Food fat-cats at the top of the table: Grocers have climbed the wealth rankings in the teeth of recession, reports Patrick Hosking

ONE curious feature of the latest wealth league table, the Sunday Times 'Britain's Rich' list, is the number of tycoons who have made their pile from food and food-related industries. Oil, you could understand. Property, certainly. Media and computer software or other fast-growth businesses, perhaps. But groceries?

Manufacturing and selling food is rather a dull business. Unlike the oil industry, where a single strike can create an instant Croesus, or property, where fortunes are made and lost on the routing of a new road or railway, groceries are safe but humdrum. Mrs Thatcher famously exploited her humble origins as the daughter of a provincial grocer.

Somehow, the cigar-chomping, Bentley-driving billionaire of popular imagination does not make his fortune meekly knocking out baked beans and frozen peas. He (and pace Anita Roddick, it usually is a he) wheels. He deals.

Yet, after the Queen, the three richest families in Britain have earned their fortunes from food. The Rausing brothers, Gad and Hans, tax exiles from Sweden and owners of the Tetra-Laval drinks cartons and dairy products empire, are said to be worth pounds 4bn. The Sainsbury family, of supermarkets fame, come third in the Sunday Times rankings with a pounds 3.4bn fortune. And Garry Weston, who controls Associated British Foods, which owns Fortnum & Mason and makes Sunblest bread and Twinings tea, is fourth, with pounds 2.1bn.

The food magnates have pushed the traditional plutocrats down the rankings. John Paul Getty II, the philanthropist who inherited a fortune from his oilman father, is now sixth. The Duke of Westminster, the landowner who has the deeds to 300 acres in London's Mayfair, slipped from second last year to seventh.

Climbing rapidly up the table are other food entrepreneurs, such as Kenneth Morrison of the fast-growing William Morrison supermarket chain, based in Yorkshire. The chain is valued at pounds 1.2bn and Mr Morrison and his family are worth pounds 403m, boosting them from 36th place to 18th in 12 months.

As such Mr Morrison, whose mother and father sold eggs and butter from a market stall in Bradford, pips Paul McCartney and is twice as rich as Sir Andrew Lloyd Webber. Better-known multimillionaires such as Lord Forte, Lord Palumbo, Robert Sangster, Lord Weinstock, Lord Rothschild, Sir David Alliance and Paul Hamlyn trail in his wake.

There have been casualties among the food entrepreneurs. The Vestey family, whose Union International meat empire was valued two years ago at pounds 1.3bn, have slimmed down to pounds 500m. However, that company now appears on the mend following a restructuring of its pounds 300m of debts and the recruiting of Tiny Rowland's former lieutenant, Terry Robinson.

Littlewoods, the mail order-to- pools empire owned by the Moores family (ranked 8th equal by the Sunday Times), has just pulled out of food retailing. Last month it struck a deal in which Iceland Frozen Foods - another meteoric food retailer - took over the food halls in its stores.

Food isn't the only way to enter the ranks of the super-rich: betting on Norman Lamont's frailties has done equally well for George Soros. The currency speculator, who punted on a sterling collapse ahead of Black Wednesday, when the pound fell out of the exchange rate mechanism, is said to be worth pounds 750m, and therefore pounds 50m better off than that other corporate gambler, Sir Jimmy Goldsmith.

Even allowing for the inaccuracies of any ranking of the rich (Robert Maxwell was valued at pounds 1.2bn in 1990), food has produced a large number of tycoons in Britain. The obvious reason is that we all have to eat; groceries are the most recession-proof of industries. Bigger empires built on debt or property have crumbled, leaving the decidedly unglamorous food companies supreme. But when the economy recovers, the food magnates will be toppled by industrialists and financiers in faster-growing sectors.

A more sinister explanation is that we pay too much for our groceries, that food manufacturers and supermarket owners are profiteering at the expense of their customers. J Sainsbury made profits before tax in its last full year of pounds 632.2m, overtaking Marks & Spencer to become Britain's most profitable retailer. Tesco is expected to announce pre-tax profits of about pounds 580m when it reports its annual results this morning.

Critics of the industry point to the widening margins made by grocers. Whereas net margins of 3 or 4 per cent were normal 10 years ago, the most successful British supermarket groups now make double that. US and continental food retailers, meanwhile, get by on margins of around 2 per cent. British supermarket shares have performed accordingly. One hundred pounds invested in Sainsbury when it was floated on the stock market in 1973 is now worth pounds 5,344.

But to see David Sainsbury, the chairman, chief executive and largest shareholder, as a rapacious capitalist is misguided. He and the rest of the family (which includes Tim Sainsbury, the industry minister) do receive tens of millions in annual dividend income. But he lives quite modestly. There are no racehorses, no aircraft. Eschewing the Rolls or Bentley, Mr Sainsbury prefers to travel in a chauffeur-driven Chevrolet van. He is also a huge donor to charity.

He argues that supermarkets, including his own, do not make excessive profits. Although margins are high, the return on capital - an alternative measure of profitability - is little higher than average. The bulk of profits are reinvested in building new superstores. In the last two years Sainsbury, Tesco, Argyll (which owns Safeway), Asda and others have all gone to their shareholders for fresh injections of capital to finance aggressive investment programmes.

The Office of Fair Trading keeps an eye on food prices. So far it has refrained from referring the industry to the Monopolies and Mergers Commission. Yes, British supermarket customers are paying a little more than their American and continental counterparts, but that is inevitable if they want the convenient free parking, the wide aisles, the choice of 20,000 lines in a single store, the fresh produce and in-store bakeries, the creches and so on.

As poverty bites, there are signs that people don't want all these extras, or at least that they are no longer prepared to pay a premium price for them. The upmarket supermarket groups are seeing their customer base shrinking and their sales static after stripping out the benefit of new shops. That is despite opening many of their stores on Sundays. Meanwhile, the discounters - shops such as Kwik Save, Aldi and Netto, are growing fast.

Food manufacturers give the same explanation as retailers to explain their rising margins. Tastes have changed. We now demand prepared recipe dishes, rather than basic ingredients. The percentage margin on a ready-to-eat chicken kiev will be more than on a raw chicken. But higher production and distribution costs justify the prices.

The stock market has begun to recognise that the golden years may already be drawing to a close for grocers. And if the powerful supermarkets start to suffer, you can be sure the food manufacturers will be forced to share the pain. Supermarket shares have been on the slide for several months. Since the Sunday Times did its calculations, Sainsbury shares have fallen from a New Year high of 582p to 478p, down another 9p yesterday. About pounds 600m has been wiped from the Sainsbury family fortune in just the last three months. As the stock market gyrates and sentiment swings in favour of a new sector, the era of the food fat-cats will doubtless fade away.

(Photographs omitted)