Revolutionary Measures

Asbury’s or Sainsda? Will the Sainsburys/Asda merger work?

The proposed merger between Sainsbury’s and Asda promises to shake up the grocery market in multiple ways. It will create a new leader in terms of market share and, the companies hope, give them the scale to tackle the rise of discounters such as Aldi and Lidl.

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Looking at it through a marketing lens, there are three things that stand out:

1          Slick PR (to start with)
This is a deal that has been discussed for several years apparently, and it shows in the careful messaging behind the announcement. Sainsbury’s CEO Mike Coupe has pledged that there will be no job cuts or store closures and that the combined entity will lower prices by 10%. Clearly this is disingenuous on a number of levels – the Competitions and Markets Authority is likely to force some stores to be sold, naturally reducing staff numbers, while any savings for consumers are likely to come from squeezing the combined supply chain of the new company. This will impact the profitability and potentially staff numbers at suppliers, who employ more people than Sainsbury’s/Asda itself. So there are likely to be job losses – just not at the company itself.

The main fly in the PR ointment has been a classic bit of spokesperson inattention. While waiting for a broadcast interview Mike Coupe was captured on camera singing “We’re in the Money”, from the musical 42nd Street. The overall impression (apart from that he should stick to the day job), was that the whole deal was about enriching management and shareholders, at the expense of customers and suppliers. Cue a hasty apology, but it has highlighted how there’s no such thing as off the record (or camera).

2          A complex brand balancing act
One of the attractions of the deal is that there isn’t that much crossover between the demographics of Sainsbury’s and Asda shoppers. That should mean that you won’t lose any customers, and if you can trim supplier costs you can generate large efficiencies. This is something highlighted by Sainsbury’s, which commissioned research that showed Asda customers value “fair prices” most and Sainsbury’s are attracted by “great fresh food.”

That’s all very well in theory, but achieving sufficient synergies while keeping things separate enough in practice could be more difficult. While other organisations (banking groups, airlines and consumer goods holding companies) manage multiple brands, somehow a supermarket feels different. People have a strong relationship with their supermarket of choice, probably because of the basic importance of food to their lives, so anything that is seen as weakening brand values is likely to upset consumers.

3          The competition won’t stand still
While Sainsbury’s wants the merger to happen quickly, something this large will need regulatory approval and will take time. And while both Sainsbury’s and Asda will no doubt stress that it is business as usual in the meantime, it will take up a lot of management time. Rival grocers will no doubt aim to take advantage of this, particularly as they know about the two marketing pillars (fair prices and fresh food) that the two brands will embrace going forward. Companies such as Lidl, Aldi and Tesco are already aiming to push both messages, now they’ve seen the potential Sainsbury’s strategy they’ll be redoubling their efforts to attract customers away from the merged organisation.

Due to its sheer scale in years to come the Sainsbury’s/Asda merger is likely to make it into marketing and business textbooks. The big question is whether it will be lauded as a well-executed and well-branded master stroke or listed with flops such as Bunnings takeover of Homebase? Initial marketing has been positive and pretty assured, but there’s a long way to go yet.

 

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May 2, 2018 - Posted by | Marketing, PR | , , , , , , , , , , ,

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