Sainsbury’s and Asda announced a merger deal over the weekend of 28-29 April and this surprise development is sure to revolutionise the UK’s supermarket sector. The merged retail chain will have a holding of 2,800 stores and a combined purchasing power that should enable massive cuts in supplier costs.
About the Sainsbury’s-Asda merger
The merger deal provides Asda’s owners, Walmart, with a £3bn cash windfall, and the group will own 42% of the shares in the combined group. Sainsbury’s CEO, Mike Coupe, will lead the merged supermarkets, although Asda will continue to operate from its Leeds HQ.
The merger will be investigated by the Competition and Markets Authority and is not expected to be finalised until autumn 2019 at the earliest. Both supermarket chains have announced that there are currently no planned store closures and they will continue to operate under their own brand names. One benefit to Asda will be the incorporation of Argos catalogue outlets into their stores, Sainsbury’s acquired Argos in 2016 and has added Argos outlets to its stores already.
Both supermarkets anticipate that prices will fall across their outlets as a result of the merger, with Sainsbury’s announcing planned price cuts of up to 10% on most popular product lines. The supermarket merger will overtake Tesco as the largest chain in the UK and is a result of the continued profits’ squeezing caused by the growth of discount supermarkets, Lidl and Aldi. The launch of Amazon’s grocery delivery service has also caused concern to supermarket giants. Although Sainsbury’s sales were up for the year ended March 2018, their overall pretax profits were down by almost 19%.
Trades unions have already expressed worries about potential job losses, but Mike Coupe is confident that the merger will actually create jobs. The combined market share of the Sainsbury’s-Asda group will be around 31.4%, but this is against a background which has seen all three supermarket giants lose market share to Aldi, Lidl and Waitrose.
Sainsbury’s announced that the merged group will be headed by their chairman, but are currently in the process of recruiting a replacement for current chairman, David Tyler. Mike Coupe stated that this merger will: “create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy”.