Walmart International boss Judith McKenna has taken a swipe at the competition watchdog for failing to understand the changing nature of the UK grocery market.

McKenna hit out at the Competition and Markets Authority (CMA) over its provisional findings into the proposed Sainsbury’s-Asda merger, after the regulator suggested the combined business could spark higher prices and a decline in product quality.

Speaking exclusively to Retail Week, McKenna suggested the CMA did not fully recognise the level of competition provided by Aldi and Lidl, or the significance of UK consumers’ ongoing switch to online shopping.

Judith McKenna RWL2019

Judith McKenna: ‘I am not sure everybody understood the changing shape and nature of UK retailing’

McKenna said: “We’ve made no secret of the fact we were surprised and disappointed [by the CMA’s findings]. There were a couple of things from a Walmart perspective – one of which was this belief that we wouldn’t lower prices. In this market, the concept that you wouldn’t do that just seems so counterintuitive to all of us. It was one of the key premises of the deal.

“On a broader basis, I am not sure that everybody understood the changing shape and nature of UK retailing. If you think about grocery online, it is interesting that a deal was announced between M&S and Ocado after the provisional findings came out.”

When asked if the CMA had also failed to understand the scale of the disruption caused by Aldi and Lidl, McKenna pointed to the fact that the average basket at the discounters now contains more items than at traditional supermarkets.

The former Asda chief operating officer said this was evidence of how the “fundamental shape of the market and dynamics of the market” have changed over the past decade, and that the way people shop “has been changing for some time”.

McKenna added: “There is a recognition that the discounters are a level of competition. The issue is the amount of competition that they create. Every one of our supermarket peers looks at their pricing versus an Aldi or a Lidl. We are all aware of that. That is because they are strong competitors in the market to us.”

Despite the CMA’s provisional report on the merger, which suggested it would be “difficult for the companies to address the concerns it had identified”, McKenna said Walmart was not ready to walk away from the deal.

“We are still in the CMA process, we are still going through that and you can’t make a decision when you don’t know what decision it is you are making,” she said.

“We need to go through this process, we need to continue to talk to the CMA, we need to continue to put the case forward. We will get the working papers at some point on the remedies and then we’ll look at it from there.

“You have to protect the consumer. That is absolutely the CMA’s priority in this and we recognise that. But the best way to have strong, healthy businesses, with good sales, lowering prices and providing employment, is to make sure that businesses continue to grow and be healthy for the long term.”

The CMA will reveal its final verdict on the proposed merger by April 30.

Walmart's McKenna hits out at CMA over Sainsbury's-Asda probe