Brand Management Report: Analysis of Asda and Sainsbury's Merger

This report provides a comprehensive overview of the proposed merger between Asda and Sainsbury's, two major UK supermarket retailers. It delves into various aspects of brand management, including market competition, distribution policies, brand equity, and customer-based brand equity. The report introduces a new brand name, "Bodega," for the merged entity and discusses its pricing strategies and positioning within the competitive landscape, specifically in relation to Tesco's market dominance. It analyzes the current situations of Asda and Sainsbury's, their financial performances, and their competitive advantages. Furthermore, it examines the importance of branding, the concept of brand extension, and the challenges and opportunities presented by the merger, including the impact on customer behavior and technological advancements in the grocery sector. The report concludes with recommendations for the merged entity, emphasizing the importance of innovative business activities, financial stability, and specialization to ensure long-term success. The report also includes references to relevant sources.

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Executive summary:-
This report is an overview of the UK’s supermarket merger between Asda and Sainsbury’s. This
report includes all the elements of branding. Starting from the introduction, the market
competition, distribution policies, brand equity and customer-based brand equity.
Introduction:-
The United Kingdom’s supermarket sector has always been competitive and to continue the
survival it requires a relentless focus on what an individual wants and how will he/she behaves
and the ability to respond quickly. This report is about the merge between the UK’s two
supermarket retailer giants Asda-Sainsbury’s. Also, this report will identify some approaches
which retailers in the grocery sector can adapt to survive in a highly competitive market. I will
describe some in-depth merging strategy of Asda-Sainsbury’s. This will also identify the
competitive position of the supermarket sector. I have created a new brand for the merger of
Asda-Sainsbury’s i.e. Bodega.
Current situation of the brands:-
Asda sores Ltd. is a British supermarket retailer, headquartered in Leeds, West Yorkshire. The
company was founded in 1949. Asda has now more than 300 stores across the UK. The
company’s stores have been selling a wide variety of merchandise including food, apparel, and
along with housewares, entertainment items.
Talking about its revenue Asda made £803.2 million in 2019. Asda has been making profits and
its percentage has been increasing every year. Further, Asda has an advantage because their
parent company Walmart are with them since 1999. The main advantage of Asda is that
Walmart is giving out its resources to Asda so that they can headstart in the digital market. Ever
since Asda’s mobile app is in top both in app store as well as play store, more than half of the
sales of Asda’s supermarket is done online. Asda currently has a market share of 15.4
% taking over Sainsbury’s and making itself UK’s second-largest supermarket behind Tesco.
Sainsbury’s was founded in 1869, this British supermarket retailer is headquartered in London,
United Kingdom. It has around 1415 stores all over the United Kingdom. Sainsbury’s have 45%
of its sales from their own brand lines product. Sainsbury’s have started expanding their network
by introducing the non-foods product. Their online operations have been developing and
growing with good pace sales at 20%.

In 2019, Sainsbury’s made £219 million profits but it was less than that of 2018 which was at
£309 million. Their main aim is price sensitivity which means they will provide customers with
products at a fair price and to lead cost leadership.
The main competitor:-
Tesco is the United kingdom’s largest supermarket retailer which holds 27% of the market
share. They have over 3400 stores around the United Kingdom. During the fiscal year, 2018/19
Tesco made a whopping £52 billion revenue, this revenue was £7 billion more than its prior
year. Tesco operates in 12 countries across Europe and Asia. Tesco maintained its top position
for years because of their strategies like branding and marketing.
Other than its originality Tesco have started providing financial services in the name of Tesco
Personal Finance (TPF) and also proving internet connections. This helped Tesco in generating
the revenue and therefore increase in profit margin. As a matter of fact, the competitive rivalry
has always been a concern for Tesco, the merger between Asda and Sainsbury’s will risk Tesco
of losing its market leadership. But to overcome this Tesco has focused more on declining the
prices of the product without compromising the product quality.
The use of Tesco’s Clubcard has helped them in retaining the customers, as it is a promotional
being used by Tesco. The Tesco Clubcard gives a discount and keeps customers loyal. To
ensure that their new pricing policies have introduced Tesco also adverts in T.V, radio,
newspapers to keep in touch with their new pricing and promotions.
Tesco’s success is because of the brand they build over the years. Its brand equity and the
associations have helped the brand to expand into new sections of the market. They analysed
the business environment around them, saw the dynamic changes and went on launching
Tesco.com, therefore, gaining a first-mover advantage.
The merger?
The merge between Asda and Sainsbury’s has been in talks to take on supermarket giant
Tesco. In the theoretical term, this merge is called as Brand extension. This a marketing
strategy used by the company to establish a new brand with an established brand name. To
mark the success this extension should be logically associate between the original product and
the new product. The increase market share, boosting profits and expanded offerings is what
successful brand extensions are about. Some of the successful mergers like Disney and Pixar,
Google and Android.
Asda and Sainsbury’s merger of £15 billion and to increase the market share to 31% to take on
Tesco is appalling. The main idea of merger is to lower the product prices and making them
more competitive on the basis of pricing.

