Independent retailers have called on regulators to take a firmer stance in dealing with Asda and Sainsbury’s plans to create a new force in the grocery sector.
The merger between the two supermarkets would make it the largest grocery retailer with a 31% market share. The deal aims to cut prices by 10% on key lines and shave £500m of its costs, mostly through added pressure on suppliers.
Convenience retailers told Retail Express they fear the Competition and Markets Authority’s (CMA) approval of Tesco-Booker and Nisa-Co-op has set a precedent and may prevent the regulator from protecting competition in the case of Sainsbury’s and Asda, and lead to even more mega mergers.
Discussing the impact of the CMA’s Tesco-Booker ruling, James Brown head of retail at Simon-Kucher, said: “I don’t think a merger between Asda and Sainsbury’s would have been imaginable a year ago.”
Nisa retailer Jack Matthews from Bradley’s Supermarkets in Leicestershire said: “Regulators are looking at this one deal at a time without an overall strategy for ensuring a competitive grocery market. The floodgate may be open, but nobody seems to be measuring the water level.”
Hitesh Modi from Costcutter BWS in Surrey argued the pace of mergers makes it hard for the CMA to assess the impact of previous deals before confirming the next one. “Without clear evidence of what the current and future state of play is, I don’t know how a decision could be made on Sainsbury’s and Asda,” he said.
Store owners told Retail Express they expected pressure on margins, varying increases in local competition, delays to planned store investment and further symbol group mergers.
Simon Lunn, owner of Simply Fresh Weare in Somerset, said: “It will undoubtedly squeeze our margins at a time when they are already at an historic low. The CMA needs to understand that it’s about protecting the wider grocery network.”
Amit Patel from Belvedere News, Food & Wine in Kent added: “This will only add margin pressures and make smaller players less competitive.”
Labour’s Shadow secretary for business Rebecca Long-Bailey also stated that the deal would further squeeze competition.
Sainsbury’s has already pushed for the CMA to launch an in-depth phase two investigation of the merger in order to speed-up the deal. Charles Hall, head of research at city analysts Peel Hunt, said there was “no chance” this new deal would progress without major store sell-offs.
Read more: How Asda-Sainsbury's will squeeze your margins