UNITED KINGDOM SUPERMARKETS | See United Kingdom.

2018 SAINSBURY’S & ASDA PLAN TO MERGE

‘Sainsbury’s proposed [spring 2018] merger with Asda might boost the two supermarkets, but the competition authorities could well rule against it. A tie-up between the second-largest store, Sainsbury’s, and third-largest, Asda, owned by America’s Walmart, makes a lot of sense for both parties. Combining market shares of 15.9% and 15.5% respectively, according to Kantar Worldpanel, the new entity would leapfrog the current market leader, Tesco, which has 27.6%. Scale is vital to grocers, giving them more muscle to negotiate with suppliers. Sainsbury’s and especially Asda have been hit by the success of Aldi and Lidl. Ten years ago the German discounters had about 4% of the market. Now they have nearly 13%. Mr [Mike] Coupe [boss of Sainsbury’s] says the proposed merger could cut prices across the new group by 10%. Whether this would be enough to compete with the discounters remains to be tested. Synergies between the two companies could save £500m ($680m). Sainsbury’s bought Argos, a home retailer, in 2016 and would roll out Argos stores in Asda as well. Sainsbury’s could exploit Asda’s advanced logistics systems, while Asda would benefit from Sainsbury’s much stronger presence online. In that market they face a new competitor in Amazon, which started selling groceries in Britain in 2016,’ (Source: ‘Sainsbury’s and Asda merge’, The Economist May 5th 2018, p27).