DOCSLIB.ORG

Tesco/Booker Merger Inquiry Case Page

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Tesco/Booker Merger Inquiry Case Page Tesco and Booker A report on the anticipated acquisition by Tesco PLC of Booker Group plc 20 December 2017 © Crown copyright 2017 You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government- licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected]. Website: www.gov.uk/cma Members of the Competition and Markets Authority who conducted this inquiry Simon Polito (Chair of the Group) Gavin Robert Robert Spedding Tim Tutton Chief Executive of the Competition and Markets Authority Andrea Coscelli The Competition and Markets Authority has excluded from this published version of the provisional findings report information which the inquiry group considers should be excluded having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure). The omissions are indicated by []. Some numbers have been replaced by a range. These are shown in square brackets. Non-sensitive wording is also indicated in square brackets. Contents Page Summary .................................................................................................................... 3 Findings .................................................................................................................... 16 1. The reference ..................................................................................................... 16 2. The Parties ......................................................................................................... 16 Tesco .................................................................................................................. 16 UK grocery operations ................................................................................... 17 Other operations ............................................................................................ 18 Booker ................................................................................................................ 18 3. The Merger and its rationale ............................................................................... 22 The Merger ......................................................................................................... 22 The rationale for the Merger ............................................................................... 22 4. Jurisdiction .......................................................................................................... 24 5. The counterfactual .............................................................................................. 26 Parties’ submissions ........................................................................................... 27 Our assessment .................................................................................................. 27 Parallel transactions ...................................................................................... 27 Status of P&H ................................................................................................ 28 Conclusion on the counterfactual ........................................................................ 29 6. Market definition.................................................................................................. 29 Grocery retail services ........................................................................................ 30 Product scope ................................................................................................ 30 Geographic scope ......................................................................................... 33 Grocery wholesale services ................................................................................ 38 Product scope ................................................................................................ 38 Geographic scope ......................................................................................... 45 Procurement of groceries .................................................................................... 48 Product scope ................................................................................................ 48 Geographic scope ......................................................................................... 49 7. Introduction to our competitive assessment and existing competition................. 49 Introduction to our competitive assessment ........................................................ 49 Competition in grocery retail services ................................................................. 52 Introduction .................................................................................................... 52 Retail competition .......................................................................................... 54 Competition in grocery wholesale services ......................................................... 65 Introduction .................................................................................................... 65 Variety of grocery wholesale services ........................................................... 66 Key competitors ............................................................................................. 68 Expansion within grocery wholesale services ................................................ 74 Purchasing habits of retailers and volume switching ..................................... 76 Switching symbol groups by retailers ............................................................ 