DEBATE: Would the Sainsbury’s-Asda merger be good for consumers?
Would the Sainsbury’s-Asda merger be good for consumers?
Richard Hunter, head of markets at Interactive Investor, says YES.
Large deals such as these will always result in winners and losers, with suppliers and some of the competition potentially falling into the losers camp. However, it is difficult to see that consumers would be anything other than winners should the deal proceed.
The combined Sainsbury’s-Asda machine would eclipse Tesco’s market share and become the UK’s dominant supermarket presence. As such, its pricing power would increase, and this would lead to cost savings for consumers. Meanwhile, the presence of the existing store portfolio, bolstered by Sainsbury’s large convenience store presence and its online offering, would mean that a store would never be far away, either physically or virtually.
In addition, the success to date of the Argos acquisition into the Sainsbury’s stable could well result in the further rollout of Argos into Asda stores.
Thus, in terms of convenience, choice, and price – the mantra of successful retailing – this deal could tick all the boxes for consumers. Whether the Competition and Markets Authority takes an equally sanguine view, however, remains to be seen.
Read more: Sainsbury’s boss sings “we’re in the money” after Asda merger announcement
Simran Jagdev, companies analyst at the Economist Intelligence Unit, says NO.
Combining two of the largest players in the grocery sector could well mean less choice for consumers, further reducing competition in an concentrated market.
The top four players (Tesco, Sainsbury’s, Asda and Morrisons) already account for 70 per cent of the UK’s grocery retail market, and control most of the supply chains. Reducing them to three could leave suppliers with fewer outlets for their goods.
While Sainsbury’s has denied it, customers might see their local Sainsbury’s and Asda stores close if regulators move to reduce the size of the new entity, which will have 2,800 stores across the country.
Sainsbury’s has tried to win over shoppers by announcing that, once it takes over Asda, it will push through a 10 per cent price cut for the “many products” that are bought regularly. These are likely to include everyday staples that are already central to the price wars common among UK grocery retailers. Pushing down prices still lower – as happened with milk in 2015 – may be counter-productive and could actually push some suppliers out of business, reducing choice further.
Read more: Competition watchdog gears up to scrutinise Sainsbury’s Asda merger