Tesco accused of undercutting local shops via its wholesale business

Village shopkeepers say Tesco is consistently undercutting them by selling products for less in its stores than via its wholesale business Booker, stoking concerns about the power of the UK’s biggest supermarket chain.

Tesco, which has 27% of the UK grocery market, bought the cash-and-carry group in 2017 for £3.7bn, promising that the deal would benefit shoppers and independent retailers.

But independent shopkeepers who are clients of Booker claim that out of a list of 50 items stocked by the UK’s biggest wholesaler – compiled from retailer invoices and online order screenshots – about a quarter are cheaper on Tesco’s shelves. That includes five items on offer via the supermarket’s Clubcard Prices loyalty discount scheme.

Examples include: a bottle of Innocent orange juice, which had a wholesale price of £2.25 in Booker but could be bought for £2 in Tesco by Clubcard holders; Rubicon sparkling mango juice, which had a wholesale price of 39p a can in Booker versus 37p in Tesco or 33p for Clubcard holders; seedless grapes for a wholesale price of £3.98 a kg in Booker compared with £3.60 in its parent group’s supermarket; and an iceberg lettuce that had a wholesale price of 95p, against 79p in Tesco.

Many other items were sold with prices printed on their labels that ensured that they would be sold for more in the independent shops than in Tesco’s stores. While it is not unusual for small shops to charge more than supermarkets because of the higher relative costs of running an independent outlet, shop owners said the focus on price-marked products reduced choice for them at Booker.

One retailer said: “When Tesco have things on offer, or at Tesco Clubcard price, they are hugely cheaper than we pay. Easter eggs are a very good example of this, as are things like big tubs of [chocolates] at Christmas time – the recommended retail price from Bookers is often double what you would pay in a Tesco store.”

Another said: “When Tesco bought Booker in 2017, I’m sure there were comments saying that Tesco would use its combined buying power to benefit Booker customers. This certainly doesn’t seem to have happened. Pricing is pretty similar.”

A third retailer said: “Every year it’s got worse since the Tesco takeover. Tesco have cheaper prices and more stock than Booker branches.”

A further independent retailer said Tesco was “selling items that are cheaper on Tesco Clubcard than they are at Booker”, such as tubs of chocolates at Christmas. “It often seems that when items are out of stock at Booker, when you go to Tesco, they have stands of them at special offer.”

Another retailer listed further examples of products that cost her more in Booker than in her local Tesco, including Robertson’s Golden Shred marmalade for £2.14 against £1.80 in Tesco, Heinz baked beans at £1.16 against £1 for Tesco Clubcard holders, and Ambrosia Devon Custard for £1.22 against £1 in the supermarket.

She said Tesco was “taking their influence on independents even further and no doubt will again be left unchallenged”.

A Booker spokesperson said: “We work very hard to offer our retail customers the best choice, price and service. Our price position versus the wholesale market is extremely competitive, and in the last year we have welcomed 354 net new retail partners, with retail customer satisfaction up 6% to 82%.

“The balance we try to strike is making sure we have the keenest prices, the best availability and the right range, allowing our retailers to grow their businesses and gain sales on leading market trends. We continue to invest in our retail business to serve our retailers better.”

Booker is understood to benchmark its prices against other wholesalers, which it aims to undercut, and the Tesco supermarket has no input in setting prices.

Last month the Guardian reported complaints from village stores that accused Tesco of using its cash-and-carry arm to “squeeze” them out of business by restricting supplies and deliveries of groceries.

Independent retailers, many of which also run local post offices in remote rural locations, have said that a series of changes recently introduced by Booker were adding to pressures at a time when some villages had been left with just one small shop or none at all.

They claim Booker has reduced the range of items available by up to 30% at some sites, withdrawn customer favourites including Yorkshire Tea and Colman’s mustard, and reduced the availability and reliability of deliveries.

One rival wholesale competitor said it was seeing an influx of independent retailers who had become disgruntled by their treatment by Booker. “Headline prices are very competitive, but the cost of service – charges for deliveries, the level of [discounts for buying large volumes] – [is getting worse],” they said.

The UK’s competition watchdog did not comment on whether it was prepared to step in to examine the grocery wholesale market.

However, the Competition and Markets Authority is taking a strong interest in grocery inflation and is already examining whether loyalty card discount schemes – including Tesco’s Clubcard system – are having a detrimental effect on the grocery market.