Supermarket shake-up: why Asda or Morrisons could vanish within a decade
Sainsbury’s and Morrisons held merger talks from last November to February, but Sainsbury’s later walked away. The discussions have renewed expectations that Britain’s supermarket sector could consolidate, with analysts saying Asda or Morrisons, or both, may lose their independent identities within a decade.
Asda has struggled to grow since its £6.8bn debt-funded takeover in 2020, while Aldi is close to overtaking it as Britain’s third-largest supermarket. The Competition and Markets Authority is due to issue a final ruling on whether Aldi and Lidl should be treated as large grocery retailers; that could change how future supermarket mergers are assessed and potentially reduce the number of stores a buyer must sell. Sainsbury’s failed £7bn bid for Asda in 2019 would have required it to dispose of about 150 stores.
- Sainsbury’s and Morrisons held merger talks, then abandoned them.
- Analysts expect renewed consolidation among major supermarket chains.
- A change in competition rules could ease future merger approvals.
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Britain's supermarket sector is dominated by four major established chains—Tesco, Sainsbury's, Morrisons and Asda—but discount retailers like Aldi and Lidl are growing rapidly. Consolidation, where large retailers merge or take over rivals, is being increasingly discussed because several established players face competitive pressure.
Asda has struggled to expand since being taken over for £6.8bn in 2020, and the fast-growing discount chain Aldi is close to overtaking it as the country's third-largest supermarket. Morrisons likewise faces challenges competing against larger, better-resourced rivals.
How future mergers will be handled depends partly on the Competition and Markets Authority, the regulator that must approve big supermarket deals. It is currently deciding whether Aldi and Lidl should be classified as major retailers, which could change the conditions applied to future mergers—potentially allowing acquirers to take over competitors whilst selling fewer stores than was previously required.