Three million quid for potato contracts?!!

Apparently someone in the Sainsbury potato buying department may have taken £3m in bribes for steering decisions towards one grower.

Something doesn’t quite mash here. I’ve a feeling this story’s been sliced and diced a bit. (If you already want to rush off and be sick, I’ll be here when you come back…)

A bit of Googling reveals the UK grows 6m tons of potatoes a year. Sainsbury has 15% market share, so let’s say it sells 900,000 tons of spuds annually.

And Greenvale supplies half its potatoes. Genorously assuming Sainsbury buys British all the time, the retail value of all those sackfuls at around 35p a kilo is just £157m. The main UK supermarkets squeeze their suppliers until the pips squeak, so Greenvale’s profit from Sainsbury – if it makes one at all – is only £5-6m at most.

To pay someone £3m on the side… when your profits are already being battered … is really fishy. There’s just no way a lowly potato buyer could salt away that kind of money without it being wrapped in news. The journalists would eat it up.

And even if the bribes had been paid over the years, chipping away at the law, then there’s still the NPV to consider. The ‘discount factor’ if you include the risks of being discovered would be huge. I mean, you’d be deep-fried if you got found out.

OK, enough puns. But it demonstrates it’s worthwhile looking beneath the crispy outer layer at the bits within…

[Update 8.40pm: the Times website confirms my guesstimates weren’t that far off: “Greenvale… turnover was £139.7m in 2005-6, but it lost £4.2m. The company, which has received the Queen’s award for innovation, is understood to supply about 45% of Sainsbury’s potatoes.” In other words, the bung wasn’t even for profit: it was simply towards contribution. Now THAT’S desperation for you.

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