Report warns of severe competition

Tesco has a share of just under 25 per cent of the Republic's grocery market, a year after it acquired the Quinnsworth/Crazy Prices chain, according to the Department of Enterprise, Trade and Employment.

The British multiple comes second after the symbol groups (Mace, Spar, etc) which have 27.8 per cent of the market. Dunnes Stores is in third place with 21.6 per cent, followed by small retail outlets (15.1 per cent), Superquinn (7.9 per cent), Roches Stores (1.8 per cent), and Marks and Spencer (1 per cent).

The figures are contained in a policy formulation report drafted by the Department about the entry of foreign multiples into the Irish retail market. A copy of the report, drafted in July, was released following a Freedom of Information request.

A review carried out by Forfas last November, details of which are included in the report, concluded that the British multiples will probably increase their share of the Irish grocery market from 25 per cent to 50 per cent "in the short to medium term".

A Forbairt analysis of overall retail space opened in 1996 found that 60 per cent went to non-Irish retailers and that British retailers represented 84 per cent of the capital value of these transactions.

In an introductory overview the report states that strong growth in the Irish economy has led to the retail market becoming a target for foreign multiples in a number of sectors. These are: food (Tesco); clothing (Marks and Spencer has proposals for the Liffey Valley site, Dublin, and for Galway and Limerick); electrical (Dixons' acquisition of Harry Moore); furniture (the establishment of Courts and Reid); tour operators (all the major operators are British owned); and pharmacy (Boots).

"The acquisition of the Quinnsworth chain by Tesco increased concerns of suppliers and distributors in the food sector as one of the major players in the grocery sector would have the capability to replace Irish produced grocery products with UK sourced products on a much larger scale than any of its competitors, or indeed the Quinnsworth group had in the past," according to the report.

For the food sector, the arrival of the foreign multiples is of concern to suppliers and distributors who feel they may be replaced. The development is likely to create "severe competition" because of the purchasing power of some of the multiples, the report notes. The Department's competition, small business and services, and enterprise programmes divisions have been involved in formulating policy on the issue since last year.

There has been "a high degree of contact with Tesco but not with any of the other foreign multiples". Forbairt is assisting suppliers to respond to the challenges taking place and to exploit new opportunities arising. The agency, along with An Bord Bia and Tesco, is represented on a working group "which meets regularly to discuss the expansion of the existing market for Irish sourced goods within the Tesco group and the development of new trade between Irish suppliers and Tesco". The major challenge for Irish suppliers is "to bring operational systems and processes up to the competitive standards required by UK multiples".

"Tesco recently commenced its programme to purchase fruit and vegetables directly from growers and to appoint one national distributor in Ireland to consolidate distribution of produce," the report states. "The company appointed (Keelings) announced that over 100 jobs would be created but obviously other existing distributors will be adversely affected."

Apart from Tesco, none of the foreign multiples has given specific guarantees regarding the purchasing of goods from Irish suppliers, according to the report. It notes that Safeway has indicated it wants to enter the Irish market, there are rumours about Sainburys buying Roches Stores and reports that the German multiple, Lidl, is seeking sites in Ireland. Lidl has 3,000 stores in Continental Europe and 130 in Britain. It sells groceries at discounted prices and offers weekly specials on a wide range of nonfood items.

The Minister for the Environment and Rural Development, Mr Dempsey, is currently working on comprehensive planning guidelines aimed at addressing the problem of large-scale retail shopping developments, or superstores.

The Restrictive Practices (Groceries) Order 1987, which prohibits practices such as below cost selling, boycotting, and "hello" money, is currently being examined by the Competition and Mergers Review Group, which is due to report at the end of this year. The Tanaiste, Ms Harney, has said she will not make any decision on the future of the order pending the report of the group. The order does not include fresh fruit and vegetables, fresh and frozen meat, and fish. According to the report, Fyffes has requested that the order be extended to include fruit and vegetables, or be abolished.