Top story
The Competition and Markets Authority has revealed “extensive concerns” over the proposed Sainsbury’s-Asda merger, which it says could “push up prices and reduce quality” for consumers.
Provisional findings from the regulator’s investigations have dealt a significant blow to the possibility of the merger.
Announcing its initial analysis, the CMA said that the deal could lead to “substantial lessening of competition” at both a local and national level.
It also said the deal would lead to a “worse experience” for both in store and online shopper nationally, by leading to reductions in the range and quality of products offered.
In a damming summary of its provisional findings, in the crucial Phase 2 investigation, the body said it thought it would be“ difficult for the companies to address the concerns it has identified.”
Concerns have also been raised that any deal could result in price rises at a large number of Sainsbury’s and Asda petrol stations.
“We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK,” said Stuart McIntosh, chair of the independent inquiry group carrying out the investigation.
“These are our provisional findings, however, and the companies and others now have the opportunity to respond to the analysis we’ve set out today.
The findings come after months of scrutiny over the mega-merger, with the final report set to be released on 30 April, after a significant deadline extension was announced last week to address the “complexity” of the case.
The CMA’s findings have “misunderstood” how people shop, commented Sainsbury’s in a Stock Exchange statement this morning, saying that it has “moved the goalsposts”.
Sainsbury’s shares have plunged 12.4% this morning back to 252.4p.
Read the full story here and follow The Grocer throughout the day for analysis and commentary.
Morning update
Dairy giant Arla has reported 1% growth to €10.4bn in 2018, as it delivered cost-savings “beyond targets” following a “difficult first quarter”.
The Lurpak-maker delivered sales growth on the back of strong branded sales, up 3.1% on the previous year.
The milk supplier reported a net profit of €290m, which it will pay out to its farmer owners.
The supplier secured profits on the back of its ‘Calcium’ cost-cutting programme, after being impacted by stalling growth for milk sales in Europe, and increasing feed prices for its farmers.
“Early in 2018 we took decisive action by ramping up our transformation programme Calcium and I am very happy to be able to say that the whole organization has embraced the journey and therefore we are already substantially changing the way we work, spend and invest in our business,” said Arla Foods CEO Peder Tuborgh.
“As a result, we improved our performance as a business throughout the year and go into 2019 in a significantly better position than a year ago.”
Global nutrition and ingredient business Glanbia (GLB) has announced the acquisition of US-based food manufacturing supplier Watson for $89m.
The acquisition of the non-dairy ingredients business is the latest deal for Glanbia, which acquired health-brand Slimfast in $350m deal in November.
The Irish-based supplier announced the deal as it reported a 4.1% rise in revenues, on a constant currency basis, to €2.38m.
EBITDA also surged, rising 5.2% on a constant currency basis to €284.9m for the year ended 29 December 2018.
“Consumer demand for our brands and nutritional ingredients remains strong underpinned by positive long-term global health and wellness trends,” commented group managing director Siobhan Talbot.
“Today, I am happy to announce that we have agreed to acquire Watson for $89 million. Watson is a non-dairy ingredient solutions business headquartered in Connecticut, USA. It is a highly complementary addition to our Nutritional Solutions business and will help broaden our capabilities in the ingredients sector.
“We continue to drive sustainable growth and are on track to deliver our 2022 strategic ambitions. The outlook for 2019 is positive and Glanbia expects to deliver 5% to 8% growth in adjusted earnings per share, constant currency.”
Private label household products manufacturer McBride (MCB) has reduced profit forecasts after rises in distribution and raw material costs.
The listed hygiene specialist expects full-year adjusted profits to be between 10% and 15% lower than the previous financial year, it said.
Improvements in raw material price are predicted for the second half of the year, but not the extent previously anticipated, it said in a trading update.
Profitability has also been impacted by higher-than-expected distribution costs, driven by “market rates” and “capacity shortfalls” in logistics.
The warning comes as the supplier revealed a 6% rise in like-for-like sales six months to 31 December 2018. The supplier will announce its full financial figures for the period in a trading statement tomorrow.
The FTSE 100 has 0.3% to 7,204pts as trade discussions between the US and China continue.
The big risers this morning include Glanbia (GLB), up 7.1% to 17.3p, Bakkavor (BAKK), up 2.1% to 163p, and Just Eat (JE.), up 2% to 738.2p.
The early fallers include McBride, down 29% to 92.1p, Morrisons (MRW), down 4.9% to 228p and Tesco (TSCO), down 2% to 225p.
Yesterday in the City
The stronger pound weighed down on the FTSE 100, which slid 0.6% to 7,179pts yesterday, as it impacted by poor results for FTSE giant HSBC.
As we eagerly await the initial findings from the CMA investigation into its merger with Sainsbury’s, Asda said it had to “challenge the status quo” if it was to remain relevant, after it posted a 1% increase in sales for the fourth quarter.
Greggs bakery (GRG) was the top-performing midcap over the day’s trading, jumping 11.2% to 1,781p after it upgraded its full-year profit expectations.
Other key risers included Dairy Crest (DCG), up 4.3% to 507.5p, Coca-Cola HBC (CCH), down 2.7% to 2,633p, while brewer Greene King (GKG), grew 2.3% to 640.8p.
Over the channel, consumer group Danone grew full year like for like sales by 2.9% to €24.7bn in 2018, though reported sales edged downwards due to negative currency impacts.
One of the key fallers yesterday, was Irish producer Kerry Group (KYGA), after it grew revenues by 3.1% last year to €6.6bn boosted by strong volume growth and acqusitions.
Other fallers included PayPoint (PAY), down 3.8% to 871p, Reckitt Benckiser (RB), down 2.3% to 6,150p and AG barr (BAG), down 1.7% to 745p.
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