Outlook: Not time to party just yet
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Your support makes all the difference.WHITBREAD AND Allied Domecq's attempt to put together their Threshers and Victoria Wine off licence businesses is hardly surprising given the dynamics of the market. The competitive impact of the big supermarkets and the cross channel booze trade have left these two chains looking like a pair of drunks who have imbibed one too many cans of Tennant's Super. Having woken up with one almighty hangover they have now decided that rather than punch each other's lights out, it would be better to wander arm in arm into the night.
As a defensive strategy it is hard to fault. The pair will be able to wring out annual savings of around pounds 15m. And their combined buying power will match those of the big supermarkets. But the real question is whether they can get the deal through the competition authorities. The pair have already sought confidential guidance from the OFT and seem to have got the nod that there will be no problem.
This assumes however, that the OFT takes the broader definition of the take home drinks market. If it takes in the whole trade, including the major supermarkets, a combined Thresher-Victoria Wine would account for around 13 per cent of the market, just behind Tesco and just ahead of Sainsbury's. On that basis it ought to get the green light.
But if the narrower definition of high street off licences is adopted their 3,000 branches would amount to a market share of more than 30 per cent. Of course there are compelling arguments Whitbread and Allied Domecq could bring to bear. One is that there is hardly a paucity of competition in the market.
The number of outlets selling booze in Britain has risen by more than half since 1970 from 28,000 to almost 50,000 as supermarkets and convenience stores have muscled in. They could also argue that a stronger high street off licence group would provide a more effective competitive break on the supermarkets.
But many a slip betwixt cup and lip. If the merger does get referred, it wouldn't be the first time the competition authorities have given positive guidance confidentially and then changed their minds. Just ask Ladbroke and JC Decaux. So a nice idea lads, but don't get the beers in just yet.
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