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Q&A: What will the Sainsbury’s-Asda merger mean for shoppers?

PUBLISHED: 10:33 30 April 2018 | UPDATED: 10:47 30 April 2018

The competition watchdog is being urged to investigate the possible merger of Asda and Sainsbury's amid concerns over consumer choice. Picture: Yui Mok/PA Wire.

The competition watchdog is being urged to investigate the possible merger of Asda and Sainsbury's amid concerns over consumer choice. Picture: Yui Mok/PA Wire.

Your briefing on all the big questions thrown up by the Asda-Sainsbury’s mega-merger.

Sainsbury’s has confirmed it is merging with rival Asda to create the UK’s biggest food group, sending shockwaves through the retail industry.

The £12bn deal still needs to be scrutinised by competition authorities, but if it does go ahead, what will it mean for consumers?

What will it mean for shop prices?

The two supermarket giants have pledged to invest the cost efficiencies generated from the merger into lower prices.

Sainsbury’s expects to save £500m from merging with Asda, and has said it will lower shop prices by 10% on everyday products.

However, this could have more widespread implications for shop prices if discounters Aldi and Lidl decide to cut their prices even further to stay ahead of their main-market rivals.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The executives of other supermarkets will have their heads in their hands at the prospect of another price war.”

What will it mean for stores?

The Competition and Markets Authority (CMA) will soon start its investigation of the proposed merger, raising the prospect that Sainsbury’s and Asda will be forced to sell off stores if they directly compete in local areas.

However, Sainsbury’s insisted on Monday that it does not expect to shut any stores. The supermarket says its store footprint is more focused on the south, and Asda has more stores in the north.

What will happen to Argos?

Sainsbury’s bought Argos in 2016 and already has more than 200 Argos outlets within its supermarkets, having rapidly expanded over the past year.

It is expected that Argos will now start appearing in Asda’s stores, with Sainsbury’s chief executive Mike Coupe saying this morning that the deal “brings scale in clothing and general merchandise”.

Why are the two companies joining forces now?

All retailers are having to take drastic action to stay competitive during a critical time for the sector. With Amazon eyeing up the UK food market with its Amazon Fresh delivery service, food retailers will be nervous about its sprawling logistics network and buying power.

Sainsbury’s and Asda also have to fend off price competition from Aldi and Lidl. As a value supermarket, Asda has been under significant pressure as the German discounters have grown their market share.

Tesco’s recent merger with wholesaler Booker Group, which was cleared with minimal fuss by the CMA, will also have given executives at Sainsbury’s and Asda confidence about the possibility of joining forces.

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