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Potential Sainsbury’s and Asda merger comes with possible price cuts for shoppers

CEOs tell shoppers they can expect lower prices on the goods they buy

Potential Sainsbury’s and Asda merger comes with possible price cuts for shoppers

Sainsbury’s and Asda have confirmed that they will be merging, subject to approval. The supermarket monoliths share a combined 47 million customer transactions per week, and revenues of around £51 billion.

Sainsbury’s has claimed that it expects to be able to offer shoppers 10% lower prices on popular products once the merger is complete.

New supermarket giant?

In a landscape where discounters Aldi and Lidl have an increasing market share (9.9%) and Tesco dominates (22.1%), Sainsbury’s and Asda’s combined market share would push the new group into pole position with a competitive 23.3% (nearly one pound in every four), according to GlobalData figures.

For Asda and Sainsbury’s shoppers, the merger, if it goes ahead, may bring new possibilities – Argos is owned by Sainsbury’s, so we may start to see in-house Argos outlets in Asda stores, for example.

Competitive prices

Every month, we compare a typical supermarket basket of between 65 and 100 popular branded food and grocery products, to find out which supermarkets have the cheapest prices. Over the last six months, Sainsbury’s has consistently been more expensive than the other ‘big four’ supermarkets – Morrisons, Asda and Tesco.

Asda typically comes in around second cheapest, with Morrisons coming in cheapest. An Asda-Sainsbury’s merger may mean cheaper prices across both stores.

However, since October 2015, Tesco has price-matched on comparable branded items at the till or when you settle the bill online, so should price match the lowest-priced basket.

See how the supermarkets perform on price in our supermarket price comparison.

A boost to customer satisfaction?

When we surveyed nearly 7,000 shoppers about the supermarkets they use in October 2017, Sainsbury’s came bottom of the pile, with a customer score of 62%.

Although it didn’t score particularly badly for any one particular area, Sainsbury’s fared worst for special offers and value for money, picking up three stars for each.

Asda’s customer score was 63% – joint second from bottom with Morrisons. It also found itself in bottom place for shopping online, where it has finished since our survey was launched more than a decade ago.

We know that shoppers are increasingly driven by price. Discounter Aldi tops our supermarket stores table with a customer score of 74% and Lidl takes third place with 69%. It remains to be seen whether a commitment to lower everyday pricing will sway Asda and Sainsbury’s shoppers, should the merger go ahead.

What does this mean for consumers?

On Monday afternoon, Business minister Andrew Griffiths told Parliament that the CEOs of Sainsbury’s and Asda had assured him that they would continue to operate as different businesses and both HQs would remain open.

The merger will be subject to review by the Competition and Markets Authority (CMA). The CMA is able to assess whether the deal could reduce competition and choice for shoppers, and what action should be taken if concerns are identified. If it believes that it would be anti-competitive to have an Asda and a Sainsbury’s too close to each other, it may force a sale to a competitor.

Alex Neill, managing director of Which? Home Products and Services, says: ‘The competition regulator will need to scrutinise this proposed merger carefully to ensure there are no negative consequences for consumers.

‘Sainsbury’s and Asda have both fallen behind the pack recently in this trusted sector – with both finishing in the bottom three of our annual supermarket survey as rivals such as Aldi and Lidl have done a better job of giving shoppers what they want.’

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