The proposed Sainsbury’s and Asda merger has been around for just under a year now, and on Tuesday 19th March they released a joint statement responding to the Competition and Markets Authority (CMA). Their response to the CMA’s Provisional Findings and Notice of Proposed Remedies included a nod to Asda’s fuel pricing, something we questioned before.
Along with their fuel prices comes news of an up to 10% reduction across the board, Argos entering Asda stores and more.
What issues does the CMA have?
In February, the CMA released their provisional findings and in it they raised concerns that at over 100 petrol stations petrol prices could be inflated and competitiveness in some areas would reduce if the merger went ahead.
They found a multitude of issues in the original documents, ranging from supplying to removing the competitive nature in areas where there are limited stores. The CMA proposed options to address their initial concerns, including blocking the deal or requiring the merging companies to sell off a significant number of stores and other assets – potentially including one of the Sainsbury’s or Asda brands – to recreate the competitive rivalry lost through the merger.
Stuart McIntosh, chair of the independent inquiry group carrying out the investigation, said: “These are two of the biggest supermarkets in the UK, with millions of people purchasing their products and services every day. We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK. We also have concerns that prices could rise at a large number of their petrol stations.
“These are our provisional findings, however, and the companies and others now have the opportunity to respond to the analysis we’ve set out today. It’s our responsibility to carry out a thorough assessment of the deal to make sure that the sector remains competitive and shoppers don’t lose out.”
New responses
Sainsbury’s and Asda released their report into the findings and heavily argued against the results. The main highlight for PetrolPrices was the statement about fuel profits.
Currently, Sainsbury’s are ordinarily second or third, tied with Morrisons, to drop fuel prices which are always led by Asda. Asda also has a price promise to be the cheapest petrol station of any station in a 3-mile radius of one of theirs. Back in May, we queried this in one of our articles, and it seems it has now been answered.
Sainsbury’s announced they would cap their gross profit margin on fuel at 3.5pppl for five years, showing that it is currently more than this. Asda confirmed they would keep their current fuel pricing strategy. These price commitments will be publicly annually verified by an independent body and released to all.
The interesting thing is perhaps the five-year limit on the profit margin limit, which implies that after five years, the prices could rise or could potentially fall.
Jason Lloyd, Managing Director of PetrolPrices.com, said “ASDA dominates the top 250 cheapest fuel locations in the UK, which was one reason why the CMA rejected the proposed merger. Although it’s a good thing for the newly combined group to guarantee their lowest price fuel strategy for ASDA and capping gross margin at Sainsbury’s forecourts at 3.5p a litre, it’s not clear if the CMA will accept the proposal, particularly being monitored by an independent 3rd party reviewer.
However it seems clear that Walmart really wants to sell ASDA off, so there could be an opportunity for the CMA to force the new group to guarantee lowest fuel price strategy for ASDA and Sainsbury’s combined. That would be very significant, and no doubt put them into UK market leader for petrol retail by volume sold for many years to come.”
Implications for consumer
Sainsbury’s currently own 311 forecourts (as of 2018) and Asda own 319 (2018). Combined the market share would be 17.6%, higher than Tesco, the current market leaders, share. This could potentially lower the other supermarket’s cost as they aim to compete with the market leader in both price and size.
Overall, prices could go down but if the share prices teeter any lower then they could drive up their prices slightly to compensate for any initial losses.
Sainsbury’s Chief Executive, Mike Coupe and Asda Chief Executive, Roger Burnley said:
“We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.
We are committing to reducing prices by £1 billion per year by the third year which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually.
We hope that the CMA will properly take account of the evidence we have presented and correct its errors. We have proposed a reasonable yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers.”
What do you think of the merger? Do you think this will help lower fuel prices? Let us know below
As Sainsburys store prices are considerably higher than Asda, I cannot see this merger being of benefit to consumers. I don’t think Sainsburys will reduce their prices to Asda level, and if they do it will be short-lived and then they will blame rises on market forces.
At the end of the day they are thinking of profit and shareholders.
Rest assured, at the end of the day, Sainsbury’s will be looking after their interests before ours.
In a 50 sq.mile radius here in the North West, Sainsbury’s fuel differs by up to 4ppl, depending on where you buy it from.
Allow the merger. Put penalties in place on annual review results. If they show they have not fulfilled there pricing commitments.
As. sainsbury shareholder I am totally in favour of this merger. The combined company should commit to Walmart pricing, it certainly benefits low income American families and would here too.
GREEDY PERSON ALERT!!!!
We dont shop at Asda but we will buy fuel there if close to us as it is always competitive. We are hoping that Asda will improve its offering and that Sainsburys will reflect Asda fuel pricing.
My advice shop somewhere else we have freedom of choice and trust me if you do this the prices will soon fall into line to get you back .into their stores.
