By Eamon Quinn and Geoff Percival
A proposed €8.3bn takeover by UK supermarket giant Sainsbury of rival Asda to create the largest supermarket group in Britain will have significant effects on grocers across Ireland and Irish exporters, while Sainsbury in time could use its extra muscle to enter the Republic, according to experts on both sides on the Irish Sea.
The Green Party called on Bord Bia to prepare a response because of the “serious knock-on effect on Irish agriculture”.
“This merger effectively reduces our market in the UK from three buyers to two, and could be as significant as Brexit itself on the Irish agriculture sector,” a party spokeswoman said.
Each commands a market share of around 16% of the UK’s €130bn annual grocery trade and the takeover would, therefore, create a new British supermarket leader of over 30% that leapfrogs Tesco’s share of almost 28%.
Experts say the surprise takeover by Tesco of wholesaler Booker last year was the catalyst for the deal, as is the huge turmoil in the British grocery trade which has been hit by a series of blows, including consumers slowing spending that has meant the top UK grocers have been left holding vacant large stores of up to 100,000 square feet. Though Sainsbury has said it would run the chains as separate businesses, a large number of stores would likely close. In the North, Asda has around 17 stores, while Sainsbury, excluding its Argos outlets, has 13.
Joshua Bamfield of Britain’s Centre for Retail Research said such is the turmoil roiling British retailing that nothing can be ruled out if the transaction were to be approved by the British regulator. He suggested the UK’s competition watchdog could impose conditions that Sainsbury sell off some of its own or Asda stores in the North, and that Sainsbury could in time be in the market to buy into the Republic where Sainsbury and Asda have no outlets — provided that Brexit does not result in a hard border.
Sainsbury has been profitable but it and Asda, which has been owned by the US giant Walmart for almost 20 years, have struggled for years with price discounting during the UK retailing slump, said Mr Bamfield.
Kleeneze, Claire’s, Countrywide Farmers, Toys R US, Maplin, and Joe Bloggs were among the retailers to have gone into administration or closed down in Britain, according to the Centre for Retail Research figures. It estimates that 1,230 stores affecting over 13,170 staff have in some way been affected by the UK retail slump this year alone.
Industry body Retail Excellence said the enlarged group is now very likely to expand into the Republic.
“With the Irish economy growing, and a similar consumer culture existing here, it would be foolhardy to think such big UK players would not look at entering the Republic,” said deputy chief executive Lorraine Higgins. “This will be a further challenge for Irish retailers to withstand,” she said.
The cash and shares deal by Sainsbury also provides a potential exit route for Walmart as Asda has been struggling to grow as discounters Aldi and Lidl attract its price-conscious customers.
The transaction faces significant regulatory hurdles. Britain’s Competition and Markets Authority said it was likely to review it. However, shares in Sainsbury climbed 14.5%, valuing it at £5.9bn (€6.7bn).