‘Tesco Wholesale’ is a reality – will it be a success?

Why are supermarkets suddenly so interested in the independent grocery convenience channel?

Having worked in the channel for the last 20 years, the notion of a “TESCO WHOLESALE” is one that has been debated occasionally but mooted as an unlikely scenario rather than a realistic eventuality. But now it is reality, will it actually be a success? What is so attractive about grocery wholesale to the mults?

  • SUPPLY CHAIN EFFICIENCIES: The grocery multiples are driving good sales growth from home delivery and the expansion of their centrally managed convenience estates. However, the overall profitability of these operations is not consistent with this growth. The integration of a grocery wholesale supply chain will drive efficiencies for both. Deliveries by the same vehicle to households and convenience stores may become the norm. This will help Tesco gain a cost advantage in the intensifying battle with Amazon over grocery home delivery.
  • CLICK & COLLECT: For customers who do not want to be constrained by a two hour delivery window, collecting from their local shop rather than an out of town main store will be seen as an attractive option. The merger significantly increases Tesco’s potential in this area.
  • FRESH: Although the offering of chilled and fresh categories in independent convenience is unrecognisable compared to 10 years ago, it is still a long way behind both larger UK supermarkets and general European standards. None of the current grocery wholesalers offer a cost effective, quality solution. By partnering with the Coop, McColls now stand to gain a competitive advantage in this increasingly important category. Stores supplied by Booker may also gain this advantage.
  • FOOD TO GO: hailed as the “principal driver of growth” from the acquisition by Dave Lewis, Tesco’s buying power will significantly push up Booker’s 10%+ market share in this fast growing channel. As take in home food consumption falls, Tesco will now be well set for the future.
  • OWN LABEL: For “fresh”, and indeed many other categories, the potential to sell more own label volume through independent grocery trade will help drive cost efficiencies for supermarkets. Branded suppliers will cease to enjoy the dominance they currently have in this channel.
  • COST PRICE HARMONISATION: Whether the £200m stated by Tesco is realised remains to be seen. At the very least, the ability of suppliers to push through much needed cost prices increases will be further challenged.
  • CATEGORY EXPERTISE: Having operated in the convenience sector for 20 years, the multiples bring with them a wealth of data, analytics and category expertise. The advice they can give to independent retailers will be significantly more valuable that the current offering from symbol wholesalers.

Despite the plethora of wholesale change, the remaining constant for manufacturers is the need to develop “pull tactics”, ie influencing the retail outlets to buy more from the wholesalers. At Ceuta Healthcare we have developed a number of effective tactics which include:

  1. Our field team: “Convenience Direct” calls specifically on top end convenience symbol stores. We drive distribution via transfer order and ROS through effective POS placement and category management. This has resulted in strong return on investments for our clients.
  2. Our customer team has strong relationships with end user groups that pull from wholesale. These regional store groups (such as Central and JCR) as well as national groups such as Bourne Leisure, Select & Save and Centre Parcs. These are pivotal in driving overall channel growth.

Now, more than ever, it is important that suppliers increase their representation in this area. Ceuta offers a cost effective solution to this via a syndicated approach.

The attraction of the independent grocery convenience sector to the supermarkets is evident and further changes in the wholesale landscape are likely, both at a national and regional level.

By | 2018-02-05T14:05:20+00:00 February 5th, 2018|Ceuta Group, Ceuta Healthcare, Latest Articles|Comments Off on ‘Tesco Wholesale’ is a reality – will it be a success?