Could mergers be the key to success in the current food retail landscape?

Could mergers be the key to success in the current food retail landscape? Author: AJ Marsh Published: 11 May 2018
  • Tesco and Booker
  • Co-op and Nisa 
  • Sainsbury's and Argos 
  • Bestway and Co-op Pharmacy
  • B&M and Heron Foods

High profile mergers have started becoming the norm in recent years, resulting in a significant impact on the retail landscape for consumers. This trend appears to indicate that ‘traditional’ food supermarkets are diversifying their customer base and portfolios, with wholesalers joining forces with high street retailers. 

During a merger, companies face a number of difficult decisions and building momentum can be a real challenge. Areas that can get overlooked are staff engagement and retention of the current leadership team. During my numerous years in retail, I have seen a number of businesses go through turbulent times and lose extremely talented people due to uncertainty. Clear communication is fundamental to creating a successful business and an inclusive environment to avoid unnecessary losses.

The pending merger of Sainsbury’s and Asda would create a giant. Representing nearly £1 in every £3 spent on groceries with total revenue of £51 Billion across 2,800 stores, would make them the largest supermarket with 31% combined market share. The supermarkets have said that they expect to be able to lower prices by around 10%. Savings would come through obvious procurement benefits, operational efficiencies and integrating Argos stores or concessions into Asda stores.

It appears that mergers are the future for food retail, although it’s still too early to say if recent mergers have been an overwhelming success. No doubt all eyes are on the Tesco and Booker merger which seeks to strengthen and broaden their offering. Whilst it appears to have all the ingredients to potentially be a successful merger, only time will tell.

It’s an interesting time for the retail landscape, with many changes afoot. Could Lidl and Aldi one day combine forces?

AJ Marsh is a Consultant in the Retail practice at Berwick Partners.

Categories: Retail Recruitment

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