PUBLISHED : Wednesday, 31 January, 2007, 12:00am
UPDATED : Wednesday, 31 January, 2007, 12:00am


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WHEN Guy Watson heard last week that the British supermarket giant Tesco had opened a store in Beijing he smiled wryly.

Mr Watson, 47, is one of the few farmers in the UK prepared to speak his mind about the growing power of supermarkets, including the iconic retailer Tesco. That's because, unlike the vast majority of farmers, he doesn't sell to them. Eighteen years ago, his 350-hectare farm in Devon was certified organic. He set up the country's first 'box' scheme, whereby customers could have organic seasonal vegetables delivered directly to their doors.

The scheme took off as more people began to question the source of their food, how many kilometres it had travelled before arriving on their plates and the cost in terms of carbon emissions. Many people considered organic food tastier, healthier and more ethically produced. They were happy to pay a premium for it.

Where other farmers reliant on the supermarket purchasers found their profit margins squeezed harder and harder, Mr Watson's Riverford Organics had latched onto a gap in the market. In 2003 his profit was GBP300,000 (HK$4.5 million). He won't reveal what it is now but says his business has grown exponentially and that he makes 'an obscene amount of money'.

On the other hand, a dairy farmer down the road, Chris Horton, says he is paid only 17 pence for a litre of milk, which is what it costs to produce. That same litre is sold for more than 60 pence in the supermarket. He is considering selling his farm.

'Supermarkets didn't realise the potential of organic food,' Mr Watson says.

'They were too focused on attracting customers with low prices. But people have become more concerned with what they are eating.'

Tesco started out as a chain of large grocery stores. Now, as well as groceries, you can buy virtually anything from it. It has proved so successful that it now has a 31 per cent share of the UK retail market. But it is not universally loved.

The website www.corporatewatch.org.uk discusses how huge, 24-hour-a-day, out-of-town super-sized Tescos with free parking damage the traditional English High Street, where there is limited free parking and where traditional traders are dying out. After analysing a list of 'crimes' committed by the corporate giant and the company's responses, it concludes: 'Tesco seem totally unstoppable. They can confidently brush aside criticism knowing that nothing is really standing in their way, certainly not the government or the competition authorities who have already shown themselves very unlikely to act.

'They will control our lives from the cradle to the grave - from the 'Baby and Toddler' club to the 'buy one get one free' Tes-coffin (not currently available).'

Tesco already owns 50 stores in China, but the new one in Beijing is the first to carry its owner's name. Its main rivals are Wal-Mart, the American retailer, and France's Carrefour, both of which have been in China for years. Analysts say Tesco's long-term success depends on its overseas ventures.

But it is not remaining complacent on the domestic front. It has recently expanded its home-delivery service for online shoppers and it is heavily promoting its range of organic goods.

Guy Watson will be watching closely.