FOOD retailing was not a licence to print money, said David Webster,

Deputy Chairman of the Argyll Group, at an international food and drink

conference in London yesterday.

But he admitted the group, which largely comprises the Safeway chain,

had ridden out the recession better than most because people still

needed to eat. It's operating profit last year was #331m on a turnover

of around #5bn.

He also admitted there had been criticisms of the profit levels of

supermarket operators not only in relation to other British businesses

but also to similar operations in Europe and the US.

''Perhaps food retailers have been somewhat slow to respond,'' he told

delegates to the Agra Europe Conference. ''This may, in part, be due to

the breadth and complexity of the issues which arise.''

Comparing current performance with a decade ago, he said that

operating margins for the food orientated supermarket groups had doubled

to 6.6% but added that many non-food groups had reached double digits in

the same period, including Body Shop at 19.1%, and Kwik Fit at 14%.

But he claimed there were six major developments in the food retail

sector which had led to the doubling of margins. These were: The advent

of superstores; the increased space for sales; the increasing purchase

of freeholds as opposed to renting; the penetration of new and often

high margin markets; the streamlining of the supply chain; and the

growth of ''own brands.''

The growth in size created efficiencies and made superstores much more

profitable than supermarkets of the 1960s and 1970s. Superstore space in

Britain had increased from 10.4 million sq ft to 28 million sq ft, out

of a total of 87.5 million sq ft in the past decade. This had been

matched by a growth in investment in systems and freeholds, the big four

having spent nearly #13bn on the latter in the past decade.

Food retailers were now competing for a bigger share of the #93bn

market in ''legitimate'' food and non-food commodities, with food

accounting for just under half this figure.

He said consumers had benefited in terms of improved quality, wider

range, higher efficiency, product development, and competitiveness. One

illustration of this was the fact that food price increases had totalled

150% in the past 10 years against 175% for the retail price index.

He claimed that return on capital employed should be the yardstick on

which supermarket groups should be judged, and this showed an average

drop from 27% to 20% over the decade, putting it on a par with US and

European groups.

At the same time the discount chains had doubled their market share to

9% with a projected 15% by the middle of this decade, many of the

once-familiar big names had disappeared and one of the majors was still

finding it difficult.

He predicted that total sales space would increase from the present 87

million sq ft to anbout 100 million before saturation occurred in

Britain. But he remained shy about predicting expansion into Europe.

Ian Davis, a partner in the consulting group, McKinsey & Co, suggested

that British retailers should put more effort into Brussels lobbying

efforts to ease the transition into Europe either by creating new stores

or by acquiring existing companies there.