This week, two game-changing deals were given the go-ahead. First came the Co-op’s takeover of Nisa, voted for by a 75.79% majority of Nisa’s member shareholders, scraping past the required 75%. Hot on its heels followed the highly anticipated green light by the Competition and Markets Authority (CMA) of supermarket giant Tesco’s takeover of Booker.
While opinion is divided on the merits of each deal, one fact is clear: not since the entry of the discounters to the UK has food and drink retail experienced this level of disruption. Yet to play out in convenience is who the winners and losers will be in the years ahead.
Many experts, like retailer and consolidation forerunner David Sands, believe the Tesco-Booker deal will increase competition in the market (see comment).
However, Molly Johnson-Jones, senior food & grocery analyst at GlobalData, says the CMA has “massively underestimated” the impact the merger will have and the crossover between Booker and Tesco businesses – a point the CMA denied in its review.
“Booker is a large business and 70% of it does cross over with Tesco. Booker retailers are going to have a strong pricing advantage from Tesco. This is going to create more pressure on margins.”
Independent retailers were going to struggle for the next three years, Ms Johnson-Jones predicted, adding that price rises due to Brexit are already making an impact, alongside wage increases.
David Charman, of Spar Parkfoot Garage in West Malling, Kent, shared similar concerns.
“It’s probably a good thing for retailers under the Booker banners – they must be excited, but long-term it’s going to produce less competition in the market, which is never a good thing,” he said.
Retailers, especially those running family-branded businesses, have expressed concern over how the Co-op’s offer will sit in their stores.
Mo Razzaq, of Premier Mo’s in Glasgow, is one of those Booker retailers who expressed his delight at the deal going through. “It’s good for pricing, availability and the product range. Footfall has dropped since the tobacco legislation and this merger could be one of the answers to bringing footfall back,” he said.
If Nisa shareholders were uncertain about how to vote on Monday, they may be breathing a sigh of relief today. For some, the Co-op’s takeover may be, as one retailer described it, “the death of independent retail as we know it”, but the deal (yet to be ratified by the CMA) may now also futureproof the business in the wake of Tesco-Booker.
“It’s the right result. I am very excited for the future of retailing,” said Harj Dhasee, who runs Mickleton Stores in Gloucestershire.
However, other retailers, especially those running family-branded businesses, have expressed concern over how the Co-op’s offer will sit in their stores.
Jack Matthews, who runs Bradley’s supermarket in Quorn, said: “It’s the one thing that had me holding back. We’ll have access to a 21st century product range, but my worry is how I can brand our family store and keep it in the right light.
“There’s a lot of work from the Co-op and Nisa to support retailers to help us keep that family fascia.”