Sainsbury’s-Asda deal bad for manufacturers: analyst

By Noli Dinkovski contact

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Black: ‘There is a very high chance the Sainsbury’s-Asda deal will get cleared’
Black: ‘There is a very high chance the Sainsbury’s-Asda deal will get cleared’
The proposed mega merger between Sainsbury’s and Asda will create a “duopoly” that will seriously harm the interests of manufacturers and consumers, a leading City analyst has warned.

The deal, which would give the merged company a greater market share than Tesco’s 28%, was “not in the national interest”​ and should not go through, Shore Capital head of research Clive Black claimed.

Speaking at the Federation of Bakers Annual Conference, held in London last week (23 May), Black said Sainsbury’s plan to generate £350m of synergies from the deal was effectively an attack on branded manufacturers.

“There’ll be some interesting conversations with the likes of Nestlé, Danone, Unilever, and all the rest of them,”​ he said.

Black was particularly scathing of the Competition and Markets Authority (CMA), which he described as a “self-perpetuating, semi judicial organisation that thinks it’s quite academic – but basically pisses away millions of pounds of taxpayer’s money, and charges huge amounts of legal fees to do fuck all.”

CMA comes under fire

If the CMA did its job properly, it would “state tomorrow”​ that it didn’t believe a merger between the retailers was in the national interest and was going to increase competition, Black suggested.

“They won’t do that, because instead they will go through a massive pseudo-academic isochronic analysis of towns like Keithley, where a Sainsbury’s is in one place and an Asda is in another.

“The retailers say they won’t compete with each other – but if they are owned by the same board, that board will have a duty to collude.”

According to Black, the “game-changer”​ was the Tesco’s £4bn takeover of Booker, which was finalised in March.

“When it cleared the Morrisons-Safeway deal in 2005, the old Competition Commission stated it wanted four national players to compete with each other,” ​Black said. “And, to our minds, Tesco/Booker should never have been allowed to happen.”

“Booker is demonstrably a retail operator, even those it is a wholesaler. When that merger took place, we knew it would let the cat out of the bag.”

Dismissive of discounter rise

Black was also dismissive of the suggestion that the rise of hard-discounters Aldi and Lidl meant there was more competition in the market than in previous years.

“In 1994, Kwik Save had a 12% share of the UK market – which is the same as Aldi and Lidl today,”​ he said. “Discounters are not new to the UK, discounting has been here for a long time, and it’s broadly in the same proportion that it has been for generations – it’s just got a different flag on the front.

“It’s absolutely incredible that I’m having this conversation, but I think there is a very high chance the Sainsbury’s-Asda deal will get cleared. And, as I’ve said before, the CMA could come out very quickly and say that they don’t know any industry where a duopoly works in the shoppers’ interest.”

Responding to the criticism, a CMA spokeswoman said: “Our legal responsibility is to properly examine mergers that could restrict competition for the general public. We believe strongly in an evidence-based process, and will examine all relevant facts before reaching a decision.”

Last month, the CMA issued a preliminary ‘invitation to comment’, which is an early opportunity for interested third parties to submit any initial views about the impact that the proposed merger could have on competition in the UK. The invitation closes on Monday (4 June). Click here​ for more information.

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1 comment

Brands

Posted by C.,

It was always obvious that Sainsbury's would go after the brand margins. Anyone who's worked with JS in the last 10 years or been to any of their conferences will know that they have a ideological opposition to brands and would love to be able to get the upper hand over them.

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