Tesco's margins in Republic 'lower than in the UK'

Tesco's profit margins in the Republic are lower than its margins in the UK, the chief executive of Tesco Ireland told an Oireachtas committee yesterday.

Mr Gordon Fryett told the Oireachtas Joint Committee on Enterprise and Small Business that it was "absolutely not true" that Tesco's margins were higher here than in the UK.

He could "categorically state" that a media report to the effect that Tesco's Irish margins were 11 per cent was inaccurate. Irish margins were lower than UK margins. "That is a fact," he said.

Tesco Ireland director Mr Dermot Breen said retailing margins across Europe were "pretty slim", ranging between 3 per cent and 6 per cent. "This is a highly competitive market."

Mr Fryett told committee chairman Mr Donie Cassidy TD, Fianna Fáil, that one of the reasons Tesco could sell products more cheaply in Northern Ireland was because Tesco stores there were part of its UK business unit and benefited from significant economies of scale.

Operating costs and the cost of products from Irish suppliers were two reasons for higher costs in the Republic, he said. On average, supplier costs here were 9 per cent higher than in the UK.

Operating costs were on average 20 per cent higher in the Republic. Labour costs were 20 per cent higher; transport and distribution costs were 28 per cent higher; the cost of cleaning stores was 70 per cent higher; and security costs