Following the news that Sainsbury’s-ASDA are planning to invest £1bn in price cuts and establish a profit cap on fuel to encourage approval of the merger by the CMA, Thomas Brereton, Retail Analyst for GlobalData, a leading data and analytics company, offers his view:
“With Sainsbury’s hopes of creating a new grocery market leader by merging with ASDA being dashed a month ago by the CMA’s provisional findings, it has left Sainsbury’s treading water in a period of turbulence for supermarkets, losing out over the Christmas period to rivals as the mid-market continues to be squeezed by the discounters. But Sainsbury’s has been hit hardest recently – LFLs over the Christmas period were -1.1%, far below comparable figures of +2.2% at Tesco or +0.6% at Morrisons.
“By announcing clearer details of what post-merger plans would be – including a precise structure for price investment to reduce everyday prices 10% over the next three years, a suggested profit cap on fuel, and to dispose of a substantial number of petrol forecourts – Sainsbury’s are hoping to convince the CMA to reconsider.
“Furthermore, details of Ocado and M&S’s £1.5bn online venture have been published since the latest from the CMA, introducing a new variable into online grocery competitiveness evaluation – another issue rightfully previously flagged by the CMA, given that over 75% of the online market is controlled by the Big Four, Ocado and Amazon.
“For Sainsbury’s to forge on – with what many see as an already lost battle – shows how pivotal Sainsbury’s feels consolidation at the top end of the grocery market is in order to stop long-term share decline at the Big Four, to use economies of scale and pressure on large suppliers to reduce shelf prices for shoppers.”