If retail rival Sainsbury’s wanted to become the UK's biggest non-food business then Tesco has risen to the challenge after buying Budgens and Londis owner Booker in a £3.7bn deal.
Tesco claimed it will now become the ‘UK’s leading food business’ and said the combined group will “bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, as well as delivering significant value to shareholders”.
Booker's Londis, Budgens, Premier and Family Shopper brands give it thousands of convenience store sites. Beyond that it supplies food to 450,000 caterers, 120,000 retailers and 700,000 small businesses including Wagamama, Rick Stein and Carluccios.
But crucially for Tesco, it will give it a massively expanded network of 8,000 click and collect locations.
“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,” said Tesco chief executive Dave Lewis.
“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.”
The bold move has been revived well by analysts and shares in Tesco have leapt 10% in wake of the announcement.
Alastair Lockhart, insight director at shopper and retail marketing agency Savvy said the move makes sense. Despite Tesco’s recovery over the past year, it is still facing limited growth in the grocery market over the next few years.
“Growth in convenience, on-the-go and food services meanwhile remains buoyant and we see a lot of opportunity for innovation,” Lockhart added. “There are many synergies between these complementary businesses and the economies of scale from the deal will help the merged group remain competitive as we enter a period of higher price inflation.”
John Ibbotson of the retail consultants, Retail Vision, was similarly impressed with Tesco’s determination to reclaim its dominance over the sector that has been slowly chipped away by the rise of discounters Aldi and Lidl.
"The Tesco of old is back. This is an extremely bold move and demonstrates an intent and sense of purpose that have been missing for the best part of a decade, he said. "It also represents the official end of the global dream. For Tesco, the jewel in the crown is once again the UK. With the acquisition of Booker, which owns Budgens and Londis, Tesco has shown its hand. Its competitors, in particular the discounters, now know they’re in a fight.”