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May 1, 2018

Sainsbury’s-Asda merger – Ireland ‘launches food sector risk assessment’

The Irish government is said to be instigating a risk assessment of its food industry following the news UK supermarkets Sainsbury's and Asda are to merge.

The Irish government is said to be instigating a risk assessment of its food industry following the news yesterday that ‘big four’ UK supermarkets Sainsbury’s and Asda are to merge.

According to the Irish Times newspaper, Bord Bia – the Irish food board – plans to conduct a “comprehensive risk assessment” amid fears that local suppliers will be hit in the pocket by the deal.

Many of Ireland’s largest food producers – such as Kerry Foods, Glanbia and Greencore – are major suppliers to the big UK supermarkets and as such are seen as at risk from any pressure put on their margins after the deal completes.

Announcing the deal yesterday – which sees Sainsbury’s agreeing to pay Asda owner Walmart GBP2.97bn (US$4.08bn) for a controlling stake in the business – Sainsbury’s CEO Mike Coupe said operational efficiencies and investment means it expects to lower prices by c.10% on many of the products customers buy regularly. 

Many analysts suggested that that means suppliers will be squeezed on price and investors appeared to agree as a number of major suppliers saw their share prices fall on the news.

According to the Irish Times, Bord Bia said its London office had been contacted throughout the day by Irish suppliers affected by the merger.

The agency said it plans to develop a comprehensive risk and opportunity analysis report on behalf of the industry.

“We believe each Irish exporter affected by today’s announcement will require bespoke advice as no two situations will be the same,” a spokesperson told the newspaper..

“Bord Bia will work with each company to mitigate any potential risk and explore all potential opportunities.”

Irish food entrepreneur John Stapleton – who introduced brands such as New Covent Garden Soup Co. and Little Dish to the supermarkets – said: “Both {Sainsbury’s and Asda} are pushing the ‘bringing down prices to the consumer’ message. If they don’t deliver the synergies mentioned, suppliers are likely to feel the chill as this agenda is implemented.”

According to the newspaper both Asda and Sainsbury’s source between GBP250m and GBP300m from suppliers and producers in the Republic of Ireland and Northern Ireland each year.

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