Sainsbury's says Asda merger "a great deal for everyone". Can customers believe that?

To pull off his Asda coup, Sainsbury’s boss Mike Coupe desperately needs to sell the supermarket mega-merger as a win for the consumer.

His “great deal for everyone” will create a monster that the Competition & Market’s Authority is almost bound to take a chunk out of just to prove that it still exists. Convincing the watchdog that the consumer wins is the best way of limiting that.

To give some context to just how big this retail Godzilla will be if the deal completes, consider the numbers. Asda has 630 retail units, Sainsbury’s 1,412 (its number is higher because it has a lot of smaller “convenience” outlets on high streets up and down Britain).

Add in the 845 Argos stores Sainsbury’s owns and the new top dog of the supermarket sector will boast 2,800 outlets in total.

Using the last set of numbers supplied by market researcher Kantar WorldPanel, as at March 2018 the combined share of grocery market the pair enjoyed was a punchy 31.4 per cent.

That’s more than the 30 per cent or so the sector’s current King Kong, Tesco, boasted when it was being described as “the supermarket that ate Britain” under Sir Terry Leahy.

The most recent numbers have it at 27.6 per cent and stable. Individually Sainsbury’s clocked in at 15.8 per cent, down from 16.8 per cent a year ago. Asda claimed 15.6 per cent, having fallen from 16.2 per cent.

By the time the deal is done you would imagine the combined total will have fallen a bit further on its own. Big mergers are disruptive, service standards frequently fall when they’re in progress, and Aldi and Lidl continue to open new outlets for fun.

In the hopes of limiting the CMA’s impact, the big promise, right up at the top of the merger’s official announcement, is 10 per cent off prices. Well, some prices.

To pull that off, and still achieve the £500m annual savings he’s promised investors, Mr Coupe will have to leverage the vast buying power of the combined group. Even if the consumer wins (debatable) this isn’t good news for suppliers. Already feeling the pinch, they’re going to get squeezed again.

Sainsbury’s representatives, meanwhile, had suspiciously little to say about what 10 per cent off the “many of the products customers buy regularly” will mean in practice other than pointing me to everyday items such as bread, milk, eggs etc.

These items are already quite keenly priced given supermarkets compete hard on them. They keep them cheap in an attempt to draw people in to buy other things that offer better margins.

There are real grounds for questioning whether that promise will ever amount to anything more than a hill of cheap-ish baked beans when the dust has settled.

It’s worth considering that before Aldi and Lidl really started motoring, Sainsbury’s boasted operating margins that were comfortably above 5 per cent. These days supermarket bosses look at figures like that and sigh. If only! Currently the forecast for Sainsbury’s this year, per Digital Look, is for something like 2 per cent.

What the watchdogs need to consider is how much danger there is of this deal returning the sector to the cosy oligopoly that existed in the past, when it’s quite clear that the big four players weren’t competing to the level they liked people to think they were.

Mr Coupe will argue that there's no chance of that because the market has changed. In addition to Aldi and Lidl, a revived Co-op, the growth of online where Ocado lives, Amazon's out there too. And Godzilla’s not really scary. He’ll be giving free back rubs at Sainsbury’s and Asda’s (we’re told they’ll keep their names), just you wait and see.

But then he would say that, wouldn’t he.