Listening to Sainsbury’s chief Mike Coupe suggest that the proposed merger with Asda will give the new business the buying power to negotiate better deals, and cut prices by 10%, it is hard not to be concerned that ultimately it is the likes of farmers who will pay the price.

The proposed deal would create the UK’s largest supermarket business, with a market share of 31.4%, significantly ahead of its next big rival, Tesco at 27.6%.

That would give the combined business immense power to negotiate down prices.

So how does the processing sector react to the increasing power of the major multiples and the relentless focus on taking out costs? Increasingly, it is to try to mirror that power through a series of mergers and acquisitions, principally to drive efficiencies in their business. Only the fittest are able to survive.

In NI, in recent years we have seen a tie-up between Dawn and Dunbia, between Linden and ABP, while Fane Valley, Fivemiletown Creamery and Augher co-op have all exited milk processing, with their various milk pools swallowed up by others. LacPatrick is unlikely to exist in its current form in a few months.

While that consolidation in processing isn’t all bad news for farmers, it is important that some level of competition remains. Without that, farmers are left in a very weak position.

Green light

While the competition and markets authority (CMA) will probably look closely at the Sainsbury’s Asda deal, and perhaps force them to sell some stores (in towns where both dominate), it would be a major surprise if the merger doesn’t get the green light.

Ultimately, the CMA will assess whether the deal could reduce competition and choice for shoppers. But it will have consequences further down the supply chain.

What about competition and choice for farmers if the current trends are allowed to continue?

Read more

Sainsbury’s and Asda in merger talks