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Tesco’s deal with Booker: Attempt to control the UK food supply chain?
The deal, announced in January 2017, grants several benefits to Tesco. It means that the incumbent retailer can expand even faster in the UK food convenience sector, the fastest growing part of the grocery market for a number of years.
The merger with Booker will also give the retail giant the access to a new territory – the “out-of-home” eating market, as it will be taking over the supplier to a string of restaurants and cinemas. This is a new area for Tesco, but one that accounts for around a third of Booker’s sales.
If Tesco is true to its word, the deal will also benefit the shoppers, offering them more choice when they visit their local convenience stores. The combined business will also have a network of 8,000 click and collect points, making it more convenient than ever for online grocery shopping. The company also claims the tie-up is also a win for its suppliers with more customers to sell to.
An investigation into the deal will need to conclude that it will be good for the industry for it to go ahead; as concerns have arisen that it will strangle competition in the convenience store market, which is already quite consolidated. Tesco is already by far and away the biggest player in the market and may become too dominant after adding newly acquired retail outlets.
The retail chains, worrying about Tesco’s sprawling control of the nation’s grocery supply chain, are expected to lobby the competition watchdog to show that Booker and Tesco do have influence over the stores and a greater purchasing power will only heighten this.
It remains to be seen if the deal gets approved and whether the “synergies” promised by the deal will keep a lid on price rises, or whether the takeover will in fact give independent retailers less choice in who supplies their goods and hand yet more power to Tesco.