Tuesday, May 27, 2008

Anheuser-Busch up for sale?

Wow -- that would be big!

The Financial Times is reporting that InBev, the world's biggest brewer, is planning to offer $46 billion for A-B:
The article said sources close to the situation believe A-B's board would feel bound to follow due process and consider the $65 per share. The matter was discussed at length at an InBev board meeting on April 28 and then again at a meeting held Thursday, according to the article.

A-B became the exclusive U.S. importer for InBev's European portfolio, which includes beer brands Stella Artois, Beck's and Bass Pale Ale, in February 2007.

Speculation of a merger between the two brewers has circulated since then. In July 2007, a Citigroup analyst report featured seven analysts who wrote that they expect a merger "within the next two years." Before that, Belgium's Trends magazine reported that a merger between A-B and InBev was "inevitable in the long run."
The merger of Miller and MolsonCoors is almost complete now, so the brewing industry is getting very concentrated globally -- which would appear to be in line with other categories, where suppliers must get big enough to deal with the increasing size of their channel partners.

FAO Schwartz: Coming to a Macy's near you

It looks like FAO Schwartz will become a leased department within Macy's stores:
Macy’s announced this morning that it will open FAO Schwarz stores in up to 275 Macy’s stores this fall, and will expand the FAO boutiques to all 685 Macy’s stores that sell children’s clothing in the next two years.
There was an FAO Schwartz department in Macy's State Street store here in Chicago last Christmas season as a trial. Apparently it worked well enough to be rolled out across the chain.

My opinion generally is that combining two faltering brands (e.g., Sears-Kmart) does nothing for either of them, but I'm wrong a pretty good percentage of the time, so we'll just have to wait and see.

Wednesday, May 21, 2008

Will Barnes & Noble buy Borders? (volume 2)

I was going to call it "part 2", but given that it's bookstores we're discussing, "volume 2" seemed more appropriate.

About six weeks ago, when the rumors first arose, I mentioned the possibility that B&N might be interested in buying their main competitor. The rumor mill has heated up this week:

... Barnes & Noble may finally get ready to purchase Borders Group.

Investors, thrilled by the prospect of the two mega-sellers joining forces, pushed Borders Group shares up 11.3%, or 72 cents, to $7.07, in afternoon trading.

If Barnes & Noble does purchase Borders, the companies would face anti-trust hearings since the combined company would have more than a third of the market share.
Presumably this merger would get a lot of scrutiny from Washington. I reported a couple weeks ago that the FTC is still fighting the Whole Foods/Wild Oats merger, even after it was approved by the courts.

It's hard to see Borders surviving on their own, though. After giving it some thought, I realize now that this is really a variation on the traditional two-per-channel theme -- the two in this channel are B&N and Amazon, with Borders being third (and therefore probably doomed).

Dealer co-op programs on the web

I was having a conversation recently with a friend who works in the newspaper industry. This person, as befits a clear-eyed observer of current trends, was a bit downbeat as we discussed the future of his medium, particularly as related to the co-op advertising programs that have long been among newspapers’ major sources of income.

That newspaper circulation, ad linage, and income are plummeting is too well known to bother detailing. Perhaps less known is that more people than ever are reading newspaper – it’s just that they are doing so on-line. Newspaper web sites are among the most frequently visited sites, garnering more than enough visits to offset the many (myself included) who have cancelled their print subscriptions. The problem, my friend lamented, was that the papers had proven unable to translate these web visits into advertising revenue.

Classified ads have moved to Craigslist or Cars.com or Auto Trader, and the biggest stores are diverting more of their advertising to in-store promos. Which leaves the papers more and more dependent on that oft-neglected stalwart, the independent local retailer (aka, Mom & Pop).

Neither Mom nor Pop is a fool, and they recognize the declining readership of the papers, and therefore question the value of continuing to advertise there, especially given the rates the papers charge. (As an aside, the newspapers seem to think that the way to offset declining circulation revenue is to raise ad rates -- is there any question why they're in trouble with thinking like that?) But, to return to Mom & Pop, they can’t move to the web because they don’t have the slightest idea how to create a web ad (do you? me neither), and because their vendors won’t pay for it.

