tesco booker deal

Tesco is Back

The Tesco we loved to hate has resurfaced with a surprising move to merge with Bookers Group wholesalers.

Tesco‘s confidence, while constant internally, is being shouted from the roof tops again. It is confident in its strategy and prepared to make bold moves. Once that meant buying up space to dominate the UK grocery market. It then evolved into buying retailtainment businesses to keep shoppers in store longer drinking coffee and eating out.

Reality hit and we saw the arrival of drastic Dave. Till now the drastic element has been somewhat tempered, it has been a steady incremental strategy until today. This is the biggest move of Dave Lewis’s tenure to date and one that has its supporters and its critics.

The key critic was non-executive director Richard Cousins who quit over the Bookers deal. He was in a “different place” to the rest of the board, according to Lewis. Perhaps his concerns have been played out across the media today.

Tesco secured a significant slice of the convenience food retailing sector

Subject to CMA approval, Tesco has secured a significant slice of the convenience food retailing sector, the sector that is experiencing the fastest growth. It also secures space in the eating out landscape, from coffee shops to Michelin starred restaurants.

The quiet success story of One-Stop is set to be played out with higher decibels in the coming few years, giving Tesco more than a foothold in convenience food retailing.

How will the grocers respond?

Morrisons took the Amazon route, Tesco the wholesale route, Sainsburys tried the discount route, and Asda, well what of Asda? Asda Christmas trading is expected to be weak, market share is slipping and they do not have any presence in the convenience sector. It will be interesting to see how Asda responds, but respond they must.

Sainsburys will continue to plough its own path, with online and convenience performing well and Netto binned. That said, Sainsburys do need to evolve in line with the customer to remain competitive.

The pros of the deal for Tesco are many

The pros of the deal for Tesco are many: scale, penetration into growth sectors, getting Charles Wilson onto the Tesco board, access to more click and collect sites. In fact it is hard to identify any cons.

For Booker, range and buying strength cannot be underplayed with this deal. It’s customers could also have access to Tesco branded ranges putting pressure on brands to compete on price. Marmite-gate anyone?

It’s a fascinating new chapter in food retail that is opening before us. Let’s not read too far ahead though, surprise endings are much more fun.

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