Agri-food sighs relief as regulator blocks Sainsbury’s and Asda merger

A proposed merger between two of the UK’s largest retailers – Sainsbury’s and Asda  – has been blocked by the competition authority, to the relief of many in Britain’s agri-food sector.

Farmers and processors feared the cost-savings promised to shoppers could only be delivered by putting even more pressure on already-struggling primary producers.

MPs previously branded the deal a ‘marriage of convenience’ and chastised Asda chief executive Roger Burnley for purchasing meat – such as pork –  from the ‘cheapest possible place’.

Also Read: Suppliers could be squeezed in Sainsbury’s and Asda ‘marriage of convenience’

EFRA Committee chairman Neil Parish told Burnley he expected the same buying principles would be extended to Sainsbury’s – which mostly purchases meat produced on British farms.

“You’re going to be a big beast on the market together, combined, and you’re going to exact more pain on those who supply you – and it’s not just going to be the Nestles of this world – it’s going to be the smaller suppliers too,” he said.

Sainsbury’s has more than 600 supermarkets and 800 convenience stores in the UK, while Asda has just over 500.

Combined, they would become the UK’s largest supermarket chain and would have accounted for around a third of the country’s weekly grocery spend.

NFU Scotland policy manager John Armour, who gave evidence to the Competitions and Markets Authority (CMA) inquiry in November 2018, was among those welcoming news the merger had been barred.

The grocery market is already dominated by a few, very large operators and further consolidation would have had ramifications for all parts of the food supply chain, including consumers, farmers and crofters.

“Importantly, several consumer groups shared our concerns over the impact that the proposed merger could have had,” he said.

“Media reports around this merger featured headlines that focussed on plans to ‘slash prices’ suggesting that such a consolidation of market share would be used to increase price pressure further down the supply chain. Farmers and growers are often price takers and that any price pressures on fresh food, ultimately, are felt in primary food production.”

Others further up the agri-food supply chain agree. Retail NI chief executive Glyn Roberts said: “This was the right decision by the CMA. From a competition, consumer and supplier perspective, this proposed merger would have been a bad deal.

Many local suppliers to the grocery sector were extremely concerned that this merger would result in a significant reduction in trade.

“The local grocery market is rapidly changing. Growing numbers of consumers are moving away from the multiples and toward independent retailers.

“More and more consumers are no longer doing a weekly trolley shop and are instead switching to a basket shop several times a week with our members.”

CMA findings

In its final report, published today, the Competition and Markets Authority (CMA) found that UK shoppers and motorists would be worse off if the merger went ahead.

It also highlighted that price rises, reductions in the quality and range of products available, or a poorer overall shopping experience would be expected consequences.

Stuart McIntosh, chairman of the inquiry group, said: “It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week.

Following our in-depth investigation, we have found this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all of their UK shoppers.

“We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”