The Nightmare Scenario - Could Morrisons be Broken up and Sold Off, Leaving Just Three Big Supermarkets?

It was just a small piece in the Times this morning but it should send a chill through every one who supplies supermarkets.

The piece suggested that troubled Morrisons was being closely examined by private equity firms with a view to being bought and broken up, thereby generating mountains of quick, easy cash.

The writer went on to say that Sainsbury would love to get their hands on the 100 convenience stores that Morrisons have developed, because it would help them better compete with Tesco, and that ASDA might like to buy the superstores.

It is just speculation of course. There would probably be competition issues, given that the combined share of Morrisons and ASDA would be around 27%.

But the thought of there being only three big players in the UK grocery marketplace is alarming to put it mildly. Pressure on suppliers is tough enough with 4 major companies vying for sales and profit.

And Morrisons, the latest decision to stock New Zealand lamb during the winter apart, is a strong supporter of British farming, especially livestock.  Speaking as a farmer supplier to Morrisons I can say that they are fair and efficient too.

Morrisons will survive if they concentrate on what made them successful in the first place - selling top quality fresh food at prices cheaper than the competition. They are uniquely placed to do this because they own their own abattoirs, fruit and veg packing houses, and  bakery. Their commitment to reducing prices by £1billion is a first step towards a recovery, but given that their competitors will follow them down in price, it is to be hoped that the cost benefit of vertical integration means that Morrisons ultimately will win a pricing war.

Less easy to call is whether their new emphasis on convenience and online shopping risks taking their eye off the main ball which is getting core customers back into the stores.

Anyway, such decisions are down to Dalton Phillips, the man in charge of Morrisons. Every supplier to supermarkets should be keeping everything crossed that he sorts out a recovery strategy soon, and sees off any attempt from private equity firms to buy the business.