In our area. (Ashton-under-Lyne) sainsburys normally leads the fuel pricing for the area anyway. How about 10% less than Asda’s fuel prices instead?
ASDA were committed to having the lowest price in the area but it has not happened around Newcastle for the last month. Undercut by Tesco, Sainsburys and Morrison by as much as 2p
Here in Sunderland the price of fuel at Asda went up by 2ppl within a week of the CMA response in February. Obviously that happened at every Asda.
If they can make such sweeping reductions then it just proves how they are currently ripping off motorists and shoppers with their pricing at the moment. And a quick wander around any Asda will show how they are increasing prices week-on-week. There’s no need to do so, it is simply greed!
On the subject of capping fuel prices for 5 years is a carrot to get the approval of the CMA. It is Asda’s policy to cap and be the cheapest with no time limit it is an ongoing policy, so the CMA must ensure that the cap on fuel Must be ongoing and permanent feature not a time limited offer. Furthermore Asda prices in general are cheaper than Sainsbury and it should be a stipulation that the pricing policy Must be that of Asda and not Sainsbury or with time, prices will go up and there is no competition. If these two issues are not resolved then it will be another BA takeover of BCal where all BA did was kill off Bcal the competitor by taking it over with no conditions and fares are on the up for one reason or another.
Asda is basically American , Americans will say ANYTHING to complete a deal!
Remember CABURYS and their promise not to close factories ! Lasted just SIX WEEKS !
DO NOT TRUST THEM!
Unfortunately I am 20 miles from the nearest Asda, and have 2 Sainsbury’s, 1 within 1 mile and another around 13 miles – there is already a price difference, and the next nearest in Norwich, matches the Asda price…so, whatever they decide, will be changed for the local area no matter what.
Sainsburys quality has deteriorated masively in my opinion since Aldi and Lidl started gaining market share, in an attempt to cut their costs and try to keep competitive – but I don’t think it has worked, never seen Sainsbury car parks as proportionately empty in 20 years. If they have any sense, use the combined purchase power to get better quality, or cut costs – simple. And if the petrol/diesel price is competitive too, people will come flocking back.
Fuel prices are a very emotive subject and the merger may well be good for the motorist (although I doubt it will be as good as they promise). Supermarket fuel prices have nothing whatsoever to do with regular fuel pricing, as they are a loss leader to get you in to the store. Perhaps fuel will be cheap at Sainsbury’s as it is at Asda, but you will pay for that in-store. Of course there will be people who will vow to get their petrol there yet never darken the door of the supermarket itself, but I reckon that they would be in the minority.
Despite what Sainsbury’s Chief Executive, Mike Coupe and Asda Chief Executive, Roger Burnley say: the merged supermarket could not be trusted to either, commit to what they are doing now, let alone promise to things, in the future! They will quite easily drop their standards, as soon as can, when they think nobody is looking and that will be it! I agree with Stuart McIntosh that “should the two merge, shoppers “would,” not could, face higher prices, reduced quality and choice, and will definitely offer a poorer overall shopping experience, judging by the way they have dropped their standards, “as they raise to the bottom,” to compete with the “bucket shop” German enterprises across the UK! In view of the fact that nobody, not even CMA, monitors and controls the prices charged for the same goods, in different shops, currently, it will be “fantastic Sales opportunity” for them to catch up with loss revenues, whilst they have been forced to compete with these cheap competitors, recently! One e.g., visit the Sainsbury’s Supermarket in Hendon and complain about the “burnt “Bacon they sell, the manager, Wayne will tell you, to ring their “Careline,” knowing that nobody would bother and so get away with! In no other retail operation could you ask the customer to ring the equivalent of the manufacture, to complain about goods that they sell. We all know that this Govt. also doesn’t care, since they their MP’s will not be” seen dead,” in either store, while they shop in M&S or Waitrose or wherever, where they have higher standards and consummate higher prices, which millions of poorer folk cannot afford! But, then, as I say, who cares about the ones at the bottom of the pile?
I don’t see this merger working. There’s such a conflict of interest. One upmarket, the other cheap & cheerful.
There should be provisio: Any increase in prices would see the stores handed over to another company, without compensation. That’ll shut ’em up. I recall that when Wallmart were about to take over ASDA, they promised huge price reductions, we are still waiting. Big business is not to trusted.
Asda Diesel prices seem to be being kept at 10 pence per litre higher than petrol prices at the pumps in ASDA forecourt yet it’s a few pence more fir petrol but a few pence cheaper for Diesel at Sainsbury pumps.
Which prices will they use !
Profit first , false price fixing !
Like all Fuel forecourts , they put their prices down gradually over a few months but when news of Fuel problems abroad or vat changes , they shoot up over night.
Short term promises as usual !
When ASDA got rid of their discount card system years ago they promised they would keep much lower prices everyday , this is not the case.
