The widely expected blocking of the proposed Sainsbury’s-Asda merger yesterday by the CMA led to much speculation about what the future now holds for both chains. Brian Moore, global retail consultant at EMR-NamNews, offers his view on what it means for the grocery market and suppliers:
For Asda, the result simply means a slight change of gear for Walmart, as they slide from one form of UK semi-withdrawal (retaining a 40% stake in Asda-Sainsbury’s) to selling 80% of Asda to a private equity firm, and retaining a 20% strategic stake in UK retail. This would fit with a precedent they created in Brazil and now seen as part of a global policy in terms of withdrawing from direct participation in local retail, yet retaining a slice of the action, just-in-case…
Meanwhile, the failure of Sainsbury’s Plan Asda puts an immediate spotlight on their Plan B. Any delay in implementation compounds the issue of distraction re the day-job that was caused by their apparent blindness to the need for any alternatives to the ‘certainty’ of a successful merger.
With the benefit of 20/20 hindsight, and we shall see plenty of retrospection in the coming weeks, the ‘inevitability’ of the CMA refusal to allow a merger of two of our largest grocers means that Sainsbury’s have to revert to competition as usual, fast.
This has to mean directly competitive moves against the other mults, especially Asda, and a newly resurgent Tesco.
Unfortunately, cutting price being the easiest and fastest route to competitiveness, we are in for an escalation of the price-war, with the inevitable impact on Sainsbury’s bottom line.
The company will then be faced with the ‘inevitability’ of management changes at all levels, in order to draw a new bottom line under this unfortunate chapter in its history, as Sainsbury’s searches for a new beginning, in unprecedented times.
Individual suppliers and their NAMs have to ensure that they calculate and secure a fair share of what has to follow…
