Supermarket merger
47m £51bn
THE £12BILLION mega-merger of Asda and Sainsbury’s could spark a supermarket price war.
Britain’s competition watchdog yesterday confirmed it will examine the deal amid concerns over store closures and job losses.
Bosses at the grocery giants initially insisted no stores would close as a result of the deal, but later said regulatory authorities could force them to offload outlets as part of a competition probe.
The merger would see the business overtake Tesco to become the UK’s biggest retailer.
Last night, food and grocery suppliers warned that promises to cut prices by 10 per cent could mean farmers and other suppliers find their profit margins squeezed.
James Brown, head of the Retail & Consumer Goods practice at pricing specialists Simon-Kucher, said: “Asda and Sainsbury’s have huge buying power that already provides them with rock-bottom supplier prices.
“The prospect of this merger will send a huge chill up and down the whole supermarket supply chain.
“Current suppliers will be braced for demands for further price cuts that many will not be able to deliver.
Danger
“Could this merger lead to reduced prices for shoppers? A few, maybe. But lower prices from better deals in the mid and long term? It’s unlikely.”
Phil Stocker, chief executive of the National Sheep Association, said: “This loss of competition in the marketplace and an increased imbalance in the supply chain cannot be in the interests of food producers, nor in my mind of society at large.
“If we end up putting pressure on the bulk of our sheep farming families and businesses, we will end up with a very different countryside and rural community – and the danger is that it won’t be noticed until it is lost.”
Shoppers outside a Sainsbury’s branch in London yesterday welcomed the prospect of cheaper grocery bills but many were sceptical.
Ryan Heaganey, 24, a swimming teacher, said: “If it lowers prices, that’s good for customers. But will it happen in the long run?”
Consultant Roger Anglin, 54, said: “I don’t think the merger is about food, I think it’s about clothing, that sort of stuff. Sainsbury’s is trying to take advantage of the non-food market that Asda is really strong on.”
And William Peck, 74, added:
BOSS IN TV BLUNDER
SAINSBURY’S boss Mike Coupe was forced to apologise last night after singing “We’re In The Money” amid the supermarket giant’s merger with rival Asda.
Mr Coupe was filmed humming along to the famous tune as he waited to be interviewed by ITV News.
Sainsbury’s shares rocketed by 20 per cent as unions warned thousands of jobs are at risk.
In a statement, Mr Coupe said it was an “unguarded moment”.
He added: “It was an unfortunate choice of song from the musical 42nd Street which I saw last year. I apologise if I have offended anyone.”
When asked by Channel 4 News if he personally will be in the money, Mr Coupe admitted he was “a big shareholder in Sainsbury’s”. “Whenever you merge two companies, the first thing they do is cut back on human resources, on personnel, on equipment. I’m not sure whether that’s a good thing.”
Retail experts say Asda would take the fight to Lidl and Aldi while Sainsbury’s could undercut premium food retailers like M&S and Waitrose.
With a combined income of at least £500,000 from online deliveries each week, it would also hope to see off Amazon’s new food service.
A consolidation of the supermarket sector from the Big Four of Tesco, Sainsbury’s, Asda and Morrisons to the Big Three would not usually be expected to spur on competition. But in this case, talk of a price war has not gone away.
Budget supermarket brands Lidl and Aldi are still performing strongly