They should all be looking at £1 per litre for both Petrol and Diesel at the pumps . Instead of jumping prices which costs them to keep changing at every pump at hundreds of Fuel forecourts .
Use the profits at the shops to undercut fuel prices at the pumps fir their customers.
I think it is good idear anything to bring prises down
it is a good thing to keep things cheaper
I have grave misgivings about this merger – yet another American company getting its claws on a British one – just like Boots – oh yes, no longer a British family firm, they belong to large pharmaceutical company called Walgreen’s. Asda belongs to Walmart, another huge American conglomerate. How aware are we of this?
Promises , Promises ,Promises usually do not mean a thing just to get their own way they will promise anything
If you believe that you will believe anything. Let’s hope the competition authority do their job and knock this on the head.
It’s a great idea to merge and if they have the same prices it will be wonderful especially if they reduce prices of fuel
Why can’t Sainsbury drop their prices to ASDA s today – r they less efficent, do they make higher profits? Why would anyone believe this will lead to cheaper prices in ASDA? Don’t forget the Chief exec recorded singing ‘we’re in the Money’ when the merger was first proposed – the consumer will be worse off. STOP this Merger
I think the Government should keep its nose out of private business. There is plenty of competition nowadays. If you want a cheaper and in my view better shopping experience there is now Lidl and Aldi everywhere. This is why the big supermarkets want to merge. Without a merger they cannot reduce their prices to anywhere near as competitive as the German boys.
And let’s be fair. Asda’s fuel has been the cheapest for many a year. You cannot prevent 2 companies merging because Asda’s fuel might increase. If they wanted they could have a Board Meeting tomorrow and decide to end the policy of being cheapest. Nothing anyone could do about it.
Government interferes far too much in areas it shouldn’t.
Sainsbury’s being fair ? There is a difference of up 6 p a litre within an 80 mile radius of Cambridge to Lincolnshire. Surely supermarkets should charge the same across the country and not profiteer from so called wealthy areas as they are a lot of people on a minimum wage or thereabouts( including most Sainsbury’s workers ) in the same area.
The merger of asda and Sainsbury’s shouldn’t be allowed ever! It’s a disaster for customers of all type. Competition is the only way to ensure fairness for all customers and we all know it wouldn’t be long before any promises were broken under a multitude of excuses!
NO TO THE MERGER!
Is it a fact that American Walmart will NOT be involved in any way shape or form with the new company after the Sainsbury/Asda merger?
Personally I don’t think it right that we should continue selling off or merging British companies with the Americans in particular because I don’t feel they can be trusted to follow through on pre deal COMMITMENTS a word they perhaps fail to understand.
Surely there is a danger that if foreign interests are running British companies there is a great danger that come the crunch it will be the home lands interest that come first leaving the UK way down the line.
Coryton recently but now various Japanese, German and American companies threatening to rdcamp if we dare to look out for ourselves.
In my region the difference in price between an Asda petrol station and a Sainsburys one is less than a penny per litre. Not enough to worry about choosing one over the other based on price alone… what settles it for me is that there is no way on Earth I would ever buy my weekly supermarket shop from Asda. It’s full of ne’er-do-wells, junkies and truanting kids.
I have worked for sainsburys 52 years ago it was a proper english company with quality food and goods i enjoyed every minuit hope asda and sainsburys work well together good luck
Good for Sainsbury and Asda in trying to attract customers by selling fuel at 3% margin.
Government intervention and monitoring is just a distraction though.
With Fuel Duty at 57.95p/litre, then 20% VAT (11.59p) on top: that 69.54p shows us where our Government could help if it wanted to.
Carrot and stick spring to mind
Sainsbury’s + Asda = Consumer heartache
The only reason that the monopolies and mergers board was introduced was to monitor companies getting to big and reduce the amount of competitiveness available to the consumer. Bearing in mind that these bodies are meant to have teeth the men (and ladies running it don’t have any balls)
That is why the Lidl & Aldi are doing so much better as their profits show and as for the cost of fuel well Saisburys will never drop their prices no matter what they promise, take a classic scenario, you live in lets Caterbury where the fuel at Tescos and Sainsburys (for diesel) is predominately £1.28pl
HEY in Ramsgate it’s £1.19pl when you ask the manager he says it’s basically above his pay grade, I know this as I live in Lincolnshire and have to go to Dover at least every 6 weeks and I have been refueling there since November, please don’t all rush as it has now gone up to £1.24pl (still a lot cheaper than my normal price here at £1.2799 pl) It makes my blood boil to see these companies profiteer over the normal member of public
We need more Lidl & Aldi stores and at least once a week boycott our normal petrol station
Capping fuel prices cannot last. The aim of Sainsburys is to buy up the competition (Asda) and be in a position to charge what they like for food lines and fuel. Stifling the competition is NOT good for the consumer.