Tesco pumps profits

By Leah Vyse

- Last updated on GMT

Related tags Tesco

Tesco has been cleared to acquire 21 former BP/Safeway petrol
stations from Wm Morrison after the UK's Office of Fair Trading
(OFT) chose not to refer it to the Competition Commission.

The deal, which will add to Tesco's continued domination of the UK's food retail market, was originally announced in August and initially involved a proposed acquisition of 30 forecourt sites.

BP was initially granted first refusal to take over 12 of the 30 stores but it chose to retain rights on nine out of the 30.

Although neither company has commented on the value of the transaction, on January 30 2005 the gross value of all 30 sites was £55.3 million (€77.4m), according to Morrisons.

This latest acquisition is part of Tesco's bid to increase its presence in the £24 billion convenience sector. The retailer plans to convert all 21 sites into Tesco Express stores.

Senior research analyst at Verdict Research, Gavin Rothwell, told FoodandDrinkEurope.com"It's a lucrative area and Tesco clearly wants to take advantage of the customer base."

"Tesco is reaffirming its ability to diversify. It's key strength lies in flexibility and formats. From the Express stores to Tesco Extra, the retailer knows how to adapt to the market."

A Tesco spokesperson explained the motive behind the acquisition as a straightforward response to customer demand: "We simply listened to our customers, they like to top-up-shop between their weekly shopping trips. Being able to get fresh food locally is important to them."

Currently Tesco, which has an annual turnover of £37.1bn, has around 600 Express stores in the UK along with 700 supermarkets.

A massive 30.3 per cent of all money spent in supermarkets goes to Tesco but until now the leading retailer has not been able to expand into the convenience sector due to regulators viewing the two markets separately.

When the acquisition is complete, Tesco's share of the UK's convenience market, which is a fragmented market with over 50,000, mostly independently owned stores, will be around 6 per cent.

The retailer has been supplying forecourts for some years. It has its own petrol stations attached to supermarkets and it also has an alliance with Esso.

Marks and Spencer has also taken a step into the convenience sector with plans to open eight Simply Food stores at BP Connect stations in the UK in October and November.

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