CMA blocks Sainsbury’s-Asda merger
NamNews - Apr 25th, 10:41
The Competition and Markets Authority (CMA) has confirmed that it is blocking the proposed merger of Sainsbury’s and Asda. The two chains, along with Walmart, have since stated that they are abandoning the deal.
The widely expected decision was outlined in the regulator’s final report from its investigation into the tie-up. As flagged in its provisional findings in February, the CMA stated the deal could lead to shoppers and motorists being worse due to expected price rises, reductions in the quality and range of products available, or a poorer overall shopping experience.
The group of independent CMA panel members concluded that the tie-up would result in a substantial lessening of competition at both a national and local level for people shopping in supermarkets and online. They stated this would mean shoppers right across the UK would be affected, not just in the areas where Sainsbury’s and Asda stores overlap.
In making the decision to prohibit the merger, the CMA said it had reviewed a wide range of issues in detail, such as the increased competition presented by discounters like Lidl and Aldi, and how new or expanding competitors could affect the retail market, including online. However, it stated that these industry developments did not allay its competition concerns about the merger.
It added that it had also reviewed the two companies’ statements they would cut some prices. However, the CMA said its analysis showed that, overall, the merger would reduce competition in the market and is more likely to lead to price rises than price cuts.
Stuart McIntosh, chair of the CMA inquiry group, commented: “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.”
Following the release of the CMA’s final report, Sainsbury’s, Walmart and Asda this morning stated that they have “mutually agreed” to terminate the transaction.
Sainsbury’s CEO, Mike Coupe, commented: “The specific reason for wanting to merge was to lower prices for customers. The CMA’s conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the UK grocery market. The CMA is today effectively taking £1bn out of customers’ pockets.”
He added: “Sainsbury’s is a great business and I am confident in our strategy. We are focused on offering our customers great quality, value and service and making shopping with us as convenient as possible.”
Analysts have speculated that Sainsbury’s could face a major shake-up under its new chairman if the merger plan failed. It has been suggested that the first major move by Martin Scicluna will be an overhaul of Sainsbury’s top management team, with Coupe possibly being replaced. He masterminded the deal after nearly two years of secret talks with Asda’s management and owner Walmart.
Investors are said to have been pushing for Sainsbury’s management to cut their losses and walk away from the deal so they can focus their efforts on improving the performance of the core business.
Meanwhile, it has been suggested that a definitive CMA block would supply the catalyst for a sale of Asda by Walmart, with private equity firms the most likely bidders. However, with Asda recovering some momentum after cutting prices and improving its own label ranges, its US owner may decide to recommit to its UK subsidiary.
Judith McKenna, CEO of Walmart’s international division, said it was “disappointed” by the CMA’s decision, adding: “Our focus now is continuing to position Asda as a strong UK retailer delivering for customers. Walmart will ensure Asda has the resources it needs to achieve that.”
Checkers brings world-class retail to Constantia with new flagship store
27/11/2019 - 13:01
Checkers has opened the doors to its state-of-the-art 2 330 m² flagship supermarket at the Constantia Emporium as the retailer continues to take innovation to new heights.
Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.
Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.
Exclusive leases must fall: Commission cracks whip on Shoprite, Pick n pay, Spar, Woolies
26/11/2019 - 09:57
The Competition Commission Inquiry into Grocery Retail, published on Monday, called for an end to the exclusive leases negotiated by national retail chains in all shopping malls across the country in a bid to open up access to markets for smaller players.
Today’s customers are loyal to speed and convenience, not brands
25/11/2019 - 11:15
Consumer expectations are rapidly shifting as technologies such as mobile, geolocation, social media and increasingly, Internet of Things devices and wearables, connect people to a world of easily accessible information and convenient services. With the ability to browse, compare and order with a few swipes and taps, consumers are becoming trained to value convenience and service above nearly anything else.