In an important moment for the future of food retailing in the UK, the Competition and Markets Authority (CMA) has made a provisional ruling that the planned £12 billion horizontal merger between Asda and Sainsbury may be blocked on a number of competition grounds.
The CMA states that "The CMA has provisional concerns that the merger could lead to a substantial lessening of competition at both a national and local level .... should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK. We also have concerns that prices could rise at a large number of their petrol stations."
One of the consequences of the planned merger - without the CMA requiring the enlarged business to sell of some of their stores / assets - would be that the newly integrated firm would become the biggest seller of fuel by volume in the UK.
The chart below tracks the market share of the leading food retailers in the UK.
Sainsbury’s operates a network of 1,428 grocery stores (including 647 supermarkets and 781 convenience stores), 314 PFSs and an online grocery business. Sainsbury’s also operates Argos and Habitat. Their share of the food grocery market in October 2018 was 16.5%.
Sainsbury’s sells clothing, footwear and accessories under its Tu brand.
Asda operates a network of 676 grocery stores (including 582 supermarkets and 61 convenience stores which are all attached to PFSs), 33 Asda Living stores (focused on non-grocery products including clothing), 320 PFSs and an online grocery business. Their share of the food grocery market in October 2018 was 15.5%.
Asda sells clothing, footwear and accessories under its George brand.
If the merger was allowed:
One of the possible remedies following the CMA report is that Sainsbury/Asda would be expected to see a large number of stores (perhaps upwards of 100) to rival retailers such as Lidl, Aldi, Morrisons and others to maintain competition at local level for both supermarkets and convenience stores.
© 2022 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.