Sainsbury's Boss Says Asda Merger Will Save Customers Money


May 2018

Sainsbury's Boss Says Asda Merger Will Save Customers Money

The proposed merger between the two supermarket giants, Sainsbury’s and Asda, will save the average shopper money, according to Sainsbury’s chief executive, Mike Coupe. 

The new conglomerate, made up of the nation’s second and third-largest supermarkets, would process nearly one-third of all grocery business in the UK (31%), and would employ over 330,000 staff over 2,800 stores, becoming the country’s second largest employer.

The supermarkets say that the merger would allow them to lower prices by up to 10% on most common products.  The chains would retain their own branding, selling strategy and price structure, and promise to keep all stores open.  Walmart, Asda’s current majority shareholder, will retain a 42% stake in the company, with the option to totally sell out (and thus withdraw from the UK market completely) in four years.  The deal is not yet confirmed – the Competition and Markets Authority (CMA) still needs to vet the process and ensure that such a major merger would not unfairly damage competition or form an effective monopoly.

Sainsbury’s stocks rose to their highest value since June 2017, demonstrating the confidence the business market has in the deal’s conclusion.  There have, however, been some sticky moments in the last few days for the two companies – especially when Mr Coupe was caught by cameras singing “We’re in the money” from the musical 42nd Street while waiting to be filmed for an interview on ITV.  He later apologised, calling it “an unfortunate choice of song”, and regretting for any offence caused.

Elsewhere, wholesale food suppliers to the two companies have voiced concerns that pledges to cut costs will lead to harsher deals for them, as Mr Coupe and other executives drive hard bargains in order to meet the 10% price reduction target that has bene outlined.  Austin Sugarman, CEO of Fine Foods International, said: “There will be plenty of losers from this.  If suppliers are going to have to come up with the savings, then we’ll see consolidation in the supply base.  That means closing factories, that means losing people and it means effectively less choice for consumers.”

This would be of particular concern for small businesses who could not afford to drop prices on wholesale supplying in the same way that industry leaders could, especially when combined with current rises in the Living Wage, a weaker Sterling, and the potential ramifications from Brexit.  The shadow business secretary, Labour’s Rebecca Long-Bailey, also noted concerns over the impact on suppliers, saying that alongside Tesco, a “Sainsbury’s-Asda duopoly [would have] unrivalled power to dominate, dictating choice and prices for customers…[it also] poses immense risk to suppliers, with unprecedented bargaining power to drive suppliers’ prices and payment terms down.”