78 Local conditions of grocery wholesale competition ........................................ 80 Effect of P&H entering administration ............................................................ 83 Conclusion on conditions of wholesale competition ....................................... 89 8. Efficiencies and buyer power .............................................................................. 90 Introduction ......................................................................................................... 90 Efficiencies .......................................................................................................... 92 Introduction .................................................................................................... 92 Parties’ submissions ...................................................................................... 93 1 Third party submissions ................................................................................. 96 Our assessment ............................................................................................ 98 Innovation and own-branded goods .................................................................. 108 Range effects .................................................................................................... 110 Application of the Groceries Code of Practice .................................................. 111 Conclusion on efficiencies and buyer power ..................................................... 112 9. Vertical effects: wholesale to retail .................................................................... 112 Introduction ....................................................................................................... 112 The theory of harm ...................................................................................... 112 The framework for assessment ................................................................... 114 National foreclosure strategies ......................................................................... 115 Local foreclosure strategies .............................................................................. 115 Ability ................................................................................................................ 116 Parties’ submissions .................................................................................... 117 Third party submissions ............................................................................... 118 Our assessment .......................................................................................... 119 Incentive ........................................................................................................... 121 Factors relevant to incentives assessment .................................................. 121 Framework for incentives assessment ........................................................ 123 Results of incentives assessment ................................................................ 124 Conclusion on vertical effects: wholesale to retail ............................................. 126 10. Vertical effects: retail to wholesale .................................................................... 127 Introduction ....................................................................................................... 127 The theory of harm and the framework for assessment .............................. 127 Ability ................................................................................................................ 128 Parties’ submissions .................................................................................... 128 Our assessment of local targeting ............................................................... 129
Load more

Recommended publications
  • Checking out on Plastics, EIA and Greenpeace
    Checking out on plastics A survey of UK supermarkets’ plastic habits ACKNOWLEDGEMENTS ABOUT EIA ABOUT GREENPEACE CONTENTS We investigate and campaign against Greenpeace defends the natural We would like to thank The Network ©EIAimage 1. Executive summary 4 environmental crime and abuse. world and promotes peace by for Social Change, Susie Hewson- investigating, exposing and Lowe and Julia Davies. Our undercover investigations 2. Introduction 5 confronting environmental abuse expose transnational wildlife crime, We would would also like like to to thank thank our ABOUT EIA EIAand championingUK responsible with a focus on elephants, pangolins 3. Impacts of plastics on the environment and society 6 numerous other supporters whose 62-63solutions Upper for Street, our fragile Ximporae. Ut aut fugitis resti ut atia andWe investigate tigers, and and forest campaign crimes suchagainst long-term commitment to our Londonenvironment. N1 0NY UK nobit ium alici bla cone consequam asenvironmental illegal logging crime and and deforestation abuse. 4. Methodology 8 organisation’s mission and values T: +44 (0) 20 7354 7960 cus aci oditaquates dolorem volla for cash crops like palm oil. We helped make this work possible. Our undercover investigations E: [email protected] vendam, consequo molor sin net work to safeguard global marine Greenpeace, Canonbury Villas, London N1 5. Results of scorecard ranking 9 expose transnational wildlife crime, eia-international.org fugitatur, qui int que nihic tem ecosystems by addressing the 2PN, UK with a focus on elephants and asped quei oditaquates dolorem threats posed by plastic pollution, T: + 44 (0) 20 7865 8100 6. Summary of survey responses tigers, and forest crimes such as volla vendam, conseqci oditaquates bycatch and commercial EIAE: [email protected] US illegal logging and deforestation for dolorem volla vendam, consequo exploitation of whales, dolphins POgreenpeace.org.uk Box 53343 6.1 Single-use plastic packaging 10 cash crops like palm oil.
