The NPA has expressed ‘real concern’ at the impact on primary producers of the proposed merger between Sainsbury’s and Asda.
Sainsbury’s has said the move will result in significant reductions in the prices of some popular consumer goods – and the NPA believes these could be passed onto producers.
Sainsbury’s confirmed plans on Monday morning for the merger that would create a new UK grocery giant with a share of around one-third of the UK market and combined revenues of £51 billion in 2017. Asda’s current owner Walmart would remain as a strategic partner, retaining a 42% stake in the newly-merged company.
Both the Sainsbury’s and Asda brands would be maintained, with a ‘complementary network’ of more than 2,800 Sainsbury’s, Asda and Argos stores and a combined 47 million customer transactions per week.
Sainsbury’s said the move would enable investment in areas that will benefit customers the most, including price, quality, range and creating more flexible ways to shop. It expects to lower prices by around 10% on ‘many of the products customers buy regularly’.
Sainsbury’s chief executive Mike Coupe, who will lead the new combined group, said he believed the two supermarkets were ‘the best possible fit’. “It will enable us to bring prices down, to improve quality, to improve ranges and to bring the power of Walmart in the form of buying of general merchandise and in the form of their systems and investments to the UK,” he told the BBC.
NPA reaction
NPA chairman Richard Lister said: “These plans are of real concern to the UK pigmeat sector. History shows that concentration of power in the retail rarely ends well for primary producers and, as buying power moves into fewer hands, farmers and food producers face the prospect of less competition for the products they sell and, inevitably, an even tougher trading environment.
‘Sainsbury’s is talking about cutting prices by 10%, but says there will be no savings made in terms of store closures or staff levels. The cuts will have to fall somewhere and our concern is that primary producers – including pig farmers, who have frequently already operated on unfeasibly tight margins over the past 10 years – will bear the brunt.
“We will need to see more detail on how this will affect suppliers, but our initial response is that this merger would raise some serious competition issues.”