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Merger decision a ‘missed opportunity’ for supply chain savings

26 April 2019

Following the news that the Competition and Markets Authority (CMA) has blocked the proposed Saisburys/Asda merger, consultancy SCALA says the decision ‘may have been short-sighted’. 

John Perry, managing director of SCALA, said: “This merger would have given Sainsburys and Asda the opportunity to become more efficient and compete as effectively as possible.

“They could have optimised their network of distribution centres and transport operations, with potentially significant gains through reduced handling and vehicle miles. Stock levels could also have been reduced, reducing warehousing space and capital that is currently tied up in inventory.

“Suppliers could have delivered larger orders into fewer distribution centres, which in turn would have increased consolidation, allowing vehicles to be utilised more efficiently and ultimately reducing vehicle mileage and the associated costs.

“With so much potential for efficiency gains, cost reductions and environmental rewards, all of which ultimately benefit the consumer, the CMA’s decision would suggest that it has fundamentally misunderstood the impact this merger would have had on competition.”

The big four have been losing market share to the discounters for some time now, and on top of this have the added pressure of global retail giant Amazon entering the grocery sector.

Perry continued: “It therefore seems rather short-sighted that the CMA has blocked the proposed Sainsburys/Asda merger over fears it would reduce competition and therefore raise prices for consumers.

“With competition so rife in this constantly changing sector, it’s actually quite unlikely that this merger would have had any significant impact on the consumer.

“Meanwhile, if Amazon eventually achieves the online dominance in grocery that it has achieved elsewhere, it’s quite possible that in years to come we will look back in dismay at the decline of UK grocery retailers.”