Will the competition watchdog back the deal?
Tesco already controls nearly 30% of the UK grocery market – nearly twice as big as its closest rival, Sainsbury’s. It operates about 1,750 Tesco Express convenience stores and 780 One Stop outlets in the UK as well as more than 900 supermarkets.The merger would give Tesco access to 5,400 more convenience stores in Booker’s brand groups and a further 2% share of the UK grocery market.
Tesco already has a 17% share of the convenience store sector, according to Euromonitor, and the merger with Booker would take that up to 27%. The Co-op, its nearest rival, has a 15% market share.
Tesco believes the merger will get the green light from competition authorities because it will not own the thousands of stores supplied by Booker. In theory, it would not be able to control prices in these stores as they are run and owned by independent operators.
It may also be hoping that the regulator will look at the grocery market as a whole, rather than separating out the convenience sector. When Tesco bought T&S Stores, the owner of the One Stop chain, in 2002, the deal was cleared because regulators judged the convenience store market to be separate from the supermarket business. But its view may have changed.
However, the deal would add to Tesco’s already massive power with food manufacturers, farmers and brands.
What does it mean for shoppers?
In theory, Tesco’s better buying clout and more efficient operations should lead to lower prices for shoppers.However, in some areas Tesco could control the supply of groceries and alcohol, not only to its own local supermarket and Tesco Express but to dozens of local independent convenience stores, cinemas and cafes. Such widespread power could reduce competition and keep prices high.
Read more
