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Courtesy of the Times.
The boss of J Sainsbury has hit back at claims that the supermarket group’s proposed merger with Asda would be bad for suppliers and would lead to rising prices for consumers. Mike Coupe, chief executive of Sainsbury’s, said that his job was to “go to bat” for customers and that a combination of Britain’s second and third largest grocers would generate £350 million of synergies via enhanced buying power that would improve choice and prices for shoppers.
He made the remarks as Sir Vince Cable, leader of the Liberal Democrats, wrote to Andrew Tyrie, chairman of the Competition and Markets Authority, yesterday urging the regulator to “bare its teeth” in a thorough investigation of a deal that could redefine Britain’s grocery market. Mr Coupe said: “My job is to act in the best interests of our customers. Eighty-five per cent of the food and grocery sales of both organisations comes from 100 suppliers and all of them are large multinational suppliers who have huge pricing power and will be larger, in some cases, than the combined entity [of Sainsbury’s and Asda]. All we are asking is that the top 100 suppliers give us the same price in each business.
“We want to transfer money from large suppliers, who make healthy profit margins, and give it to customers in the form of lower prices — and in the process we will also give some back to our shareholders. In the court of public opinion, I don’t think that would be an unreasonable stance to take, especially if those savings are passed on to customers in the form of lower prices.” If the supermarkets’ merger goes ahead, it will create an enlarged group with sales of £51 billion, 330,000 staff and more than 2,800 UK stores. Under the terms of the deal, Walmart will receive a cash payment from Sainsbury’s of nearly £3 billion and will hold a 42 per cent stake in the combined group, albeit with 29.9 per cent of the voting rights. The deal values Asda at £7.3 billion on a debt-free, cash-free and pension-free basis.
News of the merger has been met by alarm from politicians and trade unions, who have raised fears about the impact on suppliers, farmers and jobs. Sir Vince said in his letter to Mr Tyrie that the merger raised a number of issues, “from the potential for job losses to the development of even more powerful local concentrations of monopolitistic power that will damage independent high street retailers”.