Whether you prefer to bulk buy your food when your pay packet lands or take a little-and-often approach, the supermarket plays an important role in our day-to-day lives.
But like the rest of the UK’s retailers, supermarkets are feeling the pinch. Some shoppers are returning to a more traditional approach, utilising local grocery stores, butchers and bakeries, while others turn to the internet for their food haul.
The rise of challenger supermarkets like Aldi and Lidl have also disrupted the supermarket sector, offering rock bottom prices that are hard for other chains to match, never mind beat.
In the UK, the big four supermarkets make up 68% of the grocery market share, with Tesco the largest at 27.3%, closely followed by Sainsbury’s (15.4%), Asda (15.2%) and Morrisons (10.3%), but this dominance does not seem to be helping them.
Just as on the high street, a couple of shops have looked to merge to stay relevant, but it is not always a silver bullet – especially when the regulator puts its foot down.
This was the case for Sainsbury’s, which last month saw its merger bid for Asda shot down by the Competition and Markets Authority (CMA) on the basis that the £7bn deal would likely result in higher prices and a reduction in the quality and choice of goods available to consumers.
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The proposed merger would have propelled Sainsbury’s and Asda to the number one spot, with more than 30% of the share of the market, overtaking long-term front-runner Tesco.
Sainsbury’s and Asda have both had a difficult few years, suffering at the hands of Aldi and Lidl which have both seen rising sales figures.
In the first four months of the year, Sainsbury’s share price plummeted nearly 15% and in mid-February when the CMA published its findings into the proposed deal, in which it claimed the merger would create “substantial lessening of competition at both a national and local level”, shares fell 18.5% overnight.
Wal-Mart, the parent group of Asda, also suffered following the CMA’s analysis, with shares falling 1.5% overnight from February 19 to February 20.
Investors would be forgiven for jumping ship and offloading their shares in Sainsbury’s – the supermarket has been plagued with negative news for a while now, sending the share price down to an almost 20-year low.
But for those who are willing to take on an element of risk, taking an interest in Sainsbury’s now could be a good move as analysts anticipate much of the bad news has already been priced in – and we all still need to eat.
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