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GM Thought of the Week – Sainsbury’s and Asda in possible merger talks?

There’s interesting news in the press this week about a possible merger between supermarket giants Sainsbury’s and Asda.


The two companies are in talks about a proposed £15bn deal to join forces. A tie-up between the UK’s second and third largest supermarket chains would create a mammoth new group with a 31% share of the market in food, clothing, household goods and toy retailing.


This would comfortably position the potential new supermarket super-giant in the number one slot in front of rival Tesco, who would then only have a 28% share according to Kantar Worldpanel figures.


From a size perspective, the merger makes a lot of sense, even though it may mean Sainsbury’s and Asda could be forced to sell a number of their stores so they don’t have too much power over the grocery market in local areas.


The question is, will Asda become Sainsbury’s or Sainsbury’s become Asda? Or will they co-exist side by side as they are? Where will Argos fit in to all this, will they spring up inside Asda too?


And, how will this work from a branding perspective? Whilst both brands firmly sit in the supermarket category, they both stand for VERY different things.

Asda has built its brand around low price and great value, whereas Sainsbury’s offering is perceived as better quality and more expensive. Is it possible for the two brands to co-exist without causing any brand confusion?


In 2003 when Morrisons brought out Safeways, it was originally going to keep the Safeways brand. Shortly afterwards all Safeways stores were either closed or renamed as Morrisons.


So, if this new merger followed that example, which brand will be kept? And, could this mean that another well-known retail name is set to vanish from the retail landscape forever?


Lisa Kinsella, Associate Director of AV Investment