The Big Three?
Not so long ago, supermarkets were framed as leading to the demise of the UK high street. Now a merger between J Sainsbury and Asda might be looked at rather more favourably as the Bellerophon to the online assault. Only a small element (c.6%) of UK grocery spend is currently online (vs c.18% for all goods). Largely this is due to the consumer preference to see the actual groceries before buying them. However, new patents seek to address online issues, and then there’s a UK replica of the Amazon/Whole Foods tie-up to watch out for. Meanwhile, the Sainsbury-led merger would see the group take c.31% market share (v Tesco c.27%). Store closures have been explicitly ruled out, (albeit competition review pending). However, this is really about increasing the industry concentration. With the new group and Tesco controlling more than half of the market, in the first instance, it is the squeeze on suppliers that will be ramped up, which could suppress an element of recent supply chain inflation. Down the line, having tighter conditions with fewer players in the retail market should make it harder for online substitutes to take a position.