Supermarkets Sainsbury’s and Asda have agreed a potential merger. While plans are still in their infancy, the proposal could see the companies seize a huge 30% slice of the market. So what might that mean for consumers?
Could we see our local stores closed, or restructured? Might there be price increases because consumers will have less choice? Or will our shopping become cheaper because suppliers will have even less wiggle room when negotiating costs?
A move of this size is likely to prompt a review by the Competition and Markets Authority (CMA) - the body which regulates big business deals to ensure fairness - so it is still far from a done deal.
But according to one expert, the deal could eventually spell the end for Asda. Retail analyst Natalie Berg told HuffPost UK: “I imagine the Asda brand will ultimately disappear from the high street. There’s no room for a retailer like Asda in today’s market. If shoppers want low prices, they head to the discounters. If they want convenience, they head to Amazon.”
What are Sainsbury’s and Asda proposing?
To anyone familiar with the UK food market, it is no secret that Asda and Sainsbury’s are catering to different customers, with varying price points and geographical strongholds. Asda has historically been stronger in the north of England and Sainsbury’s dominant in the south.
But this merger has become more likely as a result of both brands spending the last five years fighting a common enemy: German discounters Lidl and Aldi.
Natalie Berg, retail analyst told HuffPost UK: “Aldi & Lidl’s combined market share has grown by 80% while online sales of non-food products have doubled. The only retailers that can sustainably compete on price with the discounters are other discounters.”
The proposed plans will create Britain’s biggest supermarket chain - with more than 2800 stores (including Argos, which is owned by Sainsbury’s) - surpassing current leader, Tesco .
Will the merger make my groceries more expensive?
A 2017 Which? report found Asda is still the cheapest supermarket - a reputation long been built on their price guarantee, that gave customers a voucher if their weekly shop wasn’t 10% cheaper than Sainsbury’s and others.
So will Sainsbury’s be forced to slash prices at the tills or will Asda get more expensive? There is evidence for both. Sainsbury’s bosses have said they could cut costs to customers by up to up to 10% after the merger.
While Asda boss Roger Burnley added Asda could also see price cuts, he said: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice.”
What does the future look like for both stores?
At the moment there has been no suggestion that a financial merger will see shops on the ground amalgamate into one shared space. Berg said: “This is about supermarket survival and cutting costs.”
However this doesn’t mean both brands will necessarily survive as separate entities either. “They may be retaining both fascias for now but I imagine the Asda brand will ultimately disappear from the high street. There’s no room for a retailer like Asda in today’s market. If shoppers want low prices, they head to the discounters. If they want convenience, they head to Amazon,” said Berg.
Although the market has not seen something on this scale before, is not completely unprecedented. When Morrisons bought Safeway in 2004 they rebranded or sold the 479 stores - wiping them off of the British high street.
Will my local store close?
Like many of the other practical consequences of the merger, there have been claims on both sides of the fence about individual supermarket closures.
Sainsbury’s chief executive, Mike Coupe, said on Monday morning he is 100% confident they won’t need to close stores if the merger goes ahead.
However, less optimistically, Joe Clarke, national officer for Sainsbury’s at Unite union told Sky News: “If you’ve got stores in close location to one another, stores will close.”
In reality this will largely depend on the outcome of any potential CMA review. Berg said there are 75 postcodes up and down the UK where Sainsbury and Asda stores neighbour each other - including Keighley in West Yorks where they are metres apart - giving the company too much of a dominant position.
But until any review goes ahead, the number is hard to predict.