'll really have us by the balls then.

Who needs farms when the future is Soylent green. http://en.wikipedia.org/wiki/Soylent_green

[porca misèria]

It is not a monopoly.

Quite right. It's a very competitive market.

Tesco has a profit margin of about 2% so for a weekly shop of £50 they make only £1 profit.

Supermarkets offer what people want compared to small corner shops. Let them expand as much as they like. Although if I was a supermarket shareholder I would question expanding because they already have 75% of the market. Getting a lot more would be v.difficult.

They're competing fiercely against each other. Sainsburys was refused planning permission for a megastore here: if they'd got it, it would've been Morrisons' that suffered (being our biggest supermarket, but a lot smaller than Sainsburys' plan).

Oh, and supermarkets provide lots of employment for unskilled people. Not like farmers, who try very hard to cut it down, and many of whom exploit farm labourers badly while profiting from all sorts of unfair advantages like the below-cost retail space and often-more-relaxed public health standards of farmers markets.

[cells]

Quite right. It's a very competitive market.

They're competing fiercely against each other. Sainsburys was refused planning permission for a megastore here: if they'd got it, it would've been Morrisons' that suffered (being our biggest supermarket, but a lot smaller than Sainsburys' plan).

Oh, and supermarkets provide lots of employment for unskilled people. Not like farmers, who try very hard to cut it down, and many of whom exploit farm labourers badly while profiting from all sorts of unfair advantages like the below-cost retail space and often-more-relaxed public health standards of farmers markets.

The problem with farmers and the public is that they look at the price the supermarkets pay

Say 40p and then the price they sell it at, say £1.40 and think OMG they are raking it in and screwing the suppliers.

They don’t seem to mention all the costs associated after leaving the farmer and getting into your trolley.

Supermarkets are very competitive.

Sainsburys has a margin of 1.33% which means if you go a weekly shop of £50 their profit is less than 70 pence.

Long live the supermarkets

[Guest sillybear2]

Supermarkets will be looking for ever smaller and neighbourly sites in the future, because in a few years time most of the plebs wont be able to afford to run a car.

[CokeSnortingTory]

Amazing how the principle of exponential growth is so hard-wired into the corporate psyche. The smart supermarket will be the one that pays down its debts while its competitors over-reach.

They're all toast in the long-run of course.....

[Scunnered]

Supermarkets are very competitive.

Sainsburys has a margin of 1.33% which means if you go a weekly shop of £50 their profit is less than 70 pence.

Does that 1.33% margin include all of their outgoings, including for instance the funds required for the 2.5m sq ft of new space which the article tells us Tesco and Asda are planning to add this year? If a large part of their profit is being used to fund expansion then perhaps their margins aren't as tight as they look. Maybe stuff like acquiring property isn't included though; does anyone know?

Long live the supermarkets

Let me display my ignorance again. I have the impression that the supermarkets have a much bigger share of the market in the UK than they do elsewhere (could be wrong though). If you're walking about a city in France or Germany then there don't seem to be nearly as many supermarkets as there are here. Does anyone know if this is really true? It could just be that they have massive supermarkets in retail parks on the edges of towns, which isn't the sort of place I'd be visiting if I was abroad. If it is just in the UK where the supermarkets are so dominant, then why haven't they caught on elsewhere?

[Guest BoomBoomCrash]

There is much truth in this, apart from the highlighted bit.

And the fact that the big supermarkets actually have much better margins than suggested too

[Tiger Woods?]

It is not a monopoly.

Tesco has a profit margin of about 2% so for a weekly shop of £50 they make only £1 profit.

Supermarkets offer what people want compared to small corner shops. Let them expand as much as they like. Although if I was a supermarket shareholder I would question expanding because they already have 75% of the market. Getting a lot more would be v.difficult.

Nope - they offer half of what consumers want (cheap groceries), but because of the tragedy of the commons, small stores go bust (hence no groceries unless you can drive 10 miles or more in some places, i.e. loss of convenience).

[MrLizard]

Sounds like a good argument for a Land Value Tax - all the land hoarding would yield some revenues...

[interestrateripoff]

Just thinking the other option is that we will soon see Tesco pubs?