The vendors won’t pay for it because they don’t trust the rates for web advertising, and because they’re tired of the administrative burden of dealer co-op generally and have no intention of adding another difficult medium.

To survive, the newspapers need to move their advertisers to the web, and to do so, they need to offer the manufacturers three things:
  • Transparent pricing
  • Reduced administration
  • Measurable results

Concurrently, they need to offer Mom & Pop three things:

  • Ease of use
  • Reasonable pricing
  • Measurable results

These things are do-able. Although the newspaper industry has a history of offering the most bizarre rate cards imaginable, they realize (I hope) that that has to end, and the web offers the capability to offer measurable pricing via pay-per-click. Sites have recently been developed (here’s one of them, AdReady) that allow the rankest amateur to easily build a web ad in multiple sizes and formats from templates (I created one in less than five minutes on my first try). If a newspaper licensed such technology and stored manufacturers’ templates, local dealers would have an incentive to run ads, which could then be billed directly to the manufacturer (no claims) on a per-click basis, with both manufacturer and dealer getting a record of the clicks.

The manufacturers would have their transparent pricing, no administrative burden, and measurable results. The dealers would have ease of use, reasonable pricing (since the web is, for now at least, much cheaper than print), and measurable results. The newspaper would get … advertising.

It’s a win-win-win.

It’s going to take an honest broker to get the newspapers and a decent core of manufacturers together to work out the mechanism for a test of such a system. I suggest the TPMA (I would suggest the Newspaper Association of America, but their track record in putting anything together, in my experience, is not good).

Sunday, May 18, 2008

Quick notes

It looks like Cannon may be replacing the (apparently) departing Martha Stewart line at Sears and Kmart. Martha's exit is not official yet, but it seems to be a done deal (the contract is up at the end of 2009). Cannon is a good brand name and while it may not have the cachet of the Martha Stewart name, it may be a better fit with the Sears/Kmart customer base.

Lionel has come chugging out of bankruptcy:
Lionel, which has been in business since 1900, sought bankruptcy protection in 2004 after a trade-secrets dispute with MTH Electric Trains.
As a baby boomer who loved my electric trains, I wish them well.

Music distribution continues to evolve

A couple recent developments demonstrate the continuing changes taking place as the music business seeks to find ways to deal with the changing times.

Whole Foods seems to be entering the record business as Starbucks is leaving, offering a line of CDs featuring emerging artists:
The first artist in the Whole Foods Artist Discovery Series will be Greg Laswell, currently signed to Vanguard Records, a historic indie label that was once the home to the Weavers and Paul Robeson. Laswell's second LP is due from Vanguard this July, but before then he'll drop the EP "How The Day Sounds," which will be sold in Whole Foods locations this month.
Amazon, meanwhile, is going to be offering a "disc on demand" service, making available out of print CDs, in partnership with Sony, BMG, and EMI.

A visit to Fresh & Easy

On a recent evening, while on assignment in Los Angeles, I went out with two of my colleagues, Andrew Wilson and Dhruthi Murthy, to visit one of Tesco's new Fresh & Easy stores.

The first conclusion to be drawn from this is that all three of us need to seriously examine our priorities if the best thing we can think of to do with a free evening is to check out new store formats.

The second is that Tesco has a lot of work to do.

I had heard that one of the problems Fresh & Easy has faced during its intro period is that Tesco was in such a hurry to get a lot of stores opened that they selected some poor locations. This seems to be confirmed by the fact that our client advised us not to visit the first location we mentioned, since we would be unlikely to survive to return to work the next day (the client. of course, was concerned that this might cause a missed deadline).

Our second choice, in Long Beach, was in a reasonably nice mid-level strip mall. The Fresh & Easy had apparently replaced a departed retailer, so maybe this wasn't indicative of their built-from-scratch locations, but we noted immediately the bare concrete floors. More important, though, were the bare shelves. The number of out-of-stocks was terrible and no one had taken the trouble to at least rearrange the shelves as a cover-up.

