If Sainsbury’s and Asda succeed in their audacious merger, then Mike Coupe will be the most powerful grocer in the land, with an astounding £51billion of revenues ringing through his tills.
The 57-year-old Sainsbury’s boss, who will be in charge of the combined group, cooked up the deal with his old friend and colleague, David Cheesewright. The latter until recently ran international operations for Asda’s American parent company, Walmart.
The pair would run into one another at industry events and started talking in earnest from early 2017. ‘It took about 15 months to get to this point,’ Coupe tells me, as we chat in his small, functional office at Sainsbury’s HQ in London’s Holborn.
Audacious: Mike Coupe insists the huge deal with Asda will benefit shoppers
There is a long way still to go before the deal is done – he expects it will take until the second half of 2019 to complete.
There is also a high degree of scepticism, with fears it could harm consumers and suppliers as well as putting jobs at risk. Coupe insists none of this will happen. He even claims shoppers will be significantly better off because the merger will lead to savings of 10 per cent off the price of ‘everyday items’.
‘The central argument as to why this merger is great for customers is that there will be lower prices, where it really counts, on items such as bread, eggs, milk, loo rolls, those types of things,’ says Coupe.
An independent team compared the price each company was paying for a variety of products. ‘What we have assumed is that, for instance, if Asda is buying a product more cheaply than Sainsbury then we will look to buy at Asda’s price. That will generate a certain amount of money. Some of it will go to our shareholders, but it will create quite a big pot that can be given back to customers.’
He doesn’t want to be drawn on which items exactly will have their prices slashed because of other variables involved, such as commodity prices.
‘How can you hold my feet to the fire? I am very happy to be judged in the court of public opinion about whether I have kept that promise,’ he says. He is absolutely right – if he fails to deliver on his promises, judgment day for Mike Coupe will come soon enough.
Advocates of the deal claim a merged group could generate as much as £500million of additional earnings a year, by using mighty Walmart’s enormous buying muscle. The prospect of such juicy returns sent Sainsbury’s share price upwards on Monday morning when details of the proposed deal were confirmed.
Assuming the deal goes through, Walmart will have a 42 per cent stake plus two seats on the board. Those are likely to include a berth for Walmart’s international head, Judith McKenna, a Brit, brought up in Middlesbrough, who as a result of the deal will become the most powerful woman on the British high street.
Despite those new transatlantic links, Coupe says he will continue with Sainsbury’s policy of buying British whenever possible. ‘Sainsbury prides itself on the fact we buy everything we can from the UK,’ he says. ‘We will continue with buying British.’
So no chlorinated chicken or hormone-injected beef from the US then? ‘There’s no chance, partly because it is not legally permissible,’ he says. It might be allowed soon, though, after Brexit, as the UK seeks to forge closer trade links with the US – so won’t Walmart try to introduce it then? ‘Sainsbury’s has a very good reputation for the food we sell and we want to protect that. Asda too. It would be really difficult for anyone to do because of all the publicity that would be involved.’
Coupe insists the deal is unlikely to involve major job cuts, and claims it might even create employment. He points out that since Sainsbury’s took over Argos in 2016 in a £1.1billion deal there are more people employed in that business.
Coupe says he will continue with Sainsbury’s policy of buying British whenever possible
‘When we acquired Argos they had 760 shops, now they have around 1,000. We have created around 1,000 jobs, with most of those new roles in shops.’
Around 250 Argos outlets will open in Asda stores, some of them completely new and some moving into the supermarket from nearby premises.
‘The combined Sainsbury-Asda organisation will employ 330,000 people. If I were a betting man, in five years’ time I wouldn’t be surprised if it still employs 330,000 people, though they might be doing different jobs.’
He is also bullish over pensions. ‘Both the Sainsbury and the Asda schemes become better protected,’ he says. The Asda scheme will remain with Walmart, while the Sainsbury’s scheme, which has an accounting deficit of nearly £1billion, will ‘be within the new company which is twice the size, so the covenant is stronger’.
‘I’m sure the Pension Regulator will not have any problem with what is being proposed,’ he says.
But if customers, employees, pensioners and shareholders are all winners, who are the losers: suppliers? ‘It’s a bit of a myth that small suppliers will be squeezed – it is not in our interest. We have a track record on innovation and bringing new products to the market from suppliers, such as Gu chocolate puddings or Charlie Bigham’s ready meals.’
What he will do, he claims, is claw back some savings from big manufacturers who can afford it.
‘Where does that money for price savings come from? Broadly speaking, from multinational corporations. A relatively large amount of our business is concentrated in the hands of a relatively few suppliers.’ But surely the big suppliers won’t just cave in? ‘Yes, they will be fighting hard – I don’t disagree,’ he says. ‘But if you look at any of the large branded manufacturers they make very, very healthy returns on capital. I would argue my job is to try to take some of that and give it to my customers.’
Coupe, who was born in Watford and grew up in rural Sussex, did a physics degree at Birmingham University, but soon gravitated towards sales and marketing.
His first job was as a sales rep for Samuel Heath & Sons, a high quality brassware business, in the teeth of the early 1980s recession. ‘They gave me a Ford Cortina and a bag of samples and I spent a year on the road trying to sell door knockers and fire screens,’ he told me when we met on a previous occasion.
He went on to work for Unilever and later for Tesco, Asda and Iceland before landing at Sainsbury’s in 2004 and taking the top job a decade later.
Coupe said both the Sainsbury and the Asda pension schemes will become better protected
Married to Jill with two grown-up daughters, his family home is in York though he lives in London during the week. His hobbies are cycling and the guitar, and he sometimes goes home after a tough day, turns up the amp and bashes out some 1950s rock and roll.
He might have needed to do that last week, when he was caught on camera singing We’re In The Money from the musical 42nd Street – not realising the microphone was on. It still seems a slightly touchy subject, but minor embarrassments aside, he knows the biggest risk to the deal is that it might not get past the Competition and Markets Authority, whose role is to protect consumers from over-dominant businesses.
Industry experts say a positive sign is that the CMA gave a green light to Tesco’s merger with Booker. That deal was much smaller, though, and another complicating factor is that the regulator is about to install a tough new chairman.
Former Tory MP Andrew Tyrie, in his role as chairman of the Treasury Select Committee, struck fear into the hearts of bankers with his forensic dissection of their failings. He will be no pushover.
Conventional economic wisdom is that merging two big players is bad for consumers because it reduces competition. Coupe argues the opposite is the case: ‘It is a brutally competitive market so that is a big check. Customers have a huge amount of choice – more than they ever had, whether that is discounters in the form of Aldi and Lidl or whether it is online.’
‘So if we abuse our power of scale, for instance, in the toiletries market, it wouldn’t be too long before some smart alec set up an online toiletries business and tried to undercut us.
‘There is huge competitive pressure from non-traditional retailers. I would cite Just Eat as a competitor to Sainsbury’s. It sells meals, we sell meals. But scale can be a force for good if it leads to lower prices for consumers.’