    [Show full text]
  • National Retailers.Xlsx
    THE NATIONAL / SUNDAY NATIONAL RETAILERS Store Name Address Line 1 Address Line 2 Address Line 3 Post Code M&S ABERDEEN E51 2-28 ST. NICHOLAS STREET ABERDEEN AB10 1BU WHS ST NICHOLAS E48 UNIT E5, ST. NICHOLAS CENTRE ABERDEEN AB10 1HW SAINSBURYS E55 UNIT 1 ST NICHOLAS CEN SHOPPING CENTRE ABERDEEN AB10 1HW RSMCCOLL130UNIONE53 130 UNION STREET ABERDEEN, GRAMPIAN AB10 1JJ COOP 204UNION E54 204 UNION STREET X ABERDEEN AB10 1QS SAINSBURY CONV E54 SOFA WORKSHOP 206 UNION STREET ABERDEEN AB10 1QS SAINSBURY ALF PL E54 492-494 UNION STREET ABERDEEN AB10 1TJ TESCO DYCE EXP E44 35 VICTORIA STREET ABERDEEN AB10 1UU TESCO HOLBURN ST E54 207 HOLBURN STREET ABERDEEN AB10 6BL THISTLE NEWS E54 32 HOLBURN STREET ABERDEEN AB10 6BT J&C LYNCH E54 66 BROOMHILL ROAD ABERDEEN AB10 6HT COOP GT WEST RD E46 485 GREAT WESTERN ROAD X ABERDEEN AB10 6NN TESCO GT WEST RD E46 571 GREAT WESTERN ROAD ABERDEEN AB10 6PA CJ LANG ST SWITIN E53 43 ST. SWITHIN STREET ABERDEEN AB10 6XL GARTHDEE STORE 19-25 RAMSAY CRESCENT GARTHDEE ABERDEEN AB10 7BL SAINSBURY PFS E55 GARTHDEE ROAD BRIDGE OF DEE ABERDEEN AB10 7QA ASDA BRIDGE OF DEE E55 GARTHDEE ROAD BRIDGE OF DEE ABERDEEN AB10 7QA SAINSBURY G/DEE E55 GARTHDEE ROAD BRIDGE OF DEE ABERDEEN AB10 7QA COSTCUTTER 37 UNION STREET ABERDEEN AB11 5BN RS MCCOLL 17UNION E53 17 UNION STREET ABERDEEN AB11 5BU ASDA ABERDEEN BEACH E55 UNIT 11 BEACH BOULEVARD RETAIL PARK LINKS ROAD, ABERDEEN AB11 5EJ M & S UNION SQUARE E51 UNION SQUARE 2&3 SOUTH TERRACE ABERDEEN AB11 5PF SUNNYS E55 36-40 MARKET STREET ABERDEEN AB11 5PL TESCO UNION ST E54 499-501
    [Show full text]
  • Community-Shops-News
    Village Shops Newsletter - Spring 2017 News from Local Shops: Appleton Shop Has a Re-vamp. On 29th Feb, Appleton-with- Eaton Village shop held a meeting in the Village Hall for volunteers, local users and potential users of the shop, to come and hear all about the exiting changes happening and to make their comments on the changes. Over 100 people turned up! The new improved shop opened on Saturday 8th April. They now have a new inside coffee area, new product ranges (including more locally produced products), increased chilled and frozen stock and a new ‘Epos System’.The refit is costing around £15k, with a £6k grant from the Post Office really helping out. I bet there is a real buzz in in the village… A New Drinks Cabinet for Hanney Community Shop. Hanneys volunteer shop manager, Hazel Abraham, applied to the Post Office Community Branch Fund for a new drinks cabinet. As you can see it is eye catching. Cold drinks sell well to school children and cyclists. For those shops who have a Post Office in your shop, There is still plenty of money in the Post Office Community Branch Fund which you can apply to in order to develop and improve your Post Office business. Example of improvements people have made include a tea room, improved signage, flooring, shelving lighting. Most applications are below £10,000 and sometimes £2,000 and below for outreach services, however it is possible to apply for more than this. Please see the details on the Post Office website. http://postofficecommunityfund.co.uk If you’re not sure what you could use the Community Branch Fund for, you can give the Network Transformation Helpline a call to discuss some ideas on 0845 266 8790 News from Local Shops Continued..
    [Show full text]
  • Driving and Broadening the Business
    ANNUAL REPORT & ACCOUNTS 2014 BOOKER GROUP PLC Equity House Irthlingborough Road DRIVING AND BROADENING THE BUSINESS Wellingborough Northants NN8 1LT BOOKER GROUP PLC www.bookergroup.com ANNUAL REPORT & ACCOUNTS 2014 Booker Group plc Annual Report & Accounts 2014 Financial Statements Booker Group is the UK’s leading food wholesaler. Report Strategic The Group now comprises Booker Wholesale, Makro, Booker Direct, Classic Drinks, Ritter Courivaud, Chef Direct and Booker India. Together we seek to provide caterers, retailers and small businesses with the best choice, price and service via the internet, delivery and cash and carry. Strategic Report Highlights 01 Business Profile and Key Performance Indicators 02 Chairman’s Statement 03 Governance Chief Executive’s Review 04 Group Finance Director’s Report 07 Corporate Social Responsibility Report 10 Risks and Uncertainties 14 Governance Directors’ Report 16 Directors and Officers 18 Corporate Governance Report 20 Audit Committee Report 25 Nomination Committee Report 30 Remuneration Report 32 Statement of Directors’ Responsibilities 50 Financial Statements Independent Auditor’s Report 51 to the Members of Booker Group plc Consolidated Income Statement 54 Consolidated Statement of Comprehensive Income 54 Consolidated Balance Sheet 55 Consolidated Cash Flow Statement 56 Statements Financial Consolidated Statement of Change in Equity 57 Notes to the Group Financial Statements 58 Company Balance Sheet 88 Notes to the Company Financial Statements 89 Directors, Officers and Professional Advisers 92 Notes: This document includes forward looking statements with respect to Booker Group plc’s (the Group’s) plans and its current goals and expectations relating to its future financial condition, performance and results. These forward looking statements sometimes contain words such as ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, ‘may’, ‘might’, ‘will’, ‘could‘ or other words of similar meaning.
