OPINION: Steve Denham on the Tesco and Booker Group merger

The announcement on Friday 27th January by Tesco and Booker Group telling the world that they were going to merge was of seismic proportions, a huge game changer.

Below is the slide that Dave Lewis, Tesco CEO, used to demonstrate the good fit that Booker will bring to the Tesco business. The big prize it shows isn’t convenience, but 'out of home', a channel to which Booker supplies more than 400,000 locations – from national chains to independent owners.

Thinking about the two businesses, there are striking basic similarities. The big difference is scale. They both source food and other products for distribution across the country, they both create ranges of own label products, they even both stores, just on a vastly different scale.

The big difference is that Booker also provides a distribution service to the out of home market as well as to a staggering number of independent retailers including the four fascia groups it operates.

The big question is: what is in it for the independent store sector? Last March, Ramesh Shingadia and I went on a road trip with Mike Greene to visit four of the now defunct My Local stores. We met in Staines where we talked to the manager, Stuart.

He lamented the loss of the Morrisons meat range that made up a significant part of the store’s turnover when it was an M Local store. As with all the wholesalers who supply the independent channel, Nisa just didn’t have the range that would allow neighbourhood stores to match what the supermarkets can do.

Mike Greene told us that in supermarket-operated convenience stores at least 50% of sales come from fresh meat and produce. For Booker-supplied retailers this may well be the real bonus of this deal, with the potential of a huge boost to their store turnover.

The Brexit question I asked recently was about what your supply chain will look like after Brexit. Put more simply: where will the cabbages that you will be selling in January 2022 be grown?

This January, they are probably grown by a Spanish farmer, but will that still be the case in five years’ time? Currently Booker source around £100million worth of produce a year, but Tesco buying power is on a totally different scale. As they say there is safety in numbers!

I have spoken with three retailers on the Better Retailing team to discover their views. Mo Razzaq, an award-winning retailer who owns two Booker-supplied stores in Blantyre, says: “I am undecided about how this merger will turn out at the moment, but I have known Charles Wilson for many years and he has never failed to deliver on anything that he has said he will do.

"I think that if Charles is allowed to do the things we heard about on January 27th this new relationship will be successful for us.”

One Stop franchisee Joga Uppal, who operates a Coventry store with his brother Aman, said: “When we joined One Stop I initially expected that the corporate nature of Tesco would come through in our relationship with them. We have discovered that this has not been the case. In fact I think One Stop provide us with a very personal working relationship."

Jai Singh operates a Go Local Extra in Sheffield. He told me: “I am a former Premier retailer and still have many friends who operate under a Booker fascia so have some concerns about how this will affect them.

"I know some who are currently investing in their business having developed their plans expecting the Booker relationship that they knew to continue. Now it looks as though this will change radically. I hope that they are properly served by this proposed change in their supply chain.”

One final thought: my wife Lynda reminded me that Tesco is seen in a bad light by many people. The Tescopoly website is still active and campaigning. She added that a store operating under one of Booker’s fascias may find that some of their customers would not be happy about their local shop being part of the Tesco organisation.

If the deal goes through, independent retailers will need to get their marketing story right so that their customers understand why the Tesco lorry is delivering to their store.