Buy the Booker

In last week’s New Europe, I talked about the increasingly favourable conditions for vertical integration of supply chains. This week Tesco announced a proposal to acquire Booker for £3.7bn. Through bolting on the wholesaler to its business, Tesco is taking out risk and cost (£175m) and softening competition from suppliers. At a point where the tension is rising between manufacturers and retailers over who should bear the brunt of cost inflation, this feels like a shrewd move. However, there may well be fall out as the competition regulators wade in. Although this is not a typical retailer merger, where combined store ownerships creates local monopolies, Booker’s ownership of its franchised Budgens and Londis offers may well come under scrutiny.