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Smaller suppliers to suffer most in Asda/Sainsbury's deal

Consumers will pay the price in less choice and lower quality produce


Alex   Black

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Alex   Black
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Smaller suppliers to suffer most in Asda/Sainsbury's deal

Business analysts Plimsoll have warned thousands of jobs were in danger throughout the supply chain with 125 of the UK’s largest food manufacturers already considered ‘in danger’ with 73 more were marked as loss making.

 

Senior analyst David Pattison said: : “If the deal goes ahead I can see a period of acquisitions, takeovers and mergers as supermarket suppliers fight for survival, in a race to the bottom on price.”

 

He added many suppliers were already having to contend with rising costs from pensions auto-enrolment, the living wage and a weaker pound.

 

Others could also be ‘ripe’ for takeovers as companies look for economies of scale to tackle squeezed margins.

 

“Mergers like this and the consolidation of the competition also make life very difficult for surviving smaller suppliers,” he said.

 

He added the industry as a whole would be forced to ‘tighten its belt’ and doing business would become harder as more stringent financial controls were introduced to reduce exposure from suppliers and customers going bust.


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“Ultimately, the consumer might well end up paying the price as a consequence of this merger with less consumer choice or lower quality products,” Pattison said.

 

Union reaction

 

NFU director Terry Jones also warned consumers would suffer if buyers abuse the increased market power after the merger.

 

Responding to a preliminary invitation to comment on the merger from the Competition and Markets Authority, Mr Jones said: “Farmers and growers form the foundations of grocery supply chains – providing the British public with safe, traceable and affordable food for all incomes.

 

“The consolidation of retail buying power has been of great concern to our members for many years,” he said.

 

“If buyers working for this enlarged business abuse its market power and make unreasonable demands on suppliers by transferring excessive risk and unexpected cost to suppliers, which in turn damages their ability to innovate and invest, then ultimately this will impact on choice and availability for shoppers.”

 

“From recent reports we also understand that ministers in both BEIS and Defra have called for the CMA to consider the impact on the supply chain and especially on small suppliers. The NFU welcomes these calls and we have asked the CMA to outline how they will reflect this in their investigation.

 

“The NFU will be examining this proposed merger very carefully. We will be undertaking our own modelling to examine the effects it could have on farm businesses and their offering to the public. Officially registering our interest in this merger with the CMA is an important first step.”

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