It’s not just Tesco shareholders who are struggling to understand the merits of the Tesco-Booker merger.
A new survey from Him! shows the majority of Booker retailers - independents operating under the Budgens, Londis and Premier symbols - don’t know what to think about the deal, with many still sitting on the fence despite Booker’s nationwide roadshows.
According to the survey, as many as 43% of Budgens, Londis and Premier retailers were persuaded that the competition regulators should let the deal go ahead, but 22% still wanted it blocked and 34% weren’t sure.
Londis retailers needed the least convincing: as many as 51% were comfortable with the deal. But almost half thought it should be stopped (24%) or didn’t know (24%).
Premier retailers needed more convincing: 42% didn’t have a problem with the deal, but 31% didn’t know, with 24% again wanting it stopped.
The most undecided were Budgens retailers: while only 10% thought the deal should be approved, none wanted it blocked, with the remainder (90%) not sure.
But if Budgens retailers were the least certain from a regulatory point of view it was Londis and Premier retailers who were the most concerned about the impact: while 36% of Londis retailers said it would be easier to succeed, 27% said it would be harder. And 40% of Premier retailers - the biggest percentage of Booker’s independent customer base - said it would be harder, while 29% said it would be easier. Conversely, 40% of Budgens retailers thought a Tesco-Booker merger would make life easier, with the remaining 60% believing it would have no impact.
James Lowman, CEO of the ACS, was not surprised at the level of uncertainty: “Everyone is looking at how the CMA view this deal because there haven’t been any deals of this nature in the UK. There have been lots of acquisitions of convenience stores in the past but no one in the UK has bought a large wholesaler servicing thousands of independents through multiple symbol operations.
“Everyone is waiting to see. There are so many ways in which it might play out. Just how that new combined group goes about serving independent retailers - whether they’re branded or not - no one can be entirely sure.”
The uncertainty among retailers in the Him! survey mirrored the findings of a larger survey conducted by Bestway across the independent retail sector, in which 72% of retailers, including 70% of Booker retailers - said they were not sure if the merger would be good for the independent trade.
Martin Race, managing director of Bestway, said its findings were not a surprise. “Tesco promised the takeover of One Stop would deliver a number of benefits, with Tesco’s then-CEO Sir Terry Leahy promising ‘significant improvements for customers, lower prices overall, and improved service’. But a recent survey by ACS showed Tesco was charging 14% higher prices for groceries to One Stop than at its own stores.”
In terms of benefits, 51% of Booker retailers saw cheaper prices as the biggest opportunity of a Tesco-Booker merger, with product quality (16%), choice (13%) and customer service (12%) some way behind. Access to new technology was valued by only 1%.
While the jury was still out on how much lower prices would be, one Budgens retailer said it was unthinkable that Tesco-Booker would not offer more competitive prices. “It would be counterproductive,” he said. “We would all leave. All I would say is that after Booker acquired Musgrave we quickly saw a double-digit improvement in the margin. But we will wait and see. This deal is different.”
Booker declined to comment.
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