    [Show full text]
  • Booker Symbol Retail
    Booker Symbol Retail Insight on shoppers: insight on stores July 2018 © IGD 2018 The UK’s biggest symbol network Premier the biggest single fascia Now encompassing over 5,600 stores the Booker retail symbol network has twice the number of the next largest symbol group or convenience chain in the UK. Total combined estimated retail sales are now £4.5bn. Operating a portfolio of four fascias Booker Booker symbol retail: store numbers symbol has a breadth of offer to meet the needs of a wide range of differing retailer 2017 2018 change needs comprising: Premier* – flexible entry level package for Premier* 3,332 3,343 +11 small stores with supply from cash & carry depots Londis 1,826 1,957 +131 Londis – fully-serviced package for smaller stores supplied through Booker Retail Budgens 159 226 +67 Partners distribution network Budgens – Tailored support package for Family Shopper 63 75 +12 larger stores including an emphasis on fresh Family Shopper – A value-focused package Total 5,380 5,601 +221 offering neighbourhood discount format © IGD 2018 Source: IGD Research * Includes Premier Express fascia variant Page 2 What defines the Booker retail symbol shopper? Top shopper Top-up is the leading mission across all missions in three fascias Tobacco/lottery/news is the second most frequent mission in Premier and Londis Budgens has significantly the largest incidence of evening meal missions Premier has the highest incidence of food- for-now missions % of shoppers on last trip shopping for Premier Londis Budgens Top-up 45 50 59 Evening meal 15 13 35 Food-for-now 26 15 18 Tobacco/lottery/news 41 42 29 © IGD 2018 Source: IGD ShopperVista Page 3 As Booker looks to the future, and the new possibilities presented by its tie-up with Stores of the Tesco, we visited three of its most recently redeveloped symbol retail stores.
    [Show full text]
  • Survey of Retailers
    1 1. Contents 1. Contents ............................................................................................................. 2 2. Executive summary .............................................................................................. 3 Background and methodology ..................................................................................... 3 Key findings ............................................................................................................. 3 3. Introduction ........................................................................................................ 5 Research objectives ................................................................................................... 5 Methodology ............................................................................................................. 5 Sample .................................................................................................................... 5 Participation criteria .................................................................................................. 8 Fieldwork ................................................................................................................. 8 Presentation of results ............................................................................................... 9 Respondent profile .................................................................................................. 10 4. Supply arrangements and local competition .........................................................
    [Show full text]
  • Booker Makro Merger Inquiry Final Report
    Booker Group PLC/Makro Holding Limited A report on the completed acquisition by Booker Group PLC of Makro Holding Limited 19 April 2013 Competition Commission 2013 Website: www.competition-commission.org.uk Members of the Competition Commission who conducted this inquiry Simon Polito (Chairman of the Group) Jeremy Peat Tony Stoller Jonathan Whiticar Chief Executive and Secretary of the Competition Commission David Saunders The Competition Commission has excluded from this published version of the final report information which the Inquiry Group considers should be excluded having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure). The omissions are indicated by []. Non-sensitive wording is also indicated in square brackets. iii Contents Page Summary .............................................................................................................................. 3 Findings ................................................................................................................................ 6 1. The reference .................................................................................................................. 6 2. Industry background ........................................................................................................ 6 Relationship between suppliers and wholesalers ............................................................ 7 Types of wholesalers ......................................................................................................
