Tesco’s suppliers could lose out from £3.7bn merger

By Matt Atherton contact

- Last updated on GMT

Tesco's suppliers might lose out from its proposed mega merger with Booker, Lord Haskins said (Flickr/Tesco PLC)
Tesco's suppliers might lose out from its proposed mega merger with Booker, Lord Haskins said (Flickr/Tesco PLC)

Related tags: Supply chain management, Mergers and acquisitions

Tesco’s £3.7bn mega merger with Booker could lead to their suppliers losing out, warns the former Northern Foods boss, Lord Christopher Haskins.

Suppliers and staff would be the ultimate “loser”​ if the merger – proposed on January 27 – takes place, said Haskins.

“The winners in this will be the shareholders. The shoppers might – but are not very likely to – win. The losers will be the suppliers and the staff,”​ he told BBC Radio 4’s Today​ programme.

Staff might end up losing their jobs if the deal is approved by the Competition and Markets Authority, Haskins said.

“That’s the nature of mature industries which will have to consolidate, which will have to rationalise, and unfortunately that means you lose jobs.”

‘That means you lose jobs’

The veteran business guru’s concerns were shared by the Farmers’ Union of Wales (FUW), mergers and acquisitions analyst Livingstone and City analyst Shore Capital.

The FUW warned the proposed mega merger could give the retail giant too much power over their suppliers.

“There are already well-recognised concerns regarding the balance of power along the supply chain being loaded in favour of major retailers, so any moves which increase such imbalances are a great worry,”​ said FUW policy officer Charlotte Priddy.

Most vulnerable would be some local supply chains, where Tesco and Booker were the main retailers, she added.

Livingstone expected discontent from the supply chain at the prospect of the mega merger.

‘Significant vocal outburst’

Livingstone associate Harsha Wickremasinghe said: “We expect a significant vocal outburst from independent retailers and the broader wholesale sector regarding the possible impact to their businesses as a result of this deal. 

“The objections will be strong; the investigations searching; and the battle to get this deal over the line could be brutal for everyone involved.”

Shore Capital analysts Clive Black and Darren Shirley echoed those concerns. They said: “We sense that elements of the competing retail, wholesale, foodservice and their respect supply chains may be up in arms with this proposed merger.”

Elsewhere, the National Farmers’ Union said it would be examining the proposed merger, and seeing what affect it would have on farmer suppliers.

Meanwhile Tesco insisted its planned £3.7bn merger​ with Booker would benefit suppliers.

What they say – about Tesco’s suppliers

  • Lord Christopher Haskins​: “The winners in this will be the shareholders. The shoppers might – but are not very likely to – win. The losers will be the suppliers and the staff.”
  • Farmers’ Union of Wales​: “There are already well-recognised concerns regarding the balance of power along the supply chain being loaded in favour of major retailers, so any moves which increase such imbalances are a great worry.”
  • Livingstone ​associate Harsha Wickremasinghe: “We expect a significant vocal outburst from independent retailers and the broader wholesale sector regarding the possible impact to their businesses as a result of this deal.”
  • Shore Capital​: “We sense that elements of the competing retail, wholesale, foodservice and their respect supply chains may be up in arms with this proposed merger.”

Related topics: Supply Chain, Retailing Crisis

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