Customers to feel cost of shop merger

SUPERMARKET customers could lose out on bargains when the high- street chains Kwik Save and Somerfield merge, consumer groups warned yesterday. Families on low incomes would be hardest hit, according to retail experts.

The pounds 1bn merger, which was confirmed yesterday, would lead to less price- cutting across the typically cut-throat supermarket sector, they said. This could mean an end to the "price war" tactics of recent years which have seen supermarkets charge as little as 3p for a tin of baked beans and 7p for a bottle of bleach.

"We would be concerned if there was a situation where lower income groups didn't have access to supermarkets which catered for their needs," the Consumers' Association said. "We would not want to see this move limit consumer's choices."

Clive Vaughan, at retail consultant Verdict Research agreed, saying: "The long-term impact of this merger is that there will be less discounting."

The merger of Somerfield and Kwik Save will create Britain's fifth largest supermarket group with 1,400 stores. Somerfield plans to convert around 100 branches of Kwik Save to its Somerfield format over the first year. Longer term, it is possible that the number of Kwik Save stores could be reduced from 880 now to 200-300.

Kwik Save is Britain's biggest discount supermarket group and its prices are typically 5-6 per cent cheaper than those at rivals such as Tesco, Sainsbury and Somerfield. As more Kwik Saves are converted to the mid- market Somerfield format, it could lead to higher prices, experts say. Given that Kwik Save is one of the few supermarket groups still operating from high streets rather than from out-of-town superstores, consumer groups are worried that the Somerfield deal might mean lower income groups are robbed of their local cheap food outlet.

Somerfield yesterday stressed that it would retain Kwik Save's "no frills" ranges of cheaper products in stores that were converted and said shoppers would benefit from more fresh foods, better service and improved shop environments. However, City analysts say the cost-savings of the merger are unlikely to be passed on to customers in lower prices.

Kwik Save's head office in Prestatyn, Clwyd, with 800 staff, is earmarked for phased closure over the next few years. Around 120 shops are likely to be either sold or closed.

Somerfield and Kwik Save have decided to merge in order to form a stronger company to battle against the so-called "Big Four" of Tesco, Sainsbury, Asda and Safeway. Both have been under pressure in recent years and have struggled to retain market share.

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