It’s time for an orderly retreat in the supermarket wars

The big four supermarkets could spend billions taking on the discounters. But the City should not allow them to, says Matthew Lynn.

There probably won't be much of an opening ceremony. Someone might hand out a few competitively priced cheesy nibbles. There might be a bottle or two of Bulgarian ros on hand. At best, someone from local radio might be asked to come over on the bus to cut the ribbon. Indeed, when Sainsbury's and the Danish discount chain Netto launch their first store together in Britain, they will no doubt do it on the cheap. This is, after all, the world of price-cutting supermarkets, and the appearance of frugality is just as important as rock-bottom prices.

The tie-up is the first, and so far the boldest, response by one of the Big Four' supermarket chains to the rise of Aldi and Lidl. Sainsbury's has decided that if you can't beat them, you might as well try and join them.The trouble is, it's not likely to work. Ten years ago, firms like British Airways tried to halt the march of budget airlines such as Ryanair and easyJet by launching their own low-cost carriers. None of them worked. The reality is that the Big Four could easily spend billions trying to take on the discounters and protect their market share. But the City should not allow them to. The best thing the Big Four can do now is admit they have to get a lot smaller and then get on with it.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.