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What the Tesco Booker acquisition really means

No point me adding to the general view that Tesco buying Booker is all about taking advantage of the growing popularity of convenience. It is a lot harder today to consider let alone build large traditional supermarkets compared to the mere £3.7bn to acquire the network that supplies stores that already exist.

The Competition and Markets Authority may want to bundle this deal with Tesco’s ownership of OneStop and demand disposals but the overall shape of the enlarged Tesco business will not be affected.

My interest in the deal is in its significance for the boring old supply chain. As inflation starts to bite and prices rise as a result of the weak ‘Brexicated’ pound, then control of the supply chain will be key to protecting margins.

No one is immune and most of us have noticed a general compensating move to raise prices by Aldi and Lidl, and an aggressive response around Christmas from Tesco, Sainsbury’s and Morrison, which resulted in strong results for them all.

A store estate large in number and broad in format and size is the footprint that gives Tesco a distinct advantage over its rivals. The ability to control replenishment is a given. But factor in the ability to forecast against demand based on a much wider set of inputs, including customer behaviour, and Tesco has an unbeatable advantage.

Naturally, this is a great deal of complexity to manage here and we must be in the realms of machine learning if only to manage the highly demanding, yet highly profitable, Fresh segment.

What remains to be seen is whether the Tesco buyers and merchandisers that once lived in an ivory tower, from which other departments were excluded, will collaborate with the supply chain, the marketers and the IT department to get this done.

Grocery retail has a poor reputation on collaboration, and on taking account of key inputs such as customer data (Dunnhumby or no Dunnhumby), but we may be about to see a change – and Tesco looks like it’s leading the charge.



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