In light of Tesco, the country’s biggest supermarket group, announcing a surprise £3.7 billion merger with the food wholesaler Booker, here are Colliers International’s reactions to the news from the Retail and Industrial and Logistics sector.
Colliers Head of Retail Capital Markets, James Watson, commented: “The industry has seen a trend of mergers and acquisitions of late, with Morrisons and Ocado partnering-up, and Sainsbury’s acquiring Argos (The Home Retail Group). By merging with Booker, Tesco’s is now set to be one of the UK’s leading retailers in the convenience store sector, seeing as the wholesaler owns Budgens, Londis and Premier. It will be interesting to see how this is dealt with by the Competition and Market Authority.”
Tom Edson, Director in Colliers International’s Retail Capital Markets, added: “As a wholesaler, Booker supplies some of the biggest restaurant brands throughout the country with produce, such as Wagamamas and Byron Burgers. This merger will definitely help boost sales for both companies going forward.
“After Morrison’s, Tesco was the second best performing grocer over the Christmas period, with sales up by 0.7 per cent. It’s highly likely that in 2017’s festive period results we’ll see these figures increase again.”
Steve Burnaby, Director in Colliers International’s Retail Agency, commented: “Albeit Booker and Tesco have announced their merger today, Booker do not operate the convenience stores they have previously acquired (Londis, Budgens and Premier), meaning Tesco’s have merged with the wholesaler brand, rather than convenience stores (which operate as franchises).
“This deal means that convenience stores will now be buying Tesco-Booker products, which will allow them a wider product range, but it’s yet to be known if this will have any effect on the pricing of goods, not only for consumers, but also for the independent owners of these stores. The Tesco-Booker buying power of where they buy their produce from, will affect the economies of scale (i.e. product margins may increase and Tesco-Booker may be able to get a better deal/more volume for their money). It’s unknown if this will be passed onto the convenience store owners, however it’s deemed unlikely it will do.
“It’s known that Musgrave, Budgens parent company, has been selling their stores over the past few years, however today’s (27 Jan. 17) merger will not have a huge ‘race for space’ impact on the market, and there will be minimal effect on what the customer sees.”
Industrial and Logistics:
Len Rosso, Head of Industrial and Logistics at Colliers International says: "We can understand Tesco's perspective on going back to its traditional food retail roots. In addition, Booker and Tesco evidently have aligned synergies and the wholesaler has been able to turn around its past debt issue so from the supermarket's standpoint, this is an attractive business move and makes core sense.
"What will be interesting to see is the outcome, particularly in terms of Booker's 172 wholesale sites, which are due to be brought into the Tesco remit. They are all in good locations but whether Tesco will move them away from here and turn the sites from wholesale into supermarkets will be the question on everyone's lips."