Most categories consisted entirely of private label products (a strategy Tesco apparently intends to expand, according to this item reporting that they will add 250 more PL products). This is good, although their choice of branded products didn't seem to follow any discernible pattern. They also had a habit of putting the same product in multiple parts of the store, which would make more sense, it seems, in a larger store. We saw three stack-outs as well as shelf space for a 24-pack of bottled water on promo. There were also strange juxtapositions, such as ice cream mixed in with frozen fish in the freezer section.

There are reports that shoppers are positive about Fresh & Easy. This report gives them overwhelmingly good reviews from customers.

The researchers found that customers who did visit Fresh & Easy liked what they saw. The chain was rated higher than Trader Joe's and Whole Foods on freshness of product, and it even managed to beat Wal-Mart on value for money.

Execution said that it expected shopper numbers - the stores they were monitoring had only 20-30 customers through the door every hour - to increase as the brand grew.

Nearly nine in 10 shoppers said they would "highly recommend" the stores to friends and family - the highest recommendation score in 200 brand evaluations undertaken by the team.

Needless to say, we weren't interviewed.

Part of the problem may be that Fresh & Easy is trying to create a new niche, a high end c-store with lots of fresh produce and prepared meals -- a mix of 7-11 and Trader Joes. It will take time to fully define the format that will do this right. Certainly a big part of the problem is that it's still very early in the life of this chain -- they need to be given time to develop. Given Tesco's track record, I'm not prepared to bet against them.

Neither, apparently, is Wal-Mart, which is planning to open very similar stores in Phoenix, going head-to-head in one of Fresh & easy's markets.
Wal-Mart Stores Inc intends to prepare and serve food in its planned small-format stores, the Financial Times said on Friday, as it competes with British retailer Tesco's Fresh & Easy markets.

The smaller-format stores will include a kitchen, food counters and seating for up to nine people, the FT said, citing planning documents.

Best Buy buying, Circuit City selling

Best Buy has recently bought half of UK's Carphone Warehouse and is rumored to be considering further European purchases.
Following its mammoth £1.1 billion purchase of half of Carphone Warehouse’s retail operation last week, US retailer Best Buy has signalled its intentions to continue its European push, hinting at further wide-scale retail chain purchases.
Rumors center on UK's DSGi (Dixons/PC World/Currys) and Kesa (Comet), as well as Germany's Media Markt.

DSGi, meanwhile, is planning to close hundreds of stores in the UK and Italy and lay off a substantial portion of its headquarters staff.

DSG is believed to be preparing to axe up to 200 of its 700 stores and convert dozens of outlets to a new consumer electronics superstore format that will include both its flagship brands PC World and Currys, according to the Sunday Times.

The revival strategy, which will be revealed on Thursday, marks the first phase of recently hired chief executive John Browett's plans to get the business back on track after two profit warnings so far this year. [...]

Mr Browett has already announced that 40 of its 150 stores in Italy will be shut over the next two years, but the key focus will be on his strategy for the key UK market.
And in the US, Circuit City, after initial reluctance, appears to be giving in to pressure to sell, and is opening its books for a possible buyout offer from Blockbuster and Carl Icahn.
Circuit City had previously resisted Blockbuster’s $1 billion-plus buyout offer, citing its questionable financing. But the CE chain said it has since received a letter from Icahn, the billionaire investor and principal Blockbuster shareholder, indicating that he would be willing to buy Circuit City himself if the video rental chain is unable to do so.

Apologies to Wal-Mart

A year or so ago, I made several posts questioning whether Wal-Mart had lost its way. These were generated by poor revenue and profit figures, as well as the closing of their South Korean and German operations, and the ongoing problems in the UK and Japan. I questioned whether Wal-Mart had taken its eye off the ball and was too distracted by international expansion to deal with the basics.

When they announced they were going upscale on fashion, and then quickly reversed direction, I went so far as to question whether they were suffering from the dread "Sears Disease" -- the frequent strategy changes that marked the decline of the former #1 retailer.

