The announcement of Tesco’s bid for Booker surprised many - not least the thousands of independent retailers and small businesses that have been using Booker as their primary source of supply for many years.
For independents, the big question now is: can the mantra put forward by Booker since the early 1990s of “we have no retail businesses competing with you” be trusted when Booker is replaced by Tesco as your primary source of supply? Will Tesco keep prices at a level in its stores and at Booker to allow independents a fair, living margin? And will there be a commitment to not go below Booker prices when a product is on deal?
Suppliers will continue to trade with both Tesco and Booker. Nevertheless, there are some immediate short-term actions to take, particularly looking at current pricing between both businesses and setting up a negotiating team to succeed in the upcoming negotiations. A ‘health check’ must be undertaken on terms offered across all customers to ensure defensibility. Terms must be harmonised between Booker and Tesco, closing that current 5%-8% gap. If Tesco delivers on its promise of benefits for independents, will that be through better pricing? If so, then the margin pressure will increase across the industry with either prices down and margins squeezed even further - or requests for improved terms and investment from all suppliers. It is crucial that suppliers start preparing for either scenario right now and ensure they are fully aligned internally to deal with these inevitable negotiations. Get ready now.
As for potential opportunities arising from the deal, one key area to focus on is potential expansion from other wholesalers and buying groups. Is there going to be a mass exodus of die-hard indies from Booker, and where would they go? Are wholesalers and buying groups prepared to expand within other areas to ensure that one of their critical routes to consumer is serviced as they would want? Furthermore, could foodservice wholesalers provide excellent, non-multiple retail supply to independents? Bidvest, to name but one, has a great deal of ex-Booker experience in both buying and sales.
Finally, it’s a good time to develop those direct independent relationships. Is your field sales team prepared with a brief, a fact-sheet about your support for their unique channel? You have to ensure your in-house and external field teams are kept fully aligned with your strategy at this key time of change.
Mark Grice is a partner at Total Negotiation
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