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The Sainsbury’s-Asda takeover could lead to increased wholesale prices, but may create opportunities for improved range across independent retail, industry experts have told RN.
Sainsbury’s chief executive Mike Coupe pledged the deal, announced last weekend, would lower prices of everyday items available in both supermarkets by 10%.
James Brown, head of retail and consumer goods practice at pricing analyst Simon-Kucher, told RN the knock-on effect of this could be higher prices in convenience stores. “Suppliers’ prices will be driven down, but if they object they risk removing themselves from the majority of the market.
“Added to this, suppliers won’t want to pass the added costs directly to customers and may consider recouping costs elsewhere, such as through increased wholesale pricing.”
Meanwhile, Steve Parfett, chairman of wholesaler AG Parfett & Sons, warned of an abuse of buying power. “We’ll have duopoly where suppliers can’t afford to fall out with either Tesco or Sainsbury’s-Asda.
“Suppliers should examine the longer-term implications and consider diversifying their market with independent wholesalers and retailers.”
The takeover was confirmed by Sainsbury’s on 30 April. If approved by the Competition and Markets Authority, the combined business would be the UK’s largest grocer with a 31.4% market share. Current market leader Tesco has a 27.6% share.
However, Mr Brown highlighted opportunities as he said smaller retailers could see improvements in an increased range.
“Smaller suppliers are at risk of being squeezed out by Sainsbury’s proposals. To prevent this, they may increase their presence in other areas such as independent convenience, and retailers may benefit from improved range as a result.
“Customers won’t mind paying more if a convenience store is closer than the supermarket and offers personal service the multiples can’t.”
Filshill retail sales director Craig Brown added: “The worrying result is reduced choice in the multiples, but suppliers can get round this with independent retail. They’ll benefit from increased reach and independent businesses will be able to offer a better range.”
Ravi Raveendran, Colombo Food & Wine, Hounslow If prices are reduced by 10%, shopkeepers in the area are going to go bust. An Asda opened in Hounslow five years ago and, in the first year, I lost a third of my turnover. If prices go down, I won’t be able to compete, especially on categories like groceries.
Peter Lamb, Lambs Larder, East Sussex It won’t be a good move for the marketplace because it will reduce competition. It won’t affect our prices because we don’t ever try to compete with multiples. If we did, we would lose. Instead, we try and maintain a unique selling point, which multiples will never be able to compete with.
Peter Robinson, Londis Pembroke Dock, Pembrokeshire The market is in a transitional period and any ripples felt from this takeover won’t be felt for two years. Sainsbury’s used to be the market leader and I think the takeover is a way of buying back the market share they lost. Whether they retain it is another thing.