THE cost to the Island’s largest retail group of transporting groceries from Portsmouth to Jersey has risen by almost 40% to £11 million over the past five years, according to its manager director.
Mike Rutter, who runs SandpiperCI – which operates outlets including Marks & Spencer, Morrisons and Iceland, said that the Island’s only temperature-controlled freight provider had increased prices three times in the past year alone.
The grocery giant’s executive chairman, Tony O’Neill, echoed his concerns, saying that the government had ‘sat there and allowed a single freight company to have a hold on all retail in the Channel Islands’.
In response, Economic Development Minister Kirsten Morel said that the government was looking at the ‘monopoly’ as well as into other potential ways to reduce freight costs.
The Island’s only temperature-controlled freight provider is Ferryspeed, after Condor Logistics closed in 2012.
The comments from SandpiperCI came after the Jersey Competition Regulatory Authority’s Grocery Market Study revealed that while a competitive retail market was working, the average shopping basket cost 12% more in a Jersey store than it would from the same retailer in the UK.
Distribution costs account for 7% of additional amount, labour 3% and the final 2% is due to sales-tax difference.
Mr Rutter said that the ‘additional 7%’ comes from the lengthy process of transporting goods from Portsmouth to Jersey, which includes decanting items to different trucks once they arrive in Jersey because the initial UK trucks are ‘too big for our roads’.
‘We currently spend just over £11m per year on freight,’ Mr Rutter said, referring to the cost of transport across the Channel.
This is an increase from £8m in 2018. He said there had been three increases in the past year owing to the price of fuel and oil.
‘However, oil prices have reduced and we have received no corresponding reduction in rates,’ he said.
Mr Rutter added: ‘The Grocery Market Study report shows there’s competition within the food sector and that’s because there are multiple players in it. There used to be more than one temperature-controlled ferry operator, and now there’s only one, so that on the face of it is no longer competitive. The government should create a level playing field that allows for new entrants to come into the freight-logistics providers market and allow everyone to compete against each other.’
He also said that labour costs had increased ‘dramatically’ in the past few years, piling on further pressure.
In order to achieve ‘net profitability’, Mr Rutter said that SandpiperCI had no choice but to pass costs on to the consumer and until another freight provider was established in the Island, ‘there’s nothing we can do to reduce freight costs’.
One of the Grocery Market Study report’s recommendations to reduce cost to consumers is to lower distribution expenses by following up the 2021 market study into freight logistics.
Mr Rutter referred particularly to recommendation five: that the government should ‘develop a policy framework to support effective competition in the freight-logistics sector, including a Ports Policy’.
Mr O’Neill said the Island was yet to see ‘tangible results’ from that report.
‘The JCRA looked into how to get competition on ferry routes. We should concentrate on northern supply routes and producing tangible results from the report. We’re great at writing reports but we’re not very good at implementing those differences which would help with costs to consumers.’
Mr O’Neill wrote to the JEP in 2018 about what he called ‘horrendously high’ costs of £8m per year. He said: ‘The findings of the latest JCRA’s report are certainly not a shock. This has been coming down the strait for many years, with increases on fuel, etc.
‘We are not making excess profits, and these are significantly less than our UK equivalents. Distribution costs on the whole are four times here than the UK.’
Mr O’Neill added: ‘I’ve lost count of the times I’ve spoken to government about introducing competitiveness into food, retail and freight in the Channel Islands. The government have sat there and allowed a freight company to have a hold on all retail in the Island.
‘Competition improves value in any sector, so let’s not have another three years before we have an in-depth look at distribution costs in the Island.’
The JEP has sought comment from Ferryspeed and will publish any response they issue.