Supply chain · 27 January 2017

Tesco’s command over food industry secured with latest acquisition  

Tesco
The deal could see Tesco take on leading restaurant chains

Tesco is acquiring the UK’s biggest food wholesaler, Booker, in a £3.7bn deal that will create the country’s largest active food industry operation.

The deal, which is still to receive approval from the Competition and Markets Authority (CMA), will see Tesco take over thousands of UK firms currently owned by Booker.

The wholesaler’s operation is currently reported to be supplying food to around 450 UK caterers and 12,000 retailers, as well as 900,000 small businesses.

Booker-owned brands include well-known restaurant chains like Carluccios and Wagamama, as well as convenience stores such as Budgens and Londis.

The acquisition may also see Tesco rollout its click-and-collect service to a possible total of 8,000 new locations, as the supermarket seeks to meet consumer demands both “in home and out of home”.

In a statement, Tesco CEO Dave Lewis said that the move “will bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, as well as delivering significant value to shareholders.”

Ensuring Tesco’s dominance in the convenient food industry, Lewis said the move would create “the UK’s leading food business, with combined expertise in retail, wholesale, supply chain and digital.”

He added: “Wherever food is prepared and eaten, we will meet this opportunity with the widest choice and best service available.”

The move from Tesco to diversify its operations has come as a surprise to some retail analysts. John Colley, a retail best practice expert at Warwick Business School, hass said that the Lewis is “chasing distractions before the job is finished” for Tesco in the supermarket trade.

“Tesco, with 28 per cent of the grocery market, is everyone’s target,” added Colley. “Lewis would do well to focus on continuing [the supermarket’s] recovery, as the industry is likely to remain highly competitive for a long time to come.”

Senior equity analyst at Investec, Gary Hobbs, has said that the deal is likely to face some heavy scrutiny by the CMA.

He said: “Lewis was confident that CMA interference would be limited, as Booker doesn’t ‘own’ its stores – they are franchised – and that Tesco will have no influence over pricing. However, having so much of the convenience market in the hands of a single player is bound to raise issues.”

In a further announcement, Tesco has now extended the availability of PayQwiq, its mobile payments app, to every store in the UK.

Available for both Android and iOS smartphones, PayQwiq allows customers to pay and collect Tesco Clubcard points by scanning their phone. The app also provides customers access to their transaction history and gives them their points balance.

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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