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Proposed Tesco – Booker merger comes under scrutiny

Tesco is coming under intensified scrutiny for its £3.7 billion merger with wholesaler Booker, which was revealed from apparently out of the blue at the end of January and seemed designed to strike fear into the hearts of beleaguered suppliers.

 

While Tesco is the UK’s largest supermarket chain, Booker Group plc is the country’s largest food wholesaler, supplying over 400,000 customers with branded and private-label products.

The UK’s Competition and Markets Authority is likely to closely examine the deal, which will see Tesco controlling as much as a quarter of the British food market. Tesco and Booker are attempting to offset concerns by pointing out that the 5,463 convenience stores Booker supplies – including Londis, Premier, Budgens and Happy Shopper – are owned and run by franchise holders, but the prospect of a behemothic, Walmart-style operation still looms large.

The Budgens and Londis chains became part of Booker in May 2015 when the group acquired Musgrave Group in a deal worth £40 million.

Responding to the announcement the Association of Convenience Stores Chief Executive, James Lowman said: “The Tesco and Booker merger is a hugely significant deal that demonstrates how important independent convenience stores are to the UK retail market.  Ten years ago, pundits were forecasting the demise of independent retailers at the hands of big competitors like Tesco, so the decision by Tesco to invest in supplying those same retailers shows that the independent sector is highly relevant and sustainable.

“Convenience stores are becoming more important to consumers’ daily lives, as they look to shop little and often and to access products and services close to where they live and work.  Consolidation in the supply of goods to independent retailers has long been predicted, indeed Booker bought a major wholesale competitor in Musgrave less than two years ago.

“Some retailers will welcome this news, others will be concerned about competing with stores supplied through the merged Booker and Tesco business, and some will be uneasy at the prospect of working in partnership with one of their biggest historical competitors.  The Competition and Markets Authority will look at all the implications of this merger, and we will assist them in any way we can.”