Asda & Sainsbury’s Sitting in a Tree M-E-R-G-I-N-G
You can’t have missed the news about Asda and Sainsbury’s proposed merger. It’s big news. Whilst the focus is on the legality and the impact on the UK market, much less has been said about the knock-on effect to manufacturers, suppliers and wholesalers.
The Bottom Line
The headline for the merger has been a promise by Sainsbury’s to reduce prices across stores by 10%. They claim this is possible by improving efficiency and leveraging better deals with suppliers. With a 2018 pre-tax income of £31.7bn, that’s a lot of ‘efficiency’ to make from the bottom line.
“negative consequences… all along the grocery supply chain” Andrew Simms, the co-director of the New Weather Institute thinktank and the author of Tescopoly.
It isn’t hard to see why the creation of a supermarket giant will be worrying the UK’s manufacturers, suppliers and wholesalers. They know that ‘efficiencies’ typically mean less profit for them as they are leant on for better and better deals.
Merger = Less Money & Fewer Options?
The longer-term impact may be that smaller companies cannot compete and customers start to see fewer options on the shelves.
Minette Batters, the president of the National Farmers’ Union, warns of “the impact of changes to supplier arrangements that could give rise to reductions in choice.”
A Hybrid Brand?
In an age where many understand that cheaper isn’t always best, where will this position such a hybrid company? Especially when the brand positioning and customer base of both is poles apart.
Sainsbury’s CEO Mike Coupe believes the merger will “create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.” But little is known of the proposed changes to their business to deliver this new dynamism other than price promises to customers.
Quality, Sustainability & Ethics
What will become of the pledges each company has made to sustainability of products and supply chains?
Asda runs a Sustain & Save Exchange that educates suppliers on efficiency and CO2 reduction. Plus, it lets them KEEP savings. It is unclear if this could survive the merger with price cuts to deliver and shareholders to please.
Sainsbury’s has lead the way in mainstream Fairtrade groceries in the UK and made a commitment to the UN Global Goals. But will they be able to afford to stick to their ethics with the need to slash prices?
What worries you most about the birth of this consumer giant? What can be done to offset the oncoming squeeze on our margins as manufacturers, suppliers and wholesalers?
We welcome your thoughts.