[three pint princess]

http://www.business-standard.com/india/new...acklash/361743/

Bradley Mitchell, who helps oversee about $62 billion at Royal London Asset Management, said he stopped holding Tesco shares for the first time in 20 years in October as the stock didn’t adequately reflect the risks faced by the supermarket operator. Cheshunt, England-based Tesco has net debt of £9.6 billion ($15.6 billion) and this week sold £431 million of mortgage-backed bonds secured on commercial property.

“Tesco never get to the point where they generate cash,†said Mitchell. “At the end of every year, they have more debt than they did at the start because there’s always new markets to invest in. I used to be a big fan, but there is a lot to be concerned about.â€

.............

According to data compiled by Bloomberg, Tesco’s Ebitda declined to £6.60 for every pound of interest paid in the last fiscal year, the lowest since 1993.

The increase in borrowing ratios follows a year in which Chief Executive Officer Terry Leahy spearheaded £6.6 billion of spending on expansion, including the £958 million takeover of South Korea’s Homever supermarket chain.

Moody’s cut Tesco’s credit outlook from “stable†on May 28, saying the company is likely to take on more cash-draining leases in pursuit of its expansion strategy. The current A3 rating is the seventh of 10 steps on the investment-grade scale.

Tesco’s stock valuation has declined relative to smaller competitor J Sainsbury Plc over the past year. The ratio of share price to earnings for Tesco has shrunk 7.5 per cent to about 13 times, while the same measure for Sainsbury has risen 12 per cent to about 19 times, Bloomberg data shows.

Tesco’s share of the £120 billion UK grocery market was 30.8 per cent as of May 17, according to Taylor Nelson Sofres Plc, down from a peak of 31.8 per cent in October 2007.

“At some stage they are going to disappoint,†said Paul Mumford, who helps oversee £600 million including Tesco shares at Cavendish Asset Management in London. Mumford said he doesn’t plan to increase his shareholding.

Sainsburys is looking good but Tesco just keep pushing it and they are falling back a bit. The money they borrow must come from somewhere, most

likely the same banks we lend our money to.

[bogbrush]

Does that 1.33% margin include all of their outgoings, including for instance the funds required for the 2.5m sq ft of new space which the article tells us Tesco and Asda are planning to add this year? If a large part of their profit is being used to fund expansion then perhaps their margins aren't as tight as they look. Maybe stuff like acquiring property isn't included though; does anyone know?

I'm virtually certain that this will be capital spend which doesn't figure in the P&L account, so i would say almost certainly that money isn't accounted for in the profit margin.

[Si1]

Supermarkets seize chance for land grab

Looks like the supermarket monopoly is going to get worse.

you mean better.?

[Saberu]

I agree supermarkets are good value, but eventually they will be selling every product under the sun (almost there!) pushing out small businessmen. The only reason they aren't already is because managing a supermarket is a logistical nightmare and it takes them a lot of time to expand into new product ranges each year but they are slowly but surely managing it.

Eventually the only thing left for small businessmen to sell will be services, since we have so little manufacturing in the UK.

Supermarkets have a point of sale advantage and marketing advantage that puts competition on it's ass when it comes to B2C, the only thing stopping them expanding is time. Just look at Walmart in the US to see where things are heading (incidentally they own Asda now).

Once all the products are taken they will take all the more obvious services which they've already begun to do with insurance etc. Eventually the only thing left for the little guy will be B2B, which I hate.

[Si1]

Just thinking the other option is that we will soon see Tesco pubs?

we already do - Wetherspoons, and various other chain pubs

good stuff

[bogbrush]

we already do - Wetherspoons, and various other chain pubs

good stuff

Did you know that tesco own Dobbies - the garden centre - too?

[Si1]

Did you know that tesco own Dobbies - the garden centre - too?

excellent - can I use my clubcard there?

edit: by the way - I didn't mean to imply Tescos own Wetherspoons or any other chain pub - I mean to say that Wetherspoons (and others such as Slug and Lettuce etc) do a similr thing to Tescos in the pub/bar arena)

Edited June 28, 2009 by Si1

[bogbrush]

excellent - can I use my clubcard there?

edit: by the way - I didn't mean to imply Tescos own Wetherspoons or any other chain pub - I mean to say that Wetherspoons (and others such as Slug and Lettuce etc) do a similr thing to Tescos in the pub/bar arena)

Maybe - ask.

I was told by an acquaintance - a very good friend of a very good friend - who just happens to be one of the top Directors at Tesco - almost next in line after Terry Leahey. He's a human being too!