As if the birth of Prince Louis wasn’t enough headline news for one month, Sainsbury’s and Asda creep in at the eleventh hour with details of a surprise merger between the two supermarkets. They are, respectively, the second and third largest supermarkets in the UK meaning a new retail super-giant is in the making.

Their combined size will give them a total market share of about 31 per cent – nearly a third of the supermarket sector – setting them well ahead of the current leader Tesco. Asda’s parent company, Walmart, are rumoured to be paying nearly £3bn in cash to gain a 42 per cent stake in Sainsbury’s. The outcome will be a network of over 2,800 stores across the UK and Ireland.

But is this a match made in heaven?

Initial thoughts are that the two are so hugely different. Granted, they are both currently one of the big four. But, surely, they hold their place within this elite group for very different reasons? Sainsbury’s is more about upmarket, premium positioning, right? Asda more noticeably adopts a pile-it-high-sell-it-cheap strategy. The typical age of the Sainsbury’s shopper is 45+ whereas Asda is favoured by young families, with at least four occupants in the household.

Children are well-catered for by Asda too, whereas the number of Sainsbury’s shoppers without children is higher than average.  Not surprisingly, Asda successfully reaches the lower socio-economic groups with an ethos driven by price, accessibility of range and larger pack sizes. Sainsbury’s on the other hand excels at over-performing in its ‘quality orientated’ customer category.

Quite different target markets. Very different trading strategies.

But, at a time when the UK retail sector is experiencing significant and rapid change with consumer shopping habits ever evolving, there must be huge potential in being able to provide greater value, choice and convenience.

So, what’s the plan? The answer is dual-branding.

Otherwise known as co-branding; a mutually beneficial relationship between two brands. It’s a strategic partnership whereby the success of one inevitably drives success in the other. It can be a great tactic to grow a business, increase awareness and break into new markets. But, I hear you asking, who doesn’t already know about Sainsbury’s and Asda? And what are the new markets available to them? They’ve pretty much got the demographic spectrum covered, haven’t they?

According to recent reports, the purpose of this dual-branding approach will be to maintain both brands whilst sharpening their distinctive customer propositions and attracting new customers. A tall order you might think. Because it’s no secret that, for it to be a success, both audiences will need to see true value from the new retail giant.

Does this mean tailor-making a dual-branded proposition to fit two target markets? Is this questioning the fundamental concept of a co-branded approach?

Whatever it means, the chances are that they will see more success as one entity; they are two strong brands working towards a common goal. Dual-branding comes with an abundance of positives – including reciprocal customer loyalty, enhanced reputation, shared risk, cost-effective operating with shared best practice and technology; not to mention an increase in sales and brand awareness. Sainsbury’s and Asda could even go as far as to challenge the perceptions of one another amongst their wider, combined customer base. Their collaboration will no doubt portray both brands in a positive light, but as with any co-branding relationship, there could be some drawbacks.

Brands need to be careful that they are not diluted by being so closely aligned with another. The chances are that complimentary brands will have been carefully selected to join forces, but there are suddenly two occupying the same air space. A lot of time will have gone into building the two brands independently, but one could easily go unnoticed in the shadows of another. Each needs to hang on to its own brand equity. 

So, in principle, dual-branding can be a fantastic marketing tool and offers great scope for brands to flourish. It can be a long-term arrangement or a one-off opportunity. Either way, the essential thing to remember is your customers and the value they’ll need to see. Their loyalty will be invaluable and will shape your reputation.

If dual-branding is on your radar and you’d like some advice, give us a call – we’d love to chat brands.