"Customer shopping habits are changing and the pace of that change is accelerating. Customers want choice, convenience and low prices and they are shopping around more than ever before. Digital is transforming the food and grocery landscape and changing the way customers shop. Competition in the marketplace is fierce - from discounters and bargain stores on the one hand to digital retailers and the rapidly growing food delivery market on the other.
It was in this context that we announced, on 30 April, a proposed combination with Asda to create a dynamic, new player in UK retail with the scale to give customers more of what they want today while creating a more resilient and adaptable business for the future.
Working with a stronger combined Sainsbury’s and Asda, our suppliers will have the opportunity to develop their product offer, make their supply chains more efficient, and grow their businesses as we grow ours.
It is worth noting that the majority of the food and groceries we sell in Sainsbury’s is supplied by large, multi-national companies who operate on significantly higher profit margins than supermarkets do. A significant proportion of the synergies we expect to achieve from the combination of Sainsbury’s and Asda will come from the harmonisation of pricing from these large suppliers - in effect, enabling both our businesses to benefit from the lower prices already being offered to either Sainsbury’s or Asda. By doing this and through other expected synergies, we will be able to lower the cost of living for millions of our customers, aiming to reduce prices on essential items by around 10%. In addition, we expect these lower prices will in turn drive higher volumes for our suppliers.
We have always been a values-driven business; we think this is something our customers care about and something which we believe sets us apart from our competitors. We have long-standing, collaborative relationships with our farmers and growers through Sainsbury’s Development Groups. Launched eleven years ago with our Dairy Development Group, we now have nine groups covering the main commodities and we work with over 2,000 farmers, supporting their sustainable growth.
We will continue to nurture and develop outstanding small suppliers and bring their distinctive, innovative food to our customers, and the merger would give suppliers currently working with only Sainsbury’s or Asda the opportunity to grow as they gain access to more customers through the combined group. We were early supporters of brands including Ella’s Kitchen, Reggae, Reggae Sauce, Tyrells, Mallow & Marsh, Pip & Nut and many others, giving them access to millions of customers across the UK and offering them sustainable growth for the future. We have set up a dedicated Future Brands team to progress the good work we have already done with our small suppliers and to further encourage and support them through the process of bringing their food to a large and diverse market.
We have a strong track record of working collaboratively and forging good relations with all our suppliers. The Advantage Group Mirror Survey, an independent report which ranks supermarkets based on feedback from their suppliers, puts Sainsbury’s at the top for business relationships for the last seven years. We are also the leading supermarket when it comes to payment processes.
In this new retail landscape a combined Sainsbury’s and Asda, creating a strong, dynamic business of enhanced scale will present opportunities to both large and small suppliers to grow their businesses as we grow ours and we look forward to working with all of our suppliers as we move ahead."
