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‘Monopoly towns’, where one supermarket chain becomes the only one available to consumers in a local area, are likely to further increase concerns over the power of major UK supermarket chains in the wake of Sainsbury’s takeover of Asda.

A feeling already prevalent in the ‘big four’ era of UK supermarkets, the potential joining of Sainsbury’s and Asda risks creating further suspicion of these major corporations among British consumers. This will encourage many to look for local products from small, local retailers, particularly in these ‘monopoly town’ hotspots.  These areas include Kirkcaldy, Lancaster, Torquay, Paignton and Brighton.

British MPs are already representing their constituents’ concerns on this matter. Topics raised have included the possibility of Sainsbury’s and Asda coordinating price increases in areas where consumers have no alternative, or product quality dropping for similar reasons.

It is important to note that data does not reflect exactly this picture. According to GlobalData, there are just nine UK towns with an Asda and a Sainsbury’s larger than 1,400 square metres (which can be taken as the size needed to be able to do a one-stop-shop). And in each of these nine towns there is an Aldi or a Lidl, albeit smaller than 1,400 square metres.

However, this does not make the concerns any less real. Other potential problems some residents of perceived ‘monopoly towns’ have outlined include the possibility that the combined Sainsbury’s/Asda may cut their stores in such areas to reduce costs where they are competing with one another – thereby reducing consumer choice.

Though the Sainsbury’s board has issued assurances, general suspicion of major corporations means the merger is still being viewed negatively by the public and politicians that represent them, encouraging localism among shoppers.

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By GlobalData

Another possible effect could be the expansion of discounters Aldi and Lidl, as consumers in ‘monopoly towns’ facing higher prices embrace competition from outside the established supermarket group.

The proposed takeover was first announced at the end of April amid expectancy from Sainsbury’s and Asda leadership that it would be approved by competition retailers. This was based on the recent approval of Tesco’s Booker takeover, thought to be because of the introduction into the supermarket arena of discounters Aldi and Lidl and delivery services Ocado and Amazon.

However, the concern over ‘monopoly towns’ is just the latest in a line of disquiet that could lead the UK’s Competition Authority to take a more negative view of the takeover.

Opposition has been raised from suppliers, who fear they will be bullied into accepting lower prices, and from trade union GMB, which believes long term job losses are likely in the name of efficiency. In this context, political opinion in the UK could gradually move to put the deal under threat.