Following the surprise announcement that Tesco is buying Booker for £3.2bn, Professor Alan Braithwaite, Chairman of supply chain and logistics consultancy, LCP Consulting (that works with many of the top ten retailers in the UK) points out that this deal has industrial logic.
Mr Braithwaite says: “The big win is that it takes Tesco into the food service arena which is the food growth market – people are eating out and institutional catering is still growing. It will give the business the platform to further challenge in that market. It will allow the Booker side of the enterprise to leverage procurement and inventory so there is a margin opportunity too. This is especially important in the light of food inflation that is now accelerating with the weaker pound.
“Looking longer term, if the deal goes through, there are major operational opportunities to integrate fulfilment networks using Tesco’s capabilities for e-commerce but adding services and accelerating response times, enabling click and collect and integrating food service deliveries. So, the competitive advantage could be compelling.
“Booker own or control Londis, Premier and Budgens retail chains/facias – so there may well be a Competition Commission complaint based on Tesco’s high convenience store and market share already. This is contrary to the published statement by Tesco. However, the Competition Commission has historically struggled with the market place segmentation in food and grocery – so it is difficult to anticipate any ruling.”