    [Show full text]
  • Tesco to Buy Wholesaler Booker in £3.7B Deal
    British supermarket giant Tesco is to buy the country's largest food wholesale operator, Booker Group PLC, in a £3.7 billion (US$4.6 billion) deal set to create "Britain’s leading food business". The acquisition is a marked change of direction for the U.K.’s biggest supermarket group, which has been closing stores around the country in a bid to cut costs. The company's CEO Dave Lewis says the announcement shows Tesco has “made significant progress in turning around our UK retail business." Booker shareholders will end up owning around 16% of the combined group under the terms of the deal. In a statement, the companies said they expected the merger to enhance quality food at attractive prices across retail and eating out locations and better serve the fast growing “out-of-home” food market. In addition, the combined group could present a broader market opportunity for suppliers “with strong growth prospects and a clear opportunity to develop better own brand and fresh ranges; cut food waste and increase efficiency by creating a broader, multi-channel partner who can work with producers across their full agricultural crop.” “Tesco has made significant progress in turning around our UK retail business. This Merger with Booker will further enhance Tesco’s growth prospects by creating the UK’s leading food business with combined expertise in retail, wholesale, supply chain and digital,” CEO Dave Lewis said. “Wherever food is prepared and eaten – ‘in home’ or ‘out of home’ – we will meet this opportunity with the widest choice and best service available.” Booker CEO, Charles Wilson, adds: “Booker is committed to improving choice, prices and FreshFruitPortal.com service for the independent retailers, caterers and small businesses that we are proud to serve.
    [Show full text]
  • Interplay of Socioeconomic Status and Supermarket Distance Is Associated with Excess Obesity Risk: a UK Cross‐Sectional Study
    Int. J. Environ. Res. Public Health 2017, 14, S1 of S2 Supplementary Materials: Interplay of Socioeconomic Status and Supermarket Distance Is Associated with Excess Obesity Risk: A UK Cross‐Sectional Study Thomas Burgoine, Joreintje D. Mackenbach, Jeroen Lakerveld, Nita G. Forouhi, Simon J. Griffin, Søren Brage, Nicholas J. Wareham and Pablo Monsivais Table S1. Details of the food outlet classification system used, according to primary retail function, with UK examples of chains and types (where applicable). This seven point food outlet classification system was derived from a more detailed 21‐point schema published by Lake et al (2010) [1]. Type of Outlet Common Defining Characteristics; Chain and Type Examples Food orders are taken by wait staff Food served to be consumed on the premises Food delivered to the table Restaurant Food paid for after eating Type: by cuisine, pizza, burger, fine dining; by origin, British, Chinese, Italian, Indian, American Chains: Pizza Express, Gourmet Burger Kitchen, Pizza Hut, Nando’s Sells limited range of groceries, newspapers/magazines, snacks, drinks, lottery, tobacco and alcohol products Convenience Often have extended opening hours store Usually small in size Type: convenience stores, newsagents, frozen, discount Chains: Londis, SPAR, Nisa, Premier Stores, Heron Foods, Poundland Departmentalised, self‐service mutiple chain store selling a wide range of groceries and household goods Supermarket Type: large, small Chains: Tesco, Sainsbury’s, ASDA, Morrisons, the Co‐operative, Waitrose, Aldi,
    [Show full text]
  • Differences in Expenditure and Amounts of Fresh Foods, Fruits and Vegetables, and fish Purchased in Urban and Rural Scotland
    Public Health Nutrition: 20(3), 524–533 doi:10.1017/S1368980016002688 Differences in expenditure and amounts of fresh foods, fruits and vegetables, and fish purchased in urban and rural Scotland Baukje de Roos*, Ferdinando Binacchi, Stephen Whybrow and Alan A Sneddon Rowett Institute of Nutrition & Health, University of Aberdeen, Foresterhill, Aberdeen AB25 2ZD, UK Submitted 5 April 2016: Final revision received 28 July 2016: Accepted 30 August 2016: First published online 5 October 2016 Abstract Objective: To quantitatively analyse expenditure on all fresh foods, fruits and vegetables (F&V) and fish across urban and rural households in Scotland. Fresh foods were chosen since, in general, they are perceived to contribute more to health than processed foods. Design: Descriptive analysis of purchase data of all foods brought into the home during 2012 from the Kantar Worldpanel database. Purchase data were restricted to fresh, unprocessed and raw foods or ‘fresh to frozen’ foods where freezing was part of harvesting. Total household purchases were adjusted for household size and composition. Setting: Scotland. Subjects: Households (n 2576). Results: Rural households reported the highest expenditure per person on fresh foods and F&V, but also bought the most (kilograms) of these items. There were linear trends of average prices paid with urban–rural location (P < 0·001), with average prices paid by large urban and remote rural households being £2·14/kg and £2·04/kg for fresh foods, £1·64/kg and £1·60/kg for F&V and £10·07/kg and £10·20/kg for fish, respectively, although differences were quantitatively small.
