There’s been a lot of noise in the last year or so about the astonishing rise of Aldi and Lidl, the German discount supermarkets that have carved themselves a massive share of the grocery market. But the other trend affecting food retailers lately is a shift away from big-box supermarkets and towards convenience stores, as busy workers opt to buy their dinner on the fly instead of planning for the week ahead.
The supermarkets have had varying successes at cashing in on this trend – Sainsbury’s and Tesco’s local stores now seem to be on every other street corner, while Asda and Morrisons have a long way to go. Now Booker, the £4.6bn turnover wholesale group, is looking to beef up its own presence on the High Street.
It’s agreed a £40m deal to buy the franchised convenience chain Londis and small-format supermarket chain Budgens from Irish wholesale group Musgraves, in a deal that will leave it with almost 5,000 stores in the UK - including its existing chain Premier. Booker, founded as a colonial shipping company way back in 1835, actually used to own Budgens, but sold it to the confectioner Barker and Dobson in 1986.
The convenience franchise (known as ‘symbol groups’) sector is fiercely competitive. Londis and Premier face pressure from the likes of Costcutter, owned by the mammoth Bibby Line Group, and the rapidly expanding co-operative Nisa, as well as the supermarkets. The explosive growth of Poundland and its imitators probably isn’t helping either.
Revenues at both Londis and Budgens were in decline as of Musgrave’s latest results (2013), but it looks like Booker is keen to turn things around and take the fight to the big supermarkets.
‘This transaction should strengthen Londis, Budgens, Premier, Family Shopper and other Booker retailers, through improving choice, prices and service to consumers,’ said its chief executive Charles Wilson. ‘Overall it will help independent retailers prosper.’
It seems investors agree - Booker’s share price was up an impressive 9.7% this morning to 166.8p. But the deal is still subject to regulatory approval, and as we’ve seen with the recent Poundland/99p Stores tie-up, the Competitions and Market Authority isn’t afraid to get down and dirty with mid-sized retailers.
If all goes to plan though, Booker could become an even more formidable force on the High Street and competition's only going to hot up.