Talking Tesco: UK Competition Commission

Why are we publishing these comments?

Tesco has been reading with interest the third party comments on the Groceries Market Investigation that the Competition Commission has been publishing on its website. Our formal submissions have addressed many of the issues raised by these comments, particularly those of some of the professional lobbying organisations. However, a number of submissions on the Competition Commission's website contain more specific comments about Tesco which we have not covered in our formal submissions.

Some of these specific comments are inaccurate and misleading, and we are providing a series of short notes in order to put the record straight. In the interests of transparency we are today publishing the first such series of notes.

National Association Of Master Bakers

The National Association of Master Bakers have raised concerns about the price differential between own-brand loaves and branded loaves suggesting that they are probably produced at the same factory.

For bread as with every other category in our range, our aim is to provide customers with choice in terms of quality and price point.

Whilst our own-brand loaves are baked at the same factories as some of the branded loaves, there are several reasons for differences in price which include differences in the cost of ingredients (for example different grades of flour will incur different costs). Branded suppliers also incur overheads which are not incurred by our own-brand suppliers: for example, brand advertising, multi-site production and direct distribution (our branded bread suppliers deliver direct to around 1,400 of our stores).

It is worth noting that sales of own-brand bread have been in decline in recent months whereas branded bread sales have generally grown. It is a heavily brand-dominated market and customers generally prefer branded bread over own-brand, despite the price premium. Although price is important to some customers, the Competition Commission itself has observed an apparent trend towards a premium on quality.1

1 CC Emerging Thinking paper, 'buyer power', paragraph 23.