    [Show full text]
  • BOOKER GROUP PLC (“Booker”) MODERN SLAVERY STATEMENT Our Business and Structure Booker Is the UK's Leading Food Wholesaler
    BOOKER GROUP PLC (“Booker”) MODERN SLAVERY STATEMENT Our Business and Structure Booker is the UK’s leading food wholesaler. The Group comprises:- Booker Wholesale/Makro - Booker Wholesale/Makro, our cash and carry businesses serve:- 441,000 catering customers and 641,000 small businesses. Our catering customers include restaurants, fast food outlets, licensed premises and cost centre caterers. These can be independent single site locations, Group Accounts and National Chains. All customers can draw upon the Booker, Makro, Classic Drinks and Chef Direct infrastuctures; Chef Direct – Our Chef Direct business serves national accounts from our distribution centre in Didcot; 94,000 independent retailers. Our largest retail customers tend to be our Premier, Londis, Budgens and Family Shopper symbol group members. We also serve our retail club members, unaffiliated independents and retail national accounts. Premier – Premier, Booker’s symbol group, serves 3,306 independent retailers; Family Shopper – Family Shopper is our local discount format and we currently serve 63 independent retailers trade under this format; Budgens & Londis – Budgens serves 156 retailers. The Budgens consumer is typically ABC1. Londis serves 1,850 retailers with approximately 49% of consumers being ABC1; Booker Direct – Booker Direct serves national retail chains from our distribution centres, with customers including Marks & Spencer, most of the cinema chains in the UK and the prison service in England and Wales; Ritter Courivaud – Ritter-Courivaud is a speciality foods supplier to the UK’s leading restaurants; and Booker India – In September 2009 we opened our first business centre in Mumbai. We now have four branches in Mumbai, one in Surat and one joint venture branch in Pune.
    [Show full text]
  • Booker (Not Covered) and Conclude That It Creates Value 44 20 7888 6531 Financially and Strategically
    30 January 2017 Europe/United Kingdom Equity Research Food Retail Tesco (TSCO.L) Rating UNDERPERFORM Price (27 Jan 17, p) 206.55 ACQUISITION Target price (p) 160.00 Market Cap (£ m) 16,884.7 Enterprise value (£ m) 27,134.1 Adding value… and complexity and risks Target price is for 12 months. Research Analysts ■ A beneficial acquisition. We have analysed Tesco's proposed £3.7bn Stewart McGuire, CFA acquisition of Booker (not covered) and conclude that it creates value 44 20 7888 6531 financially and strategically. The deal is accretive starting in year two, before [email protected] peak synergies are realised and also helps de-lever the balance sheet. The improved multi-channel logistics network will allow Tesco to improve efficiencies, lower food waste and enhance returns along the value chain. ■ New deal, new challenges. Unlike a more straightforward retail transaction (such as Sainsbury/Argos or Ahold/Delhaize), adding wholesale to retail is more complicated: it increases complexity and adds risk. While logistics and sourcing are the basis for the synergies, the differing customer bases and requirements means that integration will require more effort and nuance. Independent stores may be less inclined to buy from the wholesaler that operates the competitor across the street. The way Booker will be managed within Tesco has not yet been defined, nor has the role of Charles Wilson, Booker's well-regarded CEO. ■ Core problems remain. The transaction has almost no impact on Tesco's main problem – an extensive retail network with many large, underperforming stores. Our proprietary work on large-store performance indicates a structural operating margin headwind of 1.1% due to Tesco's store estate.
    [Show full text]