A GROSSER GROCER
Dominic Lawson on the
effect of a takeover on his corner shop
TAKEOVERS were always such fun. When I was a columnist on the Financial Times, there was nothing I enjoyed more than telling the City whether or not Un- ited's takeover bid for Associated was in the interests of shareholders. (The in- terests of the general public were quite another matter. That was the concern of the leader-writers and I didn't envy them their right to moralise.) For the bidders' extravagant sums to work, a number of things would inevitably have to be done, once they had secured the approval of the Financial Times and the votes of the investment community: close down the victim's head office (massive savings here), cut down on research and development, produce much more glossy annual reports, and sell off businesses which tied up too much capital.
There was one thing which never seemed to get mentioned: price increases for the consumers. But it is a simple point. When company x buys company y for more than y's shareholders thought it was worth (why else would they sell?) it may have appreci- ated that the old owners were charging their customers less than they could get away with, or at least that a price increase would have a less than proportionately
depressing effect on sales volume. That would be particularly attractive if the bidder had incurred lots of short-term debt to pay down. It is a ruse which will doubtless have crossed the mind (not a short distance) of Sir James Goldsmith, as he seeks to justify the spending of £13 billion he does not own on British Amer- ican Tobacco.
But Sir James Goldsmith, despite his old fondness for the food business, never thought of bidding for The Market, a shop in Highgate High Street where the resi- dents of Highgate Village have for a generation bought their groceries. For once Jimmy was beaten to the punch. Europa Foods got there first (four weeks ago).
And now, as one of those residents, I can see the takeover technique from the other side, as a customer. Even the prices of staple commodities have been subject almost overnight — to a most imaginative new business pricing plan. A plastic salt cellar with salt, marked up from 37p to 49p (or almost a third). A standard packet of parsley, up from 30p to 46p (that's over 50 per cent.) By contrast, the price of a 2Ib bag of American rice has been increased by a mere 13 per cent, or 10p, to 89p. As for more faddish products, anything goes. A two-litre bottle of 7-Up, is now 48-Up, that is marked up, from 87p to 135p. Well, it has been rather hot, so a 55 per cent price increase is what any fair-weather ice-cream vendor would advocate in the circum- stances. I trust the price will come hurtling back down by the entire 55 per cent when the rain comes. Some of the price increases reported by our neighbours — such as the doubling in price of a 51b bag of potatoes — are so bizarre that I prefer to believe that their original purchase must have been incorrectly price-stamped.
There has hitherto been no increase in quality — rather the reverse — to compen- sate for the new prices. At the delicatessen bar the smoked salmon is no longer carved to order from the fish's back, but merely arrives each day in pre-sealed polythene containers from some central food depot. No one now offers to 'look out for' a cheese which I want but is not available, and as for convenience, the shop always used to be open from nine till nine, seven days a week. So far at least, there has been no lengthening of the opening hours (although an extra two hours at night is promised 'for the future'). Meanwhile, to top it all, the pleasant wooden fascia of 'The Market' has been replaced by the 'Europa Foods' logo in a kind of zig-zagged yellow plastic.
My first reaction was that perhaps the old management had not been making money, and that Europa was doing only what was necessary. But the previous owner assured me that his store had been trading profitably and that no lines of food had been sold at a loss — there had been no loss leaders.
It is not as if Europa has lots of short-term City shareholders to appease. Although it is London's biggest indepen- dent grocery chain, with a turnover of £55 million, it is controlled by Messrs J. M. and M. M. Patel. Their chief executive, Mr Clive Preston, a brisk but pleasant Lancas- trian, insisted to me that Europa has put some prices down, it's not all up'. My neighbours by contrast allege that the only reductions they could find were in catfood. Anyway, Mr Preston cheerfully pointed out to me, `People are not price- conscious.' Sainsbury's, Tesco's et al might disagree with that, but, as Mr Preston knows well, they will never be allowed to build one of their gigantic stores in the middle of Highgate Village, which, far above any tube station, and saturated with what Americans call `high net worth' indi- viduals, is a sitter for Europa's consumer target-practice. So I believe Mr Preston when he says that any debts taken on in acquiring The Market have got nothing to do with Europa's pricing policy. It's just plain old-fashioned business sense, the sort any newspaper financial pundit would ap- plaud. The market theorist (as opposed to The Market theorist) would expect now the emergence of competition, in the shape of another grocer in Highgate Village. He would be right, except that there already is such a shop. But that is, oh, all of a minute's walk away, on the other side of what used to be the village pond, Pond Square. And that is where people from that part of the village shop, not our territory at all, worst luck.
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