Supply chain · 7 March 2018

Is Tesco’s £3.7bn Booker takeover a fair deal for small business owners?

Tesco is expected to integrate Booker Group’s wholesale expertise into its chain of supermarkets

As supermarket giant Tesco completes the acquisition of cash-and-carry chain Booker, the Federation of Small Businesses (FSB) has set out its expectations of the new food powerhouse.

The cash and shares deal saw Britain’s largest retailer combine with the country’s biggest wholesaler to create what is expected to be a “new powerhouse” in the UK’s £200bn food market.

Tesco has also announced the start of a “Joining Forces” programme to ensure a smooth integration of the two firms, with several leading figures of either business crossing divides.

However, concerns were raised that the creation of a new leading food group in Britain would put small business owners at a disadvantage, potentially restricting access to wholesale stores as well as diminishing competition in the groceries sector.

Commenting on the Booker takeover, Mike Cherry, FSB chairman, said discussions with the Competitions and Markets Authority (CMA) had begun to allay fears of a reduced level of service for small business owners seeking supplies.

“We originally spoke to the CMA about assessing this acquisition at the start of last year amid concerns about its potential impact on small firms that buy from Booker and compete with Tesco,” he explained.

“It’s critical that this takeover does not result in any deterioration of service for small retailers that buy from the wholesaler or create a market player that dominates..

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Cherry added that while the CMA’s investigation had reassured small businesses, the FSB would “keep an ear to the ground for any indication that smaller firms that directly compete with the supermarket giant are in any way disadvantaged”.

He added: “Done right, we recognise that there could be real benefits for small businesses from the deal – a more efficient ordering framework, lower prices, more frequent deliveries, improved food waste and better access to fresh produce.”

Cherry suggested efforts made by Tesco to repair its relationship with its own supply chain indicated a positive start.

He added: “We’ve already seen promising efforts from Tesco to recover its reputation among small businesses, such as working with FSB to improve its payment practices for small suppliers.

“We hope to see the same consideration of small firms taken forward by Booker under its new ownership.”

Retail expert Steve Dresser used Twitter to demonstrate how the Booker takeover was already visible in Tesco stores.

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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