Will the Sainsbury's-Asda Merger Spell Chaos for UK Suppliers?

 

 

 

The planned merger between supermarket giants Sainsbury’s and Asda has proven unanimously unpopular among suppliers, politicians and environmental activists

In a shock deal worth £10 billion, the two retailers will become the UK’s largest supermarket chain, representing 2, 800 stores and 31% of the market share. In doing so, they intend to drive down prices to compete with the increasingly popular budget grocers, Aldi and Lidl. However, as they await approval from the Competition and Markets Authority (CMA), a number of establishments have vocally condemned the proposition.

Among those concerned is the National Farmers’ Union (NFU) who believe the merger will be detrimental to supermarket suppliers. Addressing the deal, NFU president Minette Batters outlined her apprehension; “The NFU will be examining the details of this proposed merger between Sainsbury’s and Asda carefully and the further concentration of retail power it created within the food supply chain… The impact of the whole supply chain, all the way down to farm level, needs to be carefully assessed.”

Batters’ sentiment was echoed by the government’s Business and Environment committees who have both written letters expressing their disapproval of the proposition. Rachel Reeves, chair of the Business committee, explained her team’s decision; “This merger threatens customer choice, hands yet more power to mighty supermarket players and heaps more pressure on small and medium suppliers.”

Several environmental activists have also expressed fears concerning the effect a mega-supermarket will pose to the eco-system. There is a general suspicion that, in the race to lower retail prices, Sainsbury’s and Asda will be inclined to cut corners on environmental procedures, abandoning already established green initiatives in the process.

Dan Crossley, of the Food Ethics Council, predicted that “too much pressure on producers only increases the risk of shortcuts being taken, including environmental standards being lowered. It also reduces the likelihood of producers being able to make important long-term investments to drive environmental improvements, like investing in renewable energy on farms.”

Despite the severity of these claims, it is doubtful they are substantial enough to block the deal altogether. Nevertheless, the CMA acknowledges that the Sainsbury's-Asda merger is "likely to be subject to review."

 

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