Tesco-Booker outline £200m savings strategy

Tesco CEO Dave Lewis announced the company’s integration programme with Booker is on track to deliver its £200m annual savings target.

The company's 'Joining Forces' programme will include £60m of savings this year, £140m next year and £200m every year after. Transport logistics and buying were the major areas for savings highlighted by the CEO during a meeting with investors.

Asked whether this would include requiring suppliers to reduce Booker prices to where Tesco had a preferential price and vice versa, Lewis said: “There are opportunities, but it's always with the supplier to set the price of their product.”

Suppliers at Nisa’s annual exhibition in Stoneleigh this week told Retail Express that the Tesco-Booker squeeze had already begun. “We’ve got to reduce our dependency on Tesco-Booker. There’s a lot of pressure on pricing at the moment,” said one.

Another said: “It was always inevitable that this would happen, from the moment the deal was approved.”

Former Landmark Wholesale MD Martin Williams previously told Retail Express: “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."

Despite the recent pressure, Tesco continues to improve its supplier relations according to independent analysis by the Grocery Code Adjudicator.

Discussing the other major cost saving focus, Lewis said: “One of the challenges on our mind is distribution. We need to work that through with the Tesco, One Stop and Booker networks."

The update on Tesco-Booker’s integration came as the company announced a strong set of annual results. Operating profits increased by more than a quarter, sales in Tesco Express stores rose by 2.7% and Booker’s like-for-like sales rose by nearly 10%. The period covered by the results ends before the two companies began trading as a single entity.

Booker’s full results are pending auditor approval and are yet to be announced.

Read more: What retailers can expect from a combined Tesco-Booker.