booker londis budgens

A convenience retailing powerhouse was born this week as Booker made a £40m swoop on Budgens and Londis.

The deal, if approved by the Competition & Markets Authority, will create a symbol group with 4,907 stores, a 9.4% share of the convenience market, and £5.6bn sales in buying power.

Speaking to The Grocer, Booker CEO Charles Wilson said the deal would not only give an enlarged Booker greater scale but would significantly improve its supply chain and fresh offer through Musgrave GB’s four DCs.

“The Budgens and Londis supply chain is underutilised,” Wilson said. “We’ve been making major progress on customer satisfaction in Premier but our weakest customer satisfaction scores have always been on fresh. Our C&Cs are relatively small so a lot of the fresh improvements we have made have been on the catering side. To carry a full retail range will be easier via a DC.”

Wilson said Booker planned to deliver fresh from Musgrave DCs, while ambient and products on promotion would come from Booker’s C&Cs. 

He also assured Budgens retailers that through the expertise of Booker Wholesale MD Guy Farrant and retail sales director Steve Fox it was committed to growing the brand, while pointing out that Booker owned Budgens from 1956 to 1986. 

Musgrave GB, which recorded sales of £833m in the year to 31 December 2014, has been loss-making for the past three years and a new management team has been brought in over the past year to reorganise the Budgens and Londis brands. It has also parted ways with a large number of retailers.

According to the Grocery Retail Structure 2015, published this week by William Reed Business Media/IGD, Musgrave GB lost 306 Londis stores and 28 Budgens stores in the year to 31 March 2015, leaving them with 1,712 and 168 stores respectively. Store numbers have fallen further, with Londis now operating 1,630 stores and Budgens 167, Booker revealed. 

Musgrave Group CEO Chris Martin admitted the last couple of years had been tough. “The business is loss-making and we had reduced the losses, but over the last few months the market had got tougher.”

Musgrave’s relatively small scale in the UK had also proved problematic. “Our lack of scale was affecting our ability to support our retailers. When I looked and asked myself how could we become a business of scale, I didn’t see the opportunity to expand and add. It was a difficult decision but we believe it is right for Musgrave and, through Booker’s commitment and scale, for Budgens and Londis retailers.”

Musgrave and Booker also committed to a ‘strategic partnership’ in which both parties will share expertise, especially Musgrave’s store standards and fresh capability, and Booker’s online and digital offer.

‘This will probably be a trigger for more consolidation in convenience’

Booker’s swoop on Budgens and Londis has been welcomed by c-store retailers.

Describing the deal as “good news”, Budgens retailer Andrew Thornton said though Musgrave’s management team had done a good job trying to restore the business to growth, he hoped the deal would give him more flexibility.

“I’m also pleased Booker is the one buying it,” he added. “I would not have wanted it to have gone to a multiple.”

However, others expressed concern it could spark further consolidation. The deal comes just 10 months after P&H and Costcutter joined forces to create a buying partnership and distribution agreement.

“There was always something going to happen regarding consolidation and this will probably be a trigger for more,” said one senior industry executive.

Another speculated there could be repercussions for Nisa, which has stores about the same size as Budgens.

Referring to the recent Lord Myners report, the senior source said: “It leaves Nisa isolated and with an internal focus rather than getting on with stuff like this.”