As widely reported, Sainsbury’s and Walmart have agreed a merger which will see Walmart part with the majority stake in Asda, retaining just 42 per cent. It is an interesting proposition in these times of economic uncertainty and would, say some, not merely impact others in the grocery sector but also the main players, like Primark, in the mass market clothing sector as both supermarkets have a not in-considerable share of the clothing market between them.
It is, we understand, proposed that the two businesses will retain their own distinct branding and that Asda’s operation will continue to be headquartered in Leeds and headed by its CEO Roger Burnley. There will be savings to be made across all departments of both businesses which will lead to both Asda and Sainsbury’s being better able to compete with Aldi and Lidl with Asda sticking very much to its value proposition and Sainsbury’s with its quality proposition. Undoubtedly the combined buying power of the two chains will deliver much greater bargaining power with suppliers, but there may well also be demands from the CMA for some stores to close which may well lead to redundancies at store level.
That both Asda and Sainsbury’s operate home delivery services on a significant scale and that Sainsbury’s now has Argos and its online capabilities, there will undoubtedly be a most thorough investigation into the proposed merger with considerable representations expected to be made by competitors, as well as. of course, consideration as to whether consumer choice will be negatively impacted should it be allowed to go ahead. If the two are able to combine home delivery operations then this could lead to improved profitability through a reduction in the delivery fleets of both supermarkets.
Meanwhile rumours that Amazon has been in talks to acquire Waitrose from John Lewis Group have been flatly denied. Logically though, it will take more than a loose tie-up with Morrisons and the small Wholefoods chain for Amazon to scale up its UK online groceries business. Many now expect there to be another deal in the offing as Tesco with Bookers, and the Co-op with its recently approved Costcutter wholesale supply deal and pending tie-up with Nisa, most of major players in the grocery market are focused on strengthening their positions.
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