With the merger of Tesco and Booker approved by the CMA, what can suppliers expect from Tesco Booker in future?
Suppliers have had a year to get ready for the inevitable discussion on pricing and terms between Tesco and Booker, but many organisations we work with have left it until now to get ready for this important negotiation. We know that retail is very short term, but I always thought manufacturers planned at least a year out……. maybe everyone was thinking “this will never get approved”, but the CMA didn’t seem to mind. I am sure not even the CMA anticipated the seismic, irreversible impact that their decision would have on the wholesale / C&C channel.
The interesting part is yet to come, everyone is waiting to see how a reinvigorated Booker will exert its new-found pricing influence in the RTM channel and how under the Tesco banner they will look to reward and retain key independent retailers, given the skewed David and Goliath scenario that now faces the indies.
In the meantime, the negotiation bell has rung and round 1 is underway. Tesco is looking for net price equalisation, and leveraging scale advantage to secure more attractive prices. Suppliers that rushed into “back to front” margin 3 years ago are now kicking themselves as the inevitable pendulum swing has begun, with Tesco looking secure retrospective growth incentives for the combined entity. The stated target of £200M in synergy savings over the next 3 years seems modest given the scale of pricing disparity that is out there. This reinforces the benefit of having a defensible pricing structure in place.
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