A bright side to the Tesco-Booker merger

I wonder how many people read the wholesalers & independents pages in The Grocer for the first time last week. The real makers and breakers of fortunes have always been the mults, and suppliers have set out their propositions to reflect that. Even when planning cost price increases, the start point is: ‘How will Asda and Tesco react?’.

With 6,000 suppliers in financial distress, many are hoping the Tesco-Booker merger will be blocked. I’m assuming it goes through and that members will get cheaper prices from Booker. It says they will and it makes sense as, if it gets it wrong, it stands to lose some 25% of indies who think the merger is ‘bad news’. Tesco/Booker can’t allow that.

So here’s some good news for suppliers if I’m right. Tesco was already double the size of its nearest competitors and this barely changes that. Big businesses deserve their buying power and Tesco’s 10% more buying power for 10% bigger opportunities won’t bother the organised, skilled suppliers who will play hard and win bigger. It’s also good news for so many suppliers who have not broken into the mults but have a strong C&C business. If they play it right with Booker, the route to stardom is so much easier.

 

’Can Tesco really get control of independents’ PoS?’


The confectionery, snacks and drinks businesses with, say, 30% of sales in impulse might be the worst affected by pricing harmonisation as they’ve no doubt propped up margin through the wholesalers and independents where the less price-sensitive shopper occasions gave them permission. There is, however, justification for this and it’s not just about scale. Wholesale’s lack of direct influence over the retail point of sale means suppliers need expensive field agencies, display units and price-marked packs. The new Booker/Tesco would need to prove it has this under control to argue parity pricing in wholesale and you need the strength to make that point in the harmonisation discussions. Tesco has only just got a handle on the Express/Metro business in the past 12 months. Can it really get that control of independents’ PoS?

More good news: harmonisation discussions since the advent of GSCOP can’t involve any backdating of terms. And while I’m on the subject, I know that many of you struggled with the tougher tactics of the Booker buyers, anyway. At least your volume through them will fall under GSCOP, right? Happy days.

David Sables is CEO of Sentinel Management Consultants

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