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by GK Strategy 22nd October, 2018

Supermarket merger reveals more negative social impacts

After the GMB general secretary claimed that the Asda-Sainsbury’s merger will lead to ‘job losses, cuts to pay [and] terms and conditions’; Asda announced that 2,500 jobs will be at risk ahead of the merger. The grocer is looking to reduce costs across its store operations.

This underlines the social value impacts on consumers and on employees. The involvement of both the CMA and the Pensions regulator, on behalf of consumers and employees respectively, is indicative of regulators’ social value concerns over the deal. We detailed in a previous post the social value issues raised by the merger on communities’ access to a wide selection of low-priced groceries.

The prospect of job losses, to deliver the discounted prices promised by Sainsbury’s boss Mike Coupe, on top of the £500 million worth of annual savings promised to shareholders, is an indication of the social impacts beyond the much-discussed effects on suppliers.

Social Value brings a new dimension

The social and wider economic impacts of the merger have highlighted that firms can no longer justify their mergers & acquisitions to regulators, politicians and communities largely in terms of narrowly defined economic benefits to consumers in terms of lower prices.

The emerging social value agenda is helping drive the quantification of the relative importance people place on changes in their lives. These changes are social, economic and environmental, and affect the wider public as citizens rather than just as consumers.

The rise of Lidl and Aldi (and the growth of high street branches of the big supermarkets) have shown that consumers still value convenience and high street experience over big out of town supermarkets.

Social Value and Due Diligence

Considering social value impacts and perceptions during due diligence will ultimately provide a company with competitive advantage in the long run. It will help investors and companies understand the potential social impacts of their investments and their expansion and merger plans.

It’s no longer enough for companies like supermarkets to simply have impressive sustainability credentials about their products, workforce and supply chains. That is the minimum that stakeholders now expect. Government, regulators and consumers want businesses to be accountable to the whole of society and for all of their impacts – not just in their direct value chain., It’s doubtful that the bosses of Sainsbury’s and Asda accounted for the merger’s social value impacts when they described it as ‘a great deal for everyone’. The regulators may take a different view.

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