1. News
March 20, 2019

Sainsbury’s and Asda to offer £1bn price cuts annually following merger

J Sainsbury (Sainsbury's) and Asda Group have committed to offer £1bn price cuts annually by the third year post-completion of the proposed £7bn merger.

J Sainsbury (Sainsbury’s) and Asda Group have committed to offer £1bn price cuts annually by the third year post-completion of the proposed £7bn merger.

The retailers also announced various post-merger commitments in response to the Competition Markets Authority’s (CMA) opposition to the merger.

The CMA opposed the merger last month, as it identified a possibility of increase in prices and reduction in quality of products for consumers.

Both companies noted that they strongly disagree with the CMA’s provisional findings as the analysis contains significant errors.

In order to accommodate price cuts, the companies also plan to invest £300m in the first year of the merger, followed by a further £700m over the next two years. It is expected to reduce prices by around 10% for everyday items.

They will also focus on reducing fuel gross profit margin to 3.5p per litre for five years, as well as appoint a third-party company to independently review their price commitments and share the performance data each year to the public. Both companies have agreed to pay small suppliers within 14 days.

“We are committing to reducing prices by £1 billion per year by the third year which would reduce prices by around 10% on everyday items.”

Sainsbury’s CEO Mike Coupe and Asda CEO Roger Burnley said: “We are trying to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.

“We are committing to reducing prices by £1 billion per year by the third year which would reduce prices by around 10% on everyday items. We are happy to be held to account for delivering on this commitment and to have our performance independently reviewed and to publish this annually.

“We hope that the CMA will properly take account of the evidence we have presented and correct its errors. We have proposed a reasonable yet conservative remedy package and hope the CMA considers this so that we can deliver the cost savings for customers.”

Both retailers plan to create cost savings by securing lower purchasing prices from suppliers, introducing Argos stores into Asda, and buying shared goods and services and reducing central costs.

The final CMA report of the proposed merger is expected by 30 April.