I'm still not convinced that Wal-Mart has totally righted the ship (things in the UK and Japan are looking no better), but credit must be given when things go right, and Wal-Mart's profits were up 6.9% in the first quarter.
Wal-Mart has worked to ensure that checkout lines are shorter and that stores are cleaner, with better layouts and friendlier employees. Those improvements are helping in the short term but should keep customers returning when they have more money, Schoewe said.

"When we turn the corner with the economy, this is a business that should do well," Schoewe said.
We'll see. But for now -- well, done, Wal-Mart.

The bright spot in the entertainment biz

The woes of the music biz have been discussed endlessly (here and elsewhere). The movie biz is hurting as well, and the networks' TV ratings are crashing through the floor. Not coincidentally, video game revenue growth has been phenomenal. It's not a coincidence because teenage boys and young adult males have always been among the biggest buyers of music, and a large part of the audience for movies and TV.

The incredible $500mil generated by Grand Theft Auto IV in its first week (the company is calling it the biggest entertainment event ever -- possibly hyperbole, but I can't think offhand of anything bigger) is not the only evidence of the shift. Activision had no new intros, but is still generating great results based on older titles:
Activision Inc posted a quarterly profit on Thursday that blew past expectations as demand for its "Guitar Hero 3" and "Call of Duty 4" video games made up for a complete lack of new releases. [,,,]

Revenue was $602.5 million, towering 93 percent above a year ago and burying the average estimate of $373.6 million.
Not bad, and more than enough to have folks at the record companies saying, "So that's where my missing $600 million went!"

Meanwhile, Microsoft announced that it has reached the ten million mark in sales of Xbox 360, although Nintendo's Wii is outselling it now and close behind at 8.8 million.

The worst thought for the traditional entertainment venues is what this probably means in terms of talent. If you were a young, talented, creative person, would you be dreaming of a future in music, movies, TV ... or video games?

Retail expansion slows, except for Steve & Barry's

Not surprisingly, given the slow economy, retailers are reacting by cutting back expansion plans or, in the cases where they have gone overboard with expansion in recent years, closing stores.

This article details some of the cutbacks:
  • Home Depot is closing 15 stores and reducing by 50 the number of new stores it will open
  • Foot Locker 140
  • Ann Taylor 117
  • Zales 100
  • Charming Shoppes 150
  • Wison's 158
Pacific Sunwear is shutting down an entire 153-store chain, Demo. In all, the International Council of Shopping Centers expects 5,750 stores to close this year, up 25% over 2007. Penneys, Kohls, and others are still expanding, but at reduced rates.

It isn't all gloom and doom, however. This item tells us that Steve & Barry's keeps expanding at a tremendous rate.
In a year when many specialty retailers are cutting back on openings and shuttering underperforming stores, cheap, fashionable Steve & Barry's is on an expansion roll.
The chain will open 70 stores this year, adding to its current 264 locations.

What's S&B's secret? Not a secret, really -- it's in the headline of the story: Cheap and chic fuels Steve & Barry.

It's no surprise that Foot Locker is closing 140 stores when Steve & Barry's is selling a decent pair of sneakers that appeals to the same demographic for ... get ready for this ... $8.98.

Monday, May 05, 2008

Trade Promo Tactics and Processes for Shopper Marketing

A couple weeks ago, I discussed an article about Shopper Marketing that in turn referenced a Deloitte/GMA study from last fall. It was a thought-provoking study, and I'd like to present a few of the things that crossed my mind while reading it.


The study made the point that there is no generally accepted definition of Shopper Marketing (a fact that calls into question their efforts to measure it). I'm not too hung up on tight definitions, but a description in general terms of what I'm talking about is a necessary starting point, I think. I'm not suggesting that others follow my definition, and I'm perfectly willing to accept another if a consensus forms.

A definition is especially important for manufacturers when they get to the question of budgeting, as I discuss below - what is included in which budget is a point that will require very tight definitions indeed.

I'm inclined to say that Shopper Marketing is limited to in-store promotion, because I'm of the opinion that definitions that become so broad that they exclude nothing (e.g., "TV advertising is directed to shoppers, so it's shopper marketing") become meaningless. I can see an argument that mailings to loyalty card members are Shopper Marketing, but for now I'll stick with saying that Shopper Marketing is limited to in-store promotions. An important question is whether pricing actions are included. For now, I'll say no (for reasons I detail later), but I can see combo price/image promos being Shopper Marketing. Further refinement of the definition will be needed, but let's leave that for later.

