When two giants merge.

Who will benefit from Sainsbury's and ASDA?

This week, in organisations around the country, diaries are being crashed for urgent meetings, to work out the potential implications of a merger between two of the UK’s biggest retailers, Sainsbury’s and ASDA.

The threat to their closest competitors, Morrisons, Tesco and Co-op, is obvious, but there will undoubtedly be implications for the other big food retailers as well: Waitrose, Aldi, Lidl, all have cause for concern, depending on the strategic decisions made in the post-merger behemoth. Less obvious is the threat to other retailers whose categories overlap with the supermarkets; retailers like Boots, Lloyds, Savers and Holland and Barrett; Next, Primark, Arcadia and M&S; Wilcos, Clinton’s, PC World and many more; every one of them stands to take serious collateral damage from the cut-price competition that the buying power of a combined business could bring to bear.

But the biggest implications will be for the suppliers.

Most of the big retailers know the playbook by heart and will already have kicked off the analysis of store proximities, category overlaps and pricing scenarios. My biggest concern is that the majority of the meetings within supplier businesses this week will end with very little action, because there are few tactical ones they can take right now, not until the dust settles, and the plans and requests start to flow out from Leeds and Holborn. But at times like this, inaction is the worst of all options.

There are some things that are inevitable, some fairly predictable, and others where several distinct scenarios could happen, all of which can be planned and prepared for right now. Prices, terms and discounts will be harmonised to the most advantageous, most categories will be consolidated, much of the private label supply chain will be tendered, and acres of shelf space will be up for grabs for those with the deepest pockets or the most compelling data.

One of the most insightful exercises I do with executive teams and CEO groups, is scenario-based thinking, and one scenario that often comes up is: “If you had no choice but to raise or reduce your prices by 25%, what would you do?”

Most groups will come up with a raft of pretty drastic measures, but by the end of the session, they will have chewed them over and decided that, with a few tweaks, many of them are things that they could, and probably should, do anyway, or at least rapidly step-up if they’re already in the plan. But there’s usually one or two people in any given session, who don’t get to those outcomes. Their focus is on unpicking the premise, asking “Why would we have to do that?” Pointing out that their customers can’t demand it, or that none of the competition could drop more than two or three percent, so they wouldn’t need to go much further. They may be right, but they’re missing the point.

The point of scenario thinking is not to say, “this will happen”, but to simply ask, “what if it did?” and to take creative inspiration from the conversation that results. We could all spend hours debating what the combined SainsDA will do, and it’s likely none of us, including the execs in both of those businesses today, would get it right. But what we can do is look at the plausible extremes – those scenarios that yield the greatest impact, positive and negative – and consider how we could best advantage ourselves, should those scenarios unfold. Irrespective of whether they happen, the ideas they yield can be incredibly powerful, especially if the scenario does ultimately come to pass.

I can’t imagine many suppliers or competitors saw this particular merger coming, but there will be a few who, at some point, will have considered the scenario or something similar, and thought about what they would do. My guess is that their meetings this week have felt very different to the rest.