The proposed merger between Sainsbury’s and Asda could have “huge implications for the Northern Irish grocery market” as it would create a significant force to challenge Tesco’s dominance there, a leading industry expert has said.
David Berry, director at Kantar Worldpanel, an international organisation which tracks and analyses shopper behaviour, said the merger would effectively mean a huge change in the grocery landscape in the North.
“Tesco has been the biggest retailer in Northern Ireland for over a decade, and currently holds a 35.2 per cent share of the market. Although a Sainsbury’s/Asda double act – with a combined market share of 34.4 per cent – would not quite overtake Tesco’s lead, it would certainly level the playing field,” Mr Berry said.
He believes if Sainsbury’s and Asda get the go-ahead to join forces – the £12 billion merger will be subject to the scrutiny of the UK’s Competition and Markets Authority – it could help to expand their customer base in the North.
“Asda remains particularly popular with families: nearly half of all Asda’s sales came from households with children in comparison to 30 per cent of sales at Sainsbury’s. However, city-dwellers tend to choose Sainsbury’s over Asda; 45 per cent of Sainsbury’s sales were clocked up in greater Belfast, while almost a third of sales at Asda came from this area.”
Guarantees
Asda currently has more stores than Sainsbury’s in the North. Together both employ nearly 8,000 people, and the union Unite has called for legally-binding guarantees to protect jobs in Sainsbury’s and Asda if the merger is given the green light.
Unite is also warning that it is not just store jobs that could be impacted by the proposed merger, which said there was also an issue about what might happened to staff who work in distribution centres and logistic functions.
Business chiefs in the North also have concerns that the ambition of Sainsbury’s to achieve at least “£500 million” in cost savings from the proposed merger could pose a threat to both its and Asda’s suppliers in the North.
The two supermarket groups source between £250 million to £300 million from suppliers and producers in the North and South each year.
Roger Pollen, from the Federation of Small Businesses in Northern Ireland, said the support from Sainsbury’s and Asda to their supplier base in the North made a vital contribution to the local economy. He had concerns about how the merged group would achieve their targeted £500 million in cost savings.
Suppliers
“Where are these significant savings going to come from? The logical extension is that they are going to want to pay less, and will that impact on suppliers here? We don’t know yet if because of the merger they will want to make savings in their supply chains – and that could be a worry for firms in Northern Ireland.”
Aodhán Connolly, director of the Northern Ireland Retail Consortium, said the North’s retail industry was “undergoing seismic change”, and the Sainsbury’s/Asda merger was indicative of far-reaching changes taking place.
“This is more evidence of the ongoing transformation in the retail industry. Increasing operating costs, investment in digital and continued consumer demand for choice, value, convenience and quality shopping experiences mean that the retail industry of the future will look very different to today.”
