The prospect of the combined Tesco/Booker business using its stronger position to negotiate better buying terms has caused some concern among suppliers. However, Booker’s chief executive Charles Wilson has reported that supplier reaction to the Tesco/Booker merger has been overwhelmingly positive.
“I’ve had loads of support from suppliers,” he said. “What they are looking for is low financial risk, big scale, good growth, an efficient route to market, good information, and we can offer all of that. And the ability to basically buy all production from a field of crops, whether it is catering grade or retail grade, that saves the suppliers a heck of a lot of money. I think you will find that suppliers will get behind it. We are confident it will win for the suppliers.”
The amalgamation is expected to produce cost synergies of £175 million a year, mainly in procurement and distribution. Wilson stated that Booker does not expect any of its regional distribution centres (RDCs) to close, despite there being possible overlaps with Tesco’s own distribution warehouses. “We are expecting to be growing the business and therefore putting more volume through the RDCs, while also sweating the vehicles because there is a real opportunity to do less mileage and actually more drops,” he said.
Wilson also stated that he expected the £3.7 million merger to be approved by the Competition & Markets Authority. “The CMA has to do its job but when it understands that we are really a wholesaler and Tesco is a retailer, it will see that the benefit the enlarged group can bring is actually pro-competition. We think the consumer and our customers will see this is good news because it will help them do a better job for the consumer, so everyone will be happy.”
Along with Booker’s chief executive Charles Wilson and chairman Stewart Gilliland will join the Tesco combined business’s board, and Wilson told Cash & Carry Management that he also expects Booker chief operating officer Guy Farrant and finance director Jonathan Prentis to remain within the enlarged group.
Asked what he would say to those customers who regard this move as a betrayal, given that Tesco is a direct competitor to many of them, Wilson said: “It is not a betrayal. We are very lucky that we are privileged to service a huge customer base and we have earned that. Our customers compete with Tesco on the high street, and they have for a long time, but at the moment the challenges are far more than that – other competition coming at them too, like the Co-op, Aldi, Lidl, and they are seeing rates go up, costs of labour going up, pension auto-enrolment and a whole lot of other factors.”
He added: “If I were running an independent retail store today, be it a Londis, Budgens, Premier or Family Shopper, I would want more support, better price, better quality, better choice, better service to pass on to my consumers in an environment where it is difficult to compete. I would rather have that support from the UK’s leading group than being hung up on the fact that Tesco had some other shops out there.”
Tel: Booker Group (01933) 371000
Tel: Tesco (0800) 505555