The big news coming out this weekend was not Tim and Jack getting the golden buzzer on Britain’s Got Talent, but the proposed merger of supermarket giants Sainsbury’s and ASDA. If agreed, it presents a seismic shift in British grocery not seen since Morrisons bought rival Safeway back in 2004.
The combined entity would be bigger than Tesco and have a 32% market share of UK grocery. The City is pleased and Sainsbury’s shares are skyrocketing. I suspect many colleagues and suppliers in the industry will be concerned. Whilst we don’t know yet how this will all play out, a chunk of the estimated £500 million of synergies will inevitably come from rationalising head office functions and even tougher trading terms with manufacturers. With Sainsbury’s plc set to retain control of the new entity in London, it may mean further job losses from ASDA, which is head quartered in Leeds and a major regional employer.
The scale and cash flow required to supply any of the big supermarkets is already daunting. Whilst established FMCG brands can probably enhance terms further for growth in market share, let’s hope it doesn’t mean fewer opportunities for start-up brands and independent retailers. They are the bedrock of the industry and critical for innovation.
The Brass Shopper team will be watching developments with interest.