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‘Suppliers to the big supermarkets will be extremely relieved’ - CMA blocks Asda/Sainsbury’s merger

The Competition and Markets Authority found the merger would lead to increased prices, reduced quality and choice of products or a poorer shopping experience

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‘Suppliers to the big supermarkets will be extremely relieved’ - CMA blocks Asda/Sainsbury’s merger

The proposed merger between Sainsbury’s and Asda has been blocked by the Competition and Markets Authority (CMA) after it concluded shoppers and motorists would be worse off.

 

Farming groups and retail analysts had warned suppliers would be hit hardest by the merger, with concerns over the power the retailer would hold.

 

Competition

 

According to the latest Grocery Market Share figures from Kantar WorldPanel, Sainsbury’s and Asda’s combined market share was 30.7 per cent of the market.

 

Tesco, the largest UK retailer, holds 27.4 per cent of the market, with Morrisons on 10.3 per cent.

 

In its final report, CMA concluded UK shoppers and motorists would be worse off, due to expected price rises, reductions in the quality and range of products available or a poorer overall shopping experience.


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Stuart McIntosh, chair of the inquiry group, said: “It is 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.”

 

There had been concerns that suppliers would have had to pay for Sainsbury’s and Asda’s promise to deliver consumers £1bn in savings.

 

Smaller suppliers to supermarkets would welcome the news, according to Duncan Swift, of accountants and business advisors, Moore Stephens.

 

Mr Swift said: “Suppliers to the big supermarkets will be extremely relieved that the merger has been blocked by the CMA.”

 

“Suppliers had been worried that the merger would have meant the merged businesses would have far too much power over them, which would likely have led to savage price cuts.”

 

“The decision will provide certainty to suppliers, who will now be able to invest and innovate with confidence.”

 

Right result

 

Sustain farm campaign coordinator Vicki Hird said this was the ‘right result’.

 

“Further mergers in a highly concentrated sector would mean less choice for customers.

 

“For suppliers like farmers and growers, here and overseas, this merger could have been disastrous meaning even lower farmgate prices and fewer market options when they are already the most squeezed part of the supply chain.

 

“The farmers, farm workers, environment and livestock would have suffered from the price cuts resulting from the merger."

NFU Scotland Policy manager John Armour welcomed the announcement.

 

“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.

 

“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.”

NFU Director General Terry Jones said: “The NFU’s key concern about the proposed merger has always been the potential impact it could have on our members, with the possibility for abusive market power, as well as the impact on consumer choice and the quality of products coming to the market.

 

“It is clear from the CMA’s findings that they recognise the impact further consolidation could have on the supply chain, and ultimately shoppers.

 

“In light of this decision, we will be seeking a meeting with both Sainsbury’s and Asda to fully understand what this decision will mean moving forward.”

 

Ulster Farmers’ Union president, Ivor Ferguson said it had not come as a surprise.

 

“Its findings highlight the impact that the proposed merger could have had on the entire food supply chain and for us the key concern has always been on the potential impact it could have on our members.

 

Mr Ferguson added: “It has always been our view that we, the primary producer would most likely have been hit with pressure on prices being paid for our high-quality products, due to the increased pricing power of this merger.

 

“This would have been completely unacceptable, given that margins are already tight on many farm businesses.”

 

The UFU will continue to monitor the decisions, which both of these major retailers will be taking going forward as a result of this announcement.

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