Opinion: What's next on the menu for Sainsbury's, Ocado and Booker?

Analysts and investors will have plenty to get their teeth into as a trio of food businesses already in focus – Sainsbury’s, Ocado and Booker – come under the microscope once again.

For starters on Tuesday, Sainsbury’s posts details of its first-quarter trading performance, when another dip in like-for-like sales is anticipated.

The supermarket giant has felt the heat during the past year, as the ongoing recoveries of big-four rivals Tesco and Morrisons singed its top and bottom lines.

Sainsbury’s statutory pre-tax profit fell 8.2% to £502m in the year to March 11, while like-for-like sales slipped 0.6% amid intense competition.

But having seemingly found a recipe for success after buying Argos – the grocer’s group sales jumped 12.7% last year as a result of the acquisition – Sainsbury’s is now bidding to gobble up another business.

A Nisa deal

With expansion into wholesale seemingly the flavour of the month, the grocer has entered into an exclusivity agreement with retailer and supplier Nisa over a proposed £130m deal.

Yet the reaction of the market has been mixed. Many observers see the potential purchase as a defensive reaction to Tesco’s pursuit of wholesaler Booker.

There have been suggestions that Sainsbury’s should instead focus more on rejuvenating the fortunes of its core food division, or perhaps even move to acquire a different business, rather than pursuing Nisa.

With that in mind, Sainsbury’s chief executive Mike Coupe could well find himself chewing over the thoughts of the grocer’s shareholders at its AGM on Wednesday – a day that brings with it the main course of updates from Booker and Ocado.

The latter’s share price has blown hot and cold almost since the day it floated back in 2010, but the ferocity of such fluctuation has increased over the past few years amid mouth-watering but premature promises of international partnerships.

Ocado finally inked its first deal at the start of June with a “regional European retailer”, but its shares slumped 13.3% to 270.5p in the week following that announcement – investors were seemingly underwhelmed by the maiden tie-up.

Yet, having waited five years to turn a profit, the online grocer’s bottom line is expected to surge again at the half-year stage – and its share price could continue to do the same amid speculation that Amazon, fresh from a $13.7bn (£10.7bn) swoop for Whole Foods, is mulling a move for the business.

With overseas grocers seemingly showing little hunger to splash out millions on Ocado’s Smart Platform technology, perhaps a sale would return the best value for the etailer’s shareholders.

Tesco and Booker

It’s a conclusion that Booker has already arrived at after agreeing terms on a £3.7bn merger with Tesco.

Retail genius Charles Wilson has got Britain’s biggest wholesaler cooking on gas ahead of Wednesday’s first-quarter update, but the City’s response has been lukewarm.

“As grocery retailers adapt to the growth of online, convenience and foodservice, the Tesco-Booker combination will create a formidable force”

Booker’s share price rocketed almost 15% to 212.7p at the end of January, but as the implications of the tie-up have been digested – including competition concerns and the threat of possible store closures – it has fallen closer to 180p.

One thing that cannot be doubted is that, as grocery retailers adapt to the growth of online, convenience and foodservice, the Tesco-Booker combination will create a formidable force, particularly in the latter two areas.

As the rapidly changing grocery market continues to evolve and consolidate to meet those challenges, it would take a brave person to predict what’s next on the menu.