A FEW rounds of golf will have been interrupted when news of Sainsbury’s proposed acquisition of Asda broke on Saturday. But, while the story may have shocked sector watchers initially, it is perhaps not so surprising in retrospect.
The challenges facing the grocery sector are well documented. Lidl and Aldi had been snapping at the heels of the ‘big four’ for some time now, with the trend of the discounters winning share at the expense of Tesco, Morrisons, Sainsbury’s and Asda an established and recurring theme. Alongside that we have had the Brexit vote and subsequent collapse in the pound, which has in turn ramped up the costs for supermarkets in their purchases of goods from Europe and further afield.
Add into the mix sluggish real pay growth and stuttering economic expansion and you have a recipe for difficulty.
As grocers focus on costs in such competitive conditions, those worried the Sainsbury’s-Asda union will lead to job losses are justified. After all Tesco, Morrisons and Sainsbury’s have already cut jobs in recent years.
For its part the competition watchdog may not be too concerned. The combined share of Sainsbury’s and Asda is only narrowly ahead of Tesco’s, while their store footprint is said to be largely complementary.
Whether consumers are ultimately better off remains to be seen.
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