BLACKFRIAR: Grocery industry consolidation must work for producers and consumers

The Silicon Valley mantra of '˜move fast and break things' seems to be increasingly permeating the thinking of the upper echelons of our grocery market.
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Sainsbury's

The industry’s principal

players seem to be increasingly looking to reinvent the rule book with ever more outlandish and far-reaching changes and deals.

The trend really seemed to kick into gear at the start of the year with Tesco’s unheralded swoop to purchase cash and carry giant Booker.

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The £3.7bn merger is to face a rigorous probe from watchdog the Competition and Markets Authority but has also been placed on a so-called fast track scheme with initial stages to be concluded by the end of the month.

While there has been some shareholder disquiet at the merger, analysts have queued up to praise it as a good long-term strategy for the business.

As the UK’s largest cash and carry operation, wholesaler Booker also owns the Londis and Budgens convenience store brands, as well as Happy Shopper and Premier.

If it successfully gets its marriage to the UK’s biggest retailer over the regulatory hurdles, the resultant merged entity will boast a massive market capitalisation and be a retail force to be reckoned with.

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The matter will have been a hot topic at yesterday’s AGM for Booker and you can sure it will be a regular fixture of our business pages in the forthcoming weeks.

It comes just 24 hours after the boss of Tesco’s nearest competitor Sainsbury’s declined to be drawn on its widely-understood game plan to snap up the Scunthorpe-based Nisa chain of convenience stores.

The supermarket is currently in high-level talks with regards to the acquisition of Nisa’s 2,500 outlets around the nation, with the deal widely understood to be hovering around the £130m mark.

While a fraction of the cost of the Tesco/Booker deal it would still enhance Sainsbury’s floorspace presence significantly in the UK.

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Then in turn was followed by today’s news from online grocer Ocado, who praised fellow web-based chain Amazon for its attempt to buy the Whole Foods chain in the US.

The news of the deal positively impacted upon Ocado’s shares despite a slump in its own profits as its bosses, and investors, clearly regard the £10.6bn takeover bid from Amazon as being likely to facilitate more partnerships abroad.

Ocado’s deals with Bradford-based Morrisons and Waitrose have kept the whole industry, which has frantically sought about modernising its offering in the past decade, very much on its toes.

The race towards online shopping, be it click and collect or direct delivery, has been an imperfect one, with all of the Big Four having succumbed to complacency at some stage.

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The supermarket industry, as one of the Big Four’s top bosses told me last year, is one for adrenaline junkies (something it shares with that of people working in journalism I can assure you).

The disruption caused by the rise of discounters and internet shopping has threatened the industry like it has never been threatened before and all of the Big Four have had very rocky patches in recent years.

Given that Asda and Morrisons are two of Yorkshire’s biggest companies, and that the food industry is one of the bedrocks of our region’s economy, supermarkets are a colossal part of our day-to-day life.

They are far more than places where we buy our groceries given the scale of the employment they offer, both directly and indirectly.

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With so much change and consolidation in the groceries market, we must hope that the regulators ensure any deals being put forward are for the greater good of both the consumer and the supply chain, not just the bottom lines of multi-billion pound corporations.

One thing is clear, the industry does not seem to be showing any signs of calming down any time soon.

Let us just ensure the “move fast” part of the equation plays a greater prominence than “break things”.

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