Tesco‘s landmark deal with Booker has come under pressure as a study by The Times reveals that the Tesco-owned One Stop costs more and pays less.
The £3.7 billion merger between the UK‘s largest grocer and wholesaler saw the companies‘ chief executives reassure independent shop owners now under the groups’ umbrellas that this would “bring major benefits to consumers, our customers, suppliers, colleagues and shareholders”.
A competition investigation into the deal will need to conclude that it will be good for the industry for it to go ahead.
One Stop, the convenience chain which Tesco purchased 15 years ago, is now likely to be at the heart of the investigation.
Much like the Booker deal, Tesco promised that the takeover of One Stop would deliver better prices and better pay for staff.
Sir Terry Leahy, Tesco chief executive during the takeover, said it would lead to “significant improvements for customers, lower prices overall and improved service”.
READ MORE: Booker bosses win over Tesco merger sceptics
An analysis conducted by The Times found that items in One Stop stores can be up to 40 per cent more expensive than in Tesco Express.
Furthermore, a poll conducted last year found that One Stop was one of the worst paying “symbol” group stores, with a starting rate of just £7.20 per hour, a rate lower than Tesco Express and Sainsbury‘s Local.
Many market analysts have argued that One Stop and Tesco are run on very different models, as One Stop tends to operate in low density urban areas with lower turnover. S
hore Capital‘s Clive Black said the Tesco Express model wouldn‘t work within these areas.
“However, buying One Stop meant Tesco had much greater buying scale so the big question for Tesco is ‘why do you charge different rates (at One Stop) to Tesco‘s main business‘,” he said.
“I think it is valuable to raise the issue in the context of the selling of this Tesco-Booker deal as it is a transaction that will involve a lot of stakeholders and not only shareholders but employees and local communities too.”
A Tesco spokesman said: “One Stop is a completely different kind of business to Booker, and it‘s misleading to make a link between the two transactions.
“The retail market has radically changed since 2002 and One Stop is operating in a very different market today.
“Our priority is to provide the best possible offer for our One Stop shoppers and we have made significant investments over the last two years.”