sainsbury's - asda merger

FDF said Sainsbury’s-Asda would be able to extract significantly lower prices from suppliers

More than 90% of suppliers fear a merger between Asda and Sainsbury’s will have a negative impact on their prices or trading terms, according to a major survey by the Food & Drink Federation.

The Grocer has seen a near-final draft of FDF’s formal submission to the CMA’s ongoing probe into the deal, which claims if it is allowed to go ahead would have a disastrous impact on innovation through the squeeze on suppliers.

The FDF carried out the survey, which received responses from more than 100 suppliers, after warning the CMA that individual suppliers were too scared to speak out publicly about the negative impact of the merger in a “climate of fear”.

‘The Food and Drink Federation (FDF) and its members have significant concerns about the proposed merger,’ the draft submission read.

’The FDF considers that a combined Sainsbury’s-Asda would be able to extract significantly lower prices from its suppliers as a result of having much greater buyer power.

‘More than 90% of survey respondents expect the proposed merger to have a negative or very negative impact on their prices and/or terms of supply.’

In terms of innovation, the draft said: ‘The proposed merger poses a significant risk to future levels of innovation compounded by Sainsbury’s and Asda’s importance as new product sponsors.’

The report also suggests suppliers fear ‘a merged Sainsbury’s/Asda would standardise the product range across its stores, and use its increased buyer power to limit the number of products it stocks.’

FDF chief operating officer, Tim Rycroft, told The Grocer: “The industry is facing many threats at the moment but the merger is one of the key issues for suppliers who by a huge majority have concerns over the merger and its negative impacts.

“One of the things that comes across most strongly is the concern that any levelling down of margins is going to undermine product innovation.

“The fact that over 100 suppliers responded to our survey speaks volumes for the depth of feeling about this merger.

“Suppliers have also [warned] in the survey that if they are forced to lower prices for Sainsbury’s and Asda, they will have to consider making that back by raising prices to smaller retailers.”He added: “Clearly because Sainsbury’s and Asda are such huge customers for suppliers, there is a certain amount of caution about speaking out which is why the FDF has such a key role to play in making these concerns known to the CMA.”