Asda takeover ‘will raise prices at corner shops’

Suppliers warn of damage from £14billion deal

THE £14.1bn Sainsbury’s-Asda merger will push up prices at smaller retailers, industry experts have warned.

The Federation of Wholesale Distributors (FWD), which represents food-anddrink firms, claimed suppliers would be squeezed by the deal which would create Britain’s biggest supermarket.

Sainsbury’s boss Mike Coupe has already claimed the firm would save £500m partly by being able to haggle down the price it pays on goods. However, the FWD claims any reduction in costs negotiated by Sainsbury’s-Asda would result in an increase in prices at independent shops and reduce choice in local neighbourhoods.

James Bielby, FWD chief executive, claimed a ‘waterbed effect’ would mean that where prices were pushed down for one customer, they would simply rise for another.

Bielby said: ‘If suppliers look to compensate with higher prices for other customers, the result could be a massive distortion in the market, which would place an unfair burden on smaller shops and the wholesalers who supply them, and make it difficult to compete.

‘Independent shops thrive on a mix of great service, tailored product offers and a fair price, and they make a vital contribution both socially and economically. Disadvantaging them so that huge supermarket chains can compete with Aldi and Lidl would be a step backwards.’

The FWD claims come as the Competition and Markets Authority (CMA) closed submissions for evidence into the merger.

Coupe has promised to match prices across the two supermarkets. For example, a 2lb (1kg) bag of sugar which is 70p at Sainsbury’s, would be reduced to 64p to match the price offered by Asda. Sainsbury’s claims its suppliers can afford to take on the burden of offering lower prices because most of them are multinationals, such as Unilever, which owns Marmite and Dove, and Durex and Dettol owner Reckitt Benckiser.

There are almost 50,000 convenience stores in the UK, 74pc of which are run by independent retailers. The sector made £38bn sales last year – accounting for more than one fifth of the UK grocery market. If the CMA approves the tie-up, Sainsbury’s-Asda and Tesco will have around 60pc of the grocery market share.

A spokesman for Sainsbury’s said: ‘We believe that the proposed combination of Sainsbury’s and Asda is great news for customers and suppliers alike.’

An Asda spokesman said: ‘Hardpressed families want and need lower prices. This is at the heart of our strategy – and the deal would accelerate that.’