It’s been said that mergers are like marriages – the binding together of two individuals. But, let’s face it, you wouldn’t marry someone for the ‘operational efficiencies’ they offer in running a household. So, why would you combine two companies with unique cultures and identities for that very reason?
This thinking was triggered by a new Sainsbury store that has opened near me in a medium-sized but growing town where the local communities are already serviced by a Tesco, Waitrose, two Co-ops and two Tesco Express stores, alongside a Premier, a (closed) McColl and a BP/Marks and Spencer.
The point here, is that the new Sainsbury is very good. The store is purpose built, smart, medium-sized – not too big (unlike Tesco), and not too small (unlike Waitrose). Most importantly, it has integrated Argos, so when I was Christmas shopping online, Google was quick to advise me that I could purchase electricals and gifts that could be collected instore the same day/next day.
It was a lightbulb moment in bringing the Argos tie-up to life for me. It’s a brand that I know and trust, the prices are good so it’s competitive, and suddenly it is allowing Sainsbury to properly compete with Amazon on a like-for-like basis.
“Just Too Big”
Of course, the No. 1 supermarket chain, Tesco, has looked to achieve this in its servicing of non-foods/electricals. But alongside the big black commercial hole senior management has needed to fill, the shops have had to wait their turn, and it hasn’t taken long for the retail estate to look tired. In many cases, the stores are simply too big, and it’s an expensive problem to solve on top of creating a non-food model that is a truly compelling offer.
The big question today is; will Tesco still be the number one retailer in five years’ time? As consumers’ behaviour is changing – and changing fast – will the landscape change dramatically and will Tesco be able to keep pace?
And, on reading about the Costcutter acquisition by Bestway, which was announced before Christmas, it led me to question whether I would be surprised if Bestway’s strategy turned out to be a ‘reverse’ Tesco, i.e., buy ‘big’ into Convenience or Retail to create a hybrid retail/wholesale operation on a scale that rivals Booker?
Bestway has never been shy of an acquisition. Asda could have been an interesting proposition (if the price was right and if the Issa brothers had not stepped in), and don’t let’s forget that for years, the privately owned group had a tactic of buying up old Landmark members. It’s been heard said in the industry that Bestway sees themselves as ‘retailers’, not ‘wholesalers.’ After all – retail is in their soul – and it’s exactly how the company took roots originally.
Foodservice Outlets – The Obvious Gap
If Bestway is trying to replicate the Booker/Tesco model, then the obvious gap is Foodservice outlets. And, it may come as no surprise that Salih Sheikh, Bestway’s former Head of Marketing and Digital is at the helm of a budding foodservice chain, with a tie in to none other than Asda!
Bestway being acquisitive is not a new thing. It has a history of keeping a firm eye on the market and indeed, City markets reported only recently that Bestway Group is one of two remaining bidders for the dentistry giant, Integrated Dental Holdings (IDH).
Could the future of Convenience evolve around a hybrid model that includes pharmacy and dentistry? TWC’s own research report; What’s Happening in Convenience indicated that 35%* of consumers would welcome hybrid models that added value and convenience to their shopping.
As yet, we have to see the emergence of pharmacy aligning to C-stores, which feels a symbiotic partnership and one that would have great appeal to residents in local communities, and if we analyse which types of shops have the highest amount of penetration in any one week or month, Pharmacy would be one of the highest.
The Measure of Success…
Here at TWC, we firmly believe that the most successful acquisitions are those that lead to unprecedented choice for consumers whilst creating tremendous value for stockholders. The skill of Charles Wilson and what he achieved at Booker should not be underestimated – Wilson had the confidence and skill to forensically take businesses apart and integrated them back together in a way that led to success. The measure of success was that the companies are stronger financially, they took market share, and on a very steady footing in term of their performance.
Whether forward – or reverse – engineering of acquisitive strategy, the market is going to be a source of fascination for many in the months ahead. Whether Bestway has their eye on the prize in a way that will change the dynamics of our industry has yet to be seen. We wait and watch with interest!