‘Save money. Live better.’ It’s the slogan Asda has adopted from its US parent Walmart over the past few years.
But Sainsbury’s boss Mike Coupe believes he can apply that mantra to his own business through the £13bn mega-merger with its grocery rival.
Hot on the heels of Tesco completing its £3.7bn swoop on Booker, synergies are, once again, the talk of the food retailing town.
Sainsbury’s has already saved more than the £500m target it set itself over the past three years through its own cost-cutting programme, but as margin pressure piles up in a rapidly changing sector, further reductions are needed to create a firm foundation for the future.
Through the merger with Asda, Sainsbury’s believes the enlarged business will establish a sizeable £500m in synergies.
The vast majority of that – some £350m – will come through the combined group’s immense global buying power in food, clothing and general merchandise, backed, of course, by the behemoth that is Walmart.
Not only will those synergies shore up Sainsbury’s balance sheet, but crucially they will allow the retailers to slash prices for their customers.
Coupe insists that around 10% could be trimmed from the grocery staples people buy most regularly.
But will that be enough to ensure the combined group can ‘live better’ in the current climate?
Discounters and the CMA
Even with those reductions at the shelf edge, the discounters will maintain their pricing crown.
Aldi’s outgoing UK boss Matthew Barnes has always insisted that the chain would maintain a 10% price gap to is mainstream rivals whatever the market throws at them.
The Aldi board, and their rivals at Lidl, will already be plotting their next move in grocery’s increasingly frenetic game of chess.
“The rationale for the deal stacks up, but there is no denying that plenty of questions remain”
And the other major consideration is what the Competition and Markets Authority will make of it all.
Coupe is steadfast in his declaration that no stores will close as a result of the merger, but the CMA is sure to have other ideas.
More than half of Asda’s stores are estimated to be within a 10-minute drive of a Sainsbury’s.
If the CMA were to demand that 10% or more of the combined group’s estate were offloaded in order for the merger to go through, the deal quickly becomes far less attractive to both parties, the returns on investment get slimmer and the opportunity to ‘live better’ as a business becomes more difficult to achieve.
The rationale for the deal stacks up, but there is no denying that plenty of questions remain.
Yet the enlarged group would have a leadership team more than capable of finding the answers.
Coupe, Sainsbury’s finance boss Kevin O’Byrne, Asda chief executive Roger Burnley and his Walmart superior Judith McKenna represent a formidable foursome with the grocery nous, retail experience and sheer intelligence to make this deal a success.
That, in itself, will strike fear into their rivals.
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Opinion: Will a united Sainsbury's and Asda 'live better'?