For now, my working definition is: "Joint manufacturer-retailer in-store promotions that are focused primarily on building or maintaining brand image."

Applicability across Categories

The study was entirely concentrated on the CPG/grocery category, which is hardly surprising, given that it was sponsored by the Grocery Marketing Association. Nor is it a surprise, given that the biggest trade promotion expenditures are found in that category.

But a growing share of consumer durables sales is going through channels using CPG tactics (and many of the leading retailers in durables channels are adopting CPG tactics). So, although this study may be less applicable to consumer durables, the subject of Shopper Marketing is not without interest even in those categories.

In addition, much of the attraction of Shopper Marketing is not channel-specific. It is based on the growing awareness that, as mass media fragments and the channels consolidate, it is becoming much more efficient to reach mass markets in the store than through traditional broadcast and print media.

It is harder to see applications of the study or of Shopper Marketing in general for business-to-business or non-retail marketers (e.g., financial services).


In order to create trade promotion programs that facilitate effective Shopper Marketing, a number of changes are necessary. The most important are in the areas of budgeting and in the control of the programs and budget.
Because we're talking about control of large budgets, I don't think I need to tell you that these changes will meet with opposition by those who see their empires threatened.

The vast majority of trade promotion budgets in CPG/grocery are under the control of the Sales department. This is hardly surprising, since the purpose of the programs has long been seen as driving immediate sales. If, however, we are examining an initiative whose purpose is less focused on immediate results, and more on maintaining or building brand image, then it makes little sense to have Sales in charge of the budget, because Sales is not responsible for nor measured on brand-building.

I will state the obvious: Sales is not going to like this.

I can hear the VP-Sales right now: "If Marketing wants to do in-store activities to build the brand, I'm all for it. But the funding needs to come out of the national ad budget."

I don't entirely disagree. To the extent that Shopper Marketing is intended to supplement or replace brand-building efforts such as national TV or magazine ads, it should be funded from the budget that currently pays for those activitiesd. But the fact remains that a portion of the trade promo budget has always gone for endcaps, signage, and similar activities. If we are to say that those items are now to be paid for by Marketing, with no offsetting decrease in the budget controlled by Sales, the effect would be to increase the amount of spending on price promotion - not, I trust, what anyone wants to do.

What needs to happen is that both the Sales-controlled trade promo budget and the national advertising budget are cut, and a new Shopper Marketing budget created.
The logic behind the split would be that if the primary intent of an in-store promotion is to lower price to the retailer (and, perhaps, the consumer), it comes out of what I am calling the Pricing Promotions Budget, which is controlled by Sales. If the primary intent is to build the brand in concert with the retailer, then it comes out of the Shopper Marketing Budget, which is controlled by Marketing; traditional consumer-directed advertising run by the manufacturer alone stays in the national advertising budget.

Not covered in this description is out-of-store joint promotions (e.g., newspaper or radio run by the retailer promoting the brand). This category is substantial in durables, and not insignificant in CPG/grocery. Although it is not (in my definition) Shopper Marketing, it should be in that budget because it fits the same intent and function - that is, it is a joint supplier-retailer effort that is primarily brand promotion rather than price.

This split moves budget authority and responsibility where it belongs - Marketing has responsibility for the brand, and Sales for pricing.

This does not mean that there will be no conflicts and gray areas (many promotions, inevitably, involve both pricing and branding), but if managements understands and endorses the principles, then resolution of such questions should be possible.


There are two ways I can think of immediately that a manufacturer might look at these budgets. One is to establish an overall budget figure (say 15% of sales) for price promos and Shopper Marketing, and base the breakdown largely on the retailers' demands for pricing money This might end up looking like:
  • SuperValu -- 9% on price promo, 6% on brand-building
  • Kroger -- 8% price, 7% brand
  • Wal-Mart -- 15% price
It might also be that Sales sets a particular percentage for price, while Marketing allocates whatever budget they have based simply on which store is the best vehicle for the brand activities they want to carry out. In some cases that might lead back to something close to the above, since the retailer whose emphasis is totally on price may not be the best environment for building a brand image (depending on the image you're trying to build).

