Wincanton's logistics merger with GXO could push up supermarket costs says CMA
USA-based logistics giant GXO’s purchase of Chippenham-based Wincanton is likely to reduce competition in the supply of dedicated warehousing services to UK grocers and push up deal costs for grocers, according to an initial assessment by The Competition and Markets Authority independent inquiry group.
GXO announced its deal to acquire Wincanton in February 2024 for an enterprise value of £764 million. The deal was completed in April 2024, although an interim enforcement order (IEO) was put in place to prevent the two organisations integrating while the CMA conducted its merger review.
Logistics, including warehousing, is essential to the operation of supermarkets and many other businesses in the UK. Efficient logistics systems help lower costs for both businesses and consumers and ensure that products are available in stores when needed.
GXO and Wincanton are currently two of the three suppliers of dedicated warehousing services used by grocers in the UK.
The CMA inquiry group considered that some alternatives would remain for supermarket customers following the transaction, in particular they could switch to the third supplier, DHL, and some could switch some of their activities to their own in-house warehouses.
The inquiry group’s initial assessment, however, was that these remaining alternatives would not be sufficient to prevent fees rising and that the deal could raise costs for grocers that rely on dedicated warehousing services as part of their logistics.
Richard Feasey, Chair of the independent inquiry group, said: "Contract logistics services play a critical role in ensuring that supermarket shelves are fully stocked for customers in the UK every day of the year. Our initial view is that this merger could raise the costs of these services and reduce choice for supermarkets who rely on these services for moving goods across the country.
"We want to ensure competition in this market is working as well as it can to manage costs for supermarkets and grocers, and ensure products continue to reach supermarket shelves efficiently."
But GXO and Wincanton disagree. Their written respond to the inquiry group in December said that while they agreed that the CMA did not identify concerns in respect of non retail customers – there can be no substantial lessening of competition for non retail customers given that regardless of size, customers will continue to have a wide choice of third party logistics to effectively meet their needs.
But with regard to retail - and the decision highlights “larger retail customers with complex needs”, and large grocery retail customers in particular. GXO and Wincanton said grocers are highly sophisticated, experienced and powerful purchasers of services in general, and contract logistics support in particular.
They said: "Although some grocers currently choose to procure on a large scale, their modularised
needs (multiple warehouses and transport networks) mean that they could - and many already do - choose to break these out into separate contracts of varying sizes and with staggered timings."They complained that the CMA's Phase 1 process lacked the time and resources to examine the transaction in detail, including the nuances of contract logistics services provision to different customer groups.
More hearings will take place before the final report is published at the end of April.
