Retail and wholesale experts, and the current CEOs of Tesco and Booker have predicted vast industry changes now the supermarket and wholesale giants have merged.
Following shareholder approval at both companies last week, Tesco-Booker began trading as a single entity on 5 March. A message sent by Booker to retailers said it would use the deal to improve choice, quality, price and service.
A source within Booker told Retail Express that Booker’s retail partners will begin to see the effects of the deal “within six months”.
This will include the planned £96.25m reduction in buying costs, according to former Landmark Wholesale MD Martin Williams. “The very first thing you do after a deal like this is hit the suppliers, they’ll be on the front line of this deal,” he said.
Lower prices for Booker could also decrease prices for other wholesalers, according to Paul Thomas, senior consultant at Retail Remedy. He explained: “Maintaining volume will be key for suppliers now there are less buyers. This will give wholesalers the strength to negotiate similar terms.”
Thomas added: “It’s going to be tough for the convenience sector. A price war would bring a price focus and lower margins to the convenience sector, even forcing those with traditionally higher-priced models like the Co-op to adapt.”
Williams warned: “Retailers need to be ready for an onslaught of industry change. They need to look at store standards and up their game and customer service in order to compete.”
Today’s Group MD Darren Goldney said it may take Tesco and Booker "a few years" to bring in all the changes the two companies promised. Goldney said independent retailers and wholesalers need to make the most of this period. “We can have our guns pointed at Tesco and Booker. We can bridge the gap as a result of the transitional period to look at how we can offer a better service and supply chain,” he said.
One of the first changes post-merger is likely to be deliveries, according to FMCG consultant Janet Lung Standing. Tesco CEO Dave Lewis and Booker CEO Charles Wilson told investors the two company’s 6,400 delivery vehicles would be merged into one fleet to improve efficiency.
Standing told Retail Express: “This is perfectly logical and one of the easier aspects of the deal to integrate. Will we see Tesco vans supplying independent stores? Absolutely.”
Tesco also planned to deliver Tesco customer grocery orders into Booker supplied independent shops for collection by customers. Charles Wilson explained: “It opens up at least 8,000 click and collect points, where we can combine to give better availability of home and out-of-home food.”
Lewis said this would drive footfall into convenience stores, though he admitted some shop owners are likely to react negatively to the plans.
Booker retailers in favour of the merger said they would refuse to become Tesco click and collect points.
"That’d be a red line for myself and for the other retailers I’ve spoken to,” said one Londis retailer.
Read also: Retailers can use Tesco-Booker merger to stand out, says Today's Darren Goldney