I imagine we'll end up with these two, blendings of these two, and various other approaches, before any sort of consensus approach is reached.

Systems, Processes, and Administration

Splitting of the trade promotion budget will require modifications to the systems and processes that currently control and monitor trade promotion activity and spending. If Sales and Marketing go their separate ways and use separate systems, it will not only be wasteful and inefficient, it will obscure management's view of overall channel spending.

TPM systems currently exist that can (in some cases, with moderate tweaking) separate control of budgeting and allocation processes, while rolling up to a single expenditure total. Without such systems and accompanying processes, a manufacturer will end up with Sales having budgetary control over an area (brand-building) that is Marketing's responsibility, or Marketing having control over Sales's pricing functions. Neither approach will work.

The administrative processes currently in place (e.g., for documentation and settlement) can probably be continued with few changes, with the exception that it would be best to move them to a "neutral" dpartment (Customer Service or Finance, perhaps) to avoid the turf wars that may erupt between Marketing and Sales.
Shopper Marketing and Collaboration

The Shopper Marketing paradigm described here is very dependent upon a strongly collaborative relationship with retailers - a relationship that manufacturers may need to limit to key accounts or even a subset of their key accounts, both because of their own resource constraints and because of the inability or unwillingness of some retailers to participate.

Several years ago, Dale Hagemeyer of Gartner produced a slide depicting several collaborative scenarios, a slide that many (including me) have stolen for their own presentations. In simplified format, it looks like this:
Successful Shopper Marketing efforts will require collaboration that looks like the diamond on the right. At present, brand-building trade promotion efforts generally follow the butterfly scenario and look like this (based on a chart in the GMA study): A successful Shopper Marketing collaboration will look like this:

In regard to planning, the Deloitte/GMA study made a recommendation with which I strongly agree:
Follow One Strategy. Manufacturers should not put strict boundaries between trade promotions and shopper marketing programs. Both are stimuli that influence shoppers in the store. First, manufacturers should start aligning trade promotion with shopper marketing programs. Then, they should approach retailers with one plan/calendar that has all the programs that influence a specific shopper segment.
The trick, of course, will be getting Marketing and Sales to step outside their silos long enough to agree on a single go-to-market plan and coordinate their efforts to implement it. This will be tough - we don't often enough see coordination between two efforts today (national advertising and trade promotion), how much harder will it be to coordinate three - national advertising, Shopper Marketing, and pricing promotions?

However difficult it is, I would submit that the rresults are likely to be more than sufficient to justify the effort.
Even after divisions are overcome within the manufacturer, it will be necessary to build relationships with the retailers' marketing departments. Promotions that run through the retail buyer face problems similar to those created on the manufacturer side if Sales is in charge of the Shopper Marketing budget: The retail buyer's job performance ratings and other incentives are not affected by how much brand-building goes on in the store; he or she is judged on pricing and sales measures.

Because of the complexity of these relationships, and the obstacles to them, it is almost certain that Shopper Marketing programs will be rolled out over time, beginning with only a few key accounts, and will probably vary in important ways between accounts. Account-specific marketing will be supplemented by account-specific Shopper Marketing.

Measurement and Analytics

Shopper Marketing is greatly dependent upon data and analysis, and will require both new measures and new tools.

This is where Nielsen's PRISM (about which I have expressed some skepticism in the past) and similar initiatives may prove to be of great worth.

Part of the reason for segregating Shopper Marketing and pricing promotions, in addition to the points made above, will be the need to apply separate measures to them. Pricing promotions will be subject to the trade promotion metrics that have been developed in recent years - lift, cost per incremental case, and other volume and profit measures derived from scanner data.

Shopper Marketing will be subject to measures more similar to print and broadcast media - reach, frequency, cost per thousand. Ideally, though, combo measures will be developed so that we will see what percentage of the shoppers who saw the display bought the product. These will be similar to direct mail conversion measures, or perhaps will mimic the movement of Internet advertising metrics, which moved in a few years from gross impressions to cost-per-click to cost-per-sale.

Shopper Marketing also offers opportunities to use retailer data insights. Wal-Mart's Retail Link, for example, segments stores into clusters based on demographic characteristics of their customer bases, such as ethnicity or age. At present, relatively few manufacturers take advantage of such data in designing promotions for their retailers. I believe (though I certainly can't prove) that Shopper Marketing programs run by Marketing would be more apt to utilize such data than trade promotion programs run by Sales.

Conclusion and Summary

None of these proposals are certain to happen, nor are they certainly the best way to approach Shopper Marketing. What I've presented here is intended simply as a starting point for a discussion on how best to deal with an approach that involves both Marketing and Sales, that is attempting to accomplish both immediate sales lift and longer-term branding, that involves both advertising/promotion and pricing actions. My tenttive prescription is to separate budgeting, authority, and responsibility based on intended goals, while blending the planning and reporting, and both separating and blending the measurement and analysis.

Sunday, May 04, 2008

OFT investigating price-fixing in British supermarkets

The UK's Office of Fair Trading has launched an investigation of British supermarket chains and leading suppliers over allegations of price-fixing.
The OFT is understood to have made visits to the head offices of Tesco, Asda, Sainsbury's and Morrisons and to some of their suppliers. The supermarkets are understood to be co-operating with the investigation.

Tesco said in a statement: "We understand that the OFT has asked for information from a wide range of suppliers and retailers. We are working with them to provide what they require. At Tesco we are confident that we always act in the interest of consumers."

The move comes just days after the OFT announced it was looking into allegations that 11 retailers, including Asda, Sainsbury's and Tesco, and manufacturers were working together to fix cigarette prices.
I will update this post later because The Economist has an excellent article that I read on the plane today, and I want to add some of its info (but at the moment I don't have the time).

Update: The Economist adds the names of several suppliers who have been asked to provide pricing info: Britvic, Coca-Cola, Mars, Nestlé, Procter & Gamble, Reckitt Benckiser and Unilever. They also refer to it as rather a big deal:
(This) may turn out to be one of the world's biggest and most widespread investigations into the possibility of price-fixing. The investigation involves thousands of products, from soap to cola, and some of the world's largest consumer-goods companies.
They also make two interesting points. One is that the American antitrust tactic of encouraging whistle-blowing by offering immunity seems to be spreading to Europe, a point partially confirmed by an article in today's Daily Telegraph, which names Asda/Wal-Mart as the whistle-blower:
In blowing the whistle, Wal-Mart, which owns the Asda chain, has guaranteed itself immunity from a fine should the OFT discover any cartel activity. Any company found guilty could be fined up to 10 per cent of its annual worldwide sales, which in Wal-Mart's case would be $37bn (£18.7bn).

The move is likely to make the US retailer deeply unpopular with the companies involved, many of whom are its largest suppliers.
The other interesting point is that what is alleged is price-fixing on brands, rather than the more classsic commodity pricing:
Every economics student learns that cartels are most likely to crop up when firms have least protection from cut-throat price competition. The typical cartel product—vitamins, paper, petrol, glass, bulk chemicals—is a commodity offering scant opportunity for the branding that might create some pricing power. The industry is usually mature, with stable market shares and little innovation. This dullness has a virtue for a would-be cartel: it makes it easy to check if rival firms are sticking to the market-rigging plan.
They point out that the UK supermarket category appears to compete aggressively on price (although this is the third major probe of price-fixing, a dairy products investigation resulted in over 100 million pounds in fines recently, and only a few weeks ago OFT announced an investigation of tobacco price-fixing).

What they failed to bring up is that a highly-concentrated retail sector increases the likelihood of price-fixing. The four big UK chains have a combined 75% share of market -- coordinating among four is much easier than if a market has many significant players.

They do mention that buyers may have a motivation to fix prices even if their employer doesn't: "Often they are free to set selling prices and are paid bonuses linked to targets on sales and profits relating to the products they manage."

This will be interesting to follow, and I'll try to post additional info as it becomes available.