Not only the business environment is dynamic but also customers minds are dynamic.
Customers demand value and quality. The technological changes have been the main tool for
the merger because technological advances have been disrupting the grocery sectors to some
extent. Unlike Asda-Sainsbury’s, Amazon have stepped into the UK’s grocery sector working
with Morrisons to offer a plenty of fresh and quality products as a part of its Amazon pantry,
prime now and Amazon fresh.
What is a Brand?
A brand is the name of the product or service which is made by a particular company. The
brand has its own identity which helps to differentiate from the competitors. A good brand
attracts customers and its the most valuable asset that a company holds.
In the business world, brands have their own identity which is why it has to be protected.
Companies usually secure a trademark or service mark from legal departments for their Brands.
Brands are ofter presented in the form of logos, designs or graphic presentations.
Today Amazon.com and Apple inc. are the most valuable brands in the world. Amazon has a
brand valuation of $315.5 billion whereas Apple has $309.3 billion. Here are some examples of
famous brands.

Why is Branding important?:-
Sometimes people know the brand even if they don’t know about the company. A good brand
somehow impacts the buyers and therefore motivates them. Branding goes way beyond a
particular logo or some graphic element. Brand speaks more about your business and its
referrals.
New brand:-
A good brand name should consist of its meaningfulness, unique, easy to pronounce and which
can be identified or memorized. Considering the following merger of the two UK’s supermarket
giants i.e. Asda-Sainsbury’s “BODEGA” will be the most suitable brand name of this merger.
Bodega is a synonym of Grocery and it actually confines the suitability with the established
brands. Below is the newly designed brand with its logo “FOOD FOR MOOD.”

Pricing:-
The proposed merger of Asda-Sainsbury’s is done with respect to the pricing decision. As with
the new brand i.e. Bodega, they will try to introduce new products at a lower price in ease to
increase the competition. But this doesn’t mean that they have to compromise with the quality,
their key factor is to continue the flow of the traditional supermarkets while offering the valued
product at a reasonable price. This would cut in prices at about 10% on everyday items and
ensure that the promise is being made they will allow an independent body to check this
promise in public.
Distribution policies:-
Both brands will have to face certain challenges in the supply chain. On the introduction of
Bodega (new brand) redesigning a whole new distribution network is colossal challenge. Certain
planning should be done in advance to prevent failure. Good planning process will give a fruitful
result and opportunities for cost savings. Not just the optimization of the existing networks but
exploring the options for best suitable distribution channels like centre locations or by using
Third-party logistics as outsourcing should be their early priority.
The main advantage of Asda-Sainsbury’s joint is that these two businesses have a large
geographical reach. Sainsbury’s having more of its presence in the South of the UK and Asda in
the North, this will help in coping up with distribution centres and operations related to logistics,
thus making an effective and efficient network design a lot easier.
Brand Equity:-
Brand equity is a value premium that is generated from a product or service rather than the
product itself. Brand equity has two possibilities i.e. if a brand has a good/positive brand equity
people can willingly pay for the higher prices whereas if a brand has a negative/bad brand
equity people will not pay for what the price its asked for. The main perception of Brand equity is
Consumer segment which therefore identifies the positive and negative effect. If the brand
equity is positive the company can benefit as well as its financials and vice versa.
For both, the supermarket giants brand equity has always been positive.
Customer-Based Brand Equity:-
This brand equity is used to determine the consumers attribute directly to the brand.
Asda has been using Everyday low pricing(EDLP) for a long time rather than the
traditional use of high-low pricing policy. Also, Asda’s creative campaigning have been
effective and functional due to which it has built up a more emotional understanding of
the brand.

But despite the stronghold on the Asda’s market clutch, Sainsbury’s outperformed
dramatically. Consumers have poor recognition of the Asda brand. Below is the
explanation:-
Asda-Sainsbury’s are working hard to acknowledge the changes in customer behaviour
and market forces. To keep the attention of the customers they are proposing a 10
% cut in prices of household staples and many other items.
Brand positioning:-
Brand positioning is a visionary place where a company want to own in the target audience’s
mind. This indicates what an individual thinks about the brand. The following graph is an
explanation:

Conclusion:-
Both Asda and Sainsbury’s are iconic British food brands, well-loved by millions of customers.
Their growth has been changing ever since and it will be challenging Tesco to some extent. But
this merger will be monitored by the Competition and Markets Authority (CMA). But with this
deal and idea of their new brand Bodega, it will lead to increased prices, reduced quality and
downgraded shopping experience for all their UK shoppers.
Recommendations:-
Before making any recommendations for Asda-Sainsbury’s merge, we have to understand and
establish both their core business activity. We need to see how these both can introduce an

innovative type of business activity for their new brand so that it will be favoured by customers
and stakeholders, thus helping their new brand Bodega for its future long term welfare.
Asda-Sainsbury’s have been into financial activities, which indicates that they are financially sky
high. For a longer time, Sainsbury has been trying to buy quality electronic items at a
competitive price to boost the sales and now they have their new brand where it will be easy for
them to maximize sales and productivity.
At last, they need to get involved in the specialization which means reducing the number of
activities undertaken by the business. Now when both of the parties have proposed the merger
this means they will be sharing risks, profits and most important resources. Both companies can
divide the products.
References:-
Handley, L., 2020. Asda: Creating Brand Personality – Marketing Week . [online] Marketing Week.
Available at: <https://www.marketingweek.com/asda-creating-brand-personality/> [Accessed 3 April
2020].
Statista. 2020. Sainsbury's Profits 2019 | Statista. [online] Available at:
<https://www.statista.com/statistics/386446/sainsburys-profits-united-kingdom-uk/> [Accessed 3 April
2020].
Northernfinancialreview.com. 2020. Asda Revenue Up 3.1% To £23Bn As Profit Tops £803M – Northern
Financial Review. [online] Available at:
<https://northernfinancialreview.com/2019/09/17/asda-2018-revenue-up-3-1-to-23bn-as-profit-tops-803m/
> [Accessed 3 April 2020].
BBC News. 2020. Asda Overtakes Sainsbury's In Sales Ranking. [online] Available at:
<https://www.bbc.com/news/business-47784817> [Accessed 3 April 2020].
Tesco PLC. 2020. Annual Report 2019. [online] Available at:
<https://www.tescoplc.com/investors/reports-results-and-presentations/annual-report-2019/> [Accessed 3
April 2020].
UKEssays. November 2018. Tesco’s Market Position Analysis. [online]. Available from:
https://www.ukessays.com/essays/marketing/tesco-company-breakdown-and-analysis-marketin
g-essay.php?vref=1 [Accessed 3 April
2020].
Managementstudyguide.com. 2020. Brand Extension - Meaning, Advantages And Disadvantages . [online]
Available at: <https://www.managementstudyguide.com/brand-extension.htm> [Accessed 3 April 2020].

Invenio Business Solutions. 2020. Sainsbury's & ASDA Merger – The Challenges Of Integrating Two Of
The UK’S Largest Supermarkets. [online] Available at:
<https://www.invenio-solutions.com/blog/sainsburys-asda-merger-the-challenges-of-integrating-two-of-the
-uks-largest-supermarkets> [Accessed 3 April 2020].
Strategy LLC. 2020. Why Is Branding Important?. [online] Available at:
<https://strategynewmedia.com/why-is-branding-important/> [Accessed 3 April 2020].
2020. [online] Available at: <https://doi.org/10.4236/ajibm.2019.92022> [Accessed 3 April 2020].