The branding conundrum: Balancing Sainsbury’s quality messaging with Asda’s focus on value

This week’s deal might have created the UK’s biggest supermarket group, but questions remain over how the two businesses will work together when they have such distinctive brand propositions.


The Sainsbury’s and Asda merger might have sent shockwaves through the industry, but given the current retail environment it is not entirely surprising.

Against a backdrop of increased competition in the grocery sector, the rapid growth and popularity of the discounters, disruptive technology and changing consumer habits, supermarket margins have been under pressure for some time.

And with the UK’s four main players – Tesco, Sainsbury’s, Asda and Morrison’s – all fighting for valuable market share, consolidation in the UK supermarket sector feels inevitable.

Up until this week, Tesco led the market with a 28% share, according to Kantar WorldPanel data; however, a combined Sainsbury’s and Asda would control around 31% of the supermarket sector making it he biggest supermarket group in the UK.

From a scale perspective, the deal undoubtedly makes a lot of sense – even though it will require approval from the Competition and Markets Authority, which is likely to force Sainsbury’s and Asda to sell a number of their stores so they don’t have too much power over the grocery market in local areas.

Analysis by GlobalData suggests it will have to dispose of at least 75 stores to quash concerns, although Sainsbury’s is adamant the merger could offer a good deal for consumers with the possibly for a 10% reduction in prices as well investment in formats, channels and new tech.

READ MORE: Mark Ritson – Asda and Sainsbury’s must balance unity with differentiation to make their merger work

The branding conundrum

But how this will work from a branding perspective raises a number of questions – especially in grocery where it brings together two supermarkets that stand for very different things.

Sainsbury’s has a focus on values and is perceived as being better quality but more expensive. Asda, on the other hand, has built its brand on price and a value positioning.

According to YouGov BrandIndex, Sainsbury’s has the stronger brand. Its index ranking (a measure of a range of metrics including quality, value and reputation) is 31.2, putting it second behind just Marks & Spencer in a list of 26 supermarket brands. It comes top for satisfaction with a score of 39.4 and in the top three for impression, quality, reputation and recommend.

Consumers have poorer perceptions of the Asda brand. Its index score of 17 is only enough to put it in eighth place in the supermarket rankings, while on reputation it comes in 11th with a score of 4.2 and on impression it ranks ninth on 20.5.

Sainsburys versus Asda brands

But the clearest indication of the difference between the brands comes in terms of quality and value. On quality, Asda ranks 10th with a score of just 12.1, while Sainsbury’s is third with a score of 43.4. On value, however, the places are reversed; Asda comes third in terms of value with a score of 23.1, while Sainsbury’s is seventh (its worst position) with a score of 9.4.

The figures suggest there are certainly opportunities for the two supermarkets to work together to leverage each other’s strengths and try and improve the areas that they don’t score so well in. But the two brands’ marketers will have to make sure that they don’t dilute each other’s strengths while looking to improve their weaknesses.

Room for two?

Currently, there is some crossover between Asda and Sainsbury’s shoppers, but less so between them than other supermarkets.

Figures from GlobalData estimate that 53% of Asda shoppers shop at Sainsbury’s, while 50% of Sainsbury’s shoppers also use Asda. This is well below the numbers from either that also shop at Tesco.

The two brands’ customers also have more shared values than you might think. YouGov Profiles data shows that 86% of Sainsbury’s customers and 88% of Asda shoppers are ‘always looking out for special offers’. Likewise, 71% of Sainsbury’s and 78% of Asda customers are ‘usually looking for the lowest prices when they go shopping’.

Sainsbury’s customers are slightly more inclined to say they don’t mind paying extra for good quality products (84% vs 80%), but again, there is general agreement.

“YouGov Profiles data indicates that both Asda and Sainsbury’s customers share many of the same characteristics, and have similar outlooks on what they want from supermarkets – although Asda shoppers place a greater emphasis on cost,” says Amelia Brophy, head of data products UK at YouGov.

So it will be interesting to see whether the merger has an impact on the crossover and where people shop.

READ MORE: Sainsbury’s CEO: The merger with Asda won’t cause brand confusion

It will also be worth keeping an eye on how the two supermarkets begin to explore how they can share their unique propositions, which Sainsbury’s CEO Mike Coupe says there is “plenty of opportunity” to do, and whether this does what the merger is hoping and “sharpen[s] their distinctive customer propositions” or causes confusion among consumers.

They are also adamant the two businesses will be run separately, with Asda retaining its Leeds HQ and its own CEO. But there are questions over whether two full marketing teams would be needed and the role of agencies. Sainsbury’s and Argos have already combined their media accounts and with Asda that is another ripe for synergies.

Just because brands are owned by the same holding entity doesn’t mean that they can’t co-exist.

Mike Coupe, Sainsbury’s

There are clear areas where the two could benefit. Sainsbury’s could bring Nectar to Asda, while Asda’s customers give it a new market to sell its banking services to.

The same is true for Argos, with Asda offering further opportunity to open stores within stores.

Coupe, unsurprisingly, is confident the two businesses can co-exist without muddling their brand propositions – and at a press conference earlier today (30 April) interestingly likened his business to an FMCG giant like Procter & Gamble.

“Just because brands are owned by the same holding entity doesn’t mean that they can’t co-exist,” Coupe says.

“Look at any large brand or manufacturer – P&G, for example, has literally hundreds of brands and nobody makes the association that there will be some kind of brand confusion.”

While Sainsbury’s says it will retain both fascias, whether that plays out in the long-term is another thing.

When Morrisons acquired Safeway back in 2003, it said it planned to keep the Safeway brand, on the group’s smaller stores at least. But it later sold those stores to Somerfield and the Safeway brand disappeared (until it was brought back last year on a range of ready meals for the convenience sector).

READ MORE: Why Morrisons is right to bring back the Safeway brand

And analysts are agreed that if forced to pick, Sainsbury’s would be the brand to keep.

Natalie Berg, retail analyst at NBK Retail, says: “They may be retaining both fascias for now but I imagine the Asda brand will disappear from the high street. There’s no room for a retailer like Asda in today’s market. If shoppers want low prices, they head to the discounters. If they want convenience, they head to Amazon.”

Indeed, Amazon has made its ambitions in the global grocery market very obvious over the last 12 months, with the acquisition of Whole Foods in the US last summer and a delivery deal in France with Casino Guichard Perrachon only last month.

This is on top of agreements with a number of European grocers including Morrisons and Booths in the UK.

And Berg says we should expect more to come.

“Amazon has the infrastructure in place but one-hour delivery is no good without a compelling range of products. They will come knocking on a UK retailer’s door. Despite their negligible share of the market, Amazon has been incredibly effective at driving change in areas such as same-day delivery and voice technology.”