Asda and Sainsbury’s proposed merger will reduce consumer choice, and the idea the two brands can continue to operate separately is “a load of baloney”, the chair of a Commons committee has said.
Suppliers also stand to be even further squeezed by the supermarket giants if the deal goes through, MPs on the Environment, Food and Rural Affairs Committee said in an evidence session on Wednesday.
Committee chair Neil Parish said the combined company would save money by “extracting more pain from suppliers, and it’s not just going to be the Nestlé’s of this world, it’s going to be the smaller suppliers.”
This would also mean less choice for consumers because where the two companies have different suppliers the combined company would simply pick the cheapest one.
Asda chief executive Roger Burnley said that this was not the case as the company would “absolutely continue to operate as two separate brands”.
Mr Parish responded: “No, you won’t, because how on earth can you save 10 per cent and tell us in this committee that you are going to run two separate [businesses]? I’m sorry but it’s unbelievable...
“If you’re going to make anywhere near 10 per cent in a hugely competitive market you’re going to take the model of the cheapest buying. For goodness sake, be honest with us.
“Don’t come in here and give us a load of baloney, because this is baloney.”
Mr Burnley defended the deal by saying that the retail landscape had “changed out of sight”, necessitating the merger.
“Competition and change in the grocery sector has never been greater,” he said. Supermarkets now face rivals from many different discounters such as Lidl, as well as online players like Amazon and takeaway firms such as Deliveroo.
“We absolutely know that we can’t afford to stand still,” he said.
The heated exchange came after the competition watchdog this week published responses to a consultation on the proposed £12bn merger.
“A number of submissions raised concerns about the impact of the proposed merger at the national level, on the belief that it would lead to increased concentration in the market and fewer national players, with two companies – Tesco and the combined Sainsbury’s/Asda – holding high market shares,” the Competition and Markets Authority said.
“Some respondents suggested that this could give rise to higher prices, reduced choice or a loss of innovation within the supply of groceries.”
The combined company would have around 30 per cent of the UK groceries market.
After the committee hearing, Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “Sainsbury’s and Asda have promised to cut prices for consumers, but somewhere along the line someone will pay.
“Many UK suppliers are running their business on fine margins. Exchange rate volatility has already led to public spats between suppliers and the big supermarkets because of higher import costs.
“With so much of the UK’s food supply chain dependant on one customer, it will be more important than ever to ensure suppliers are paid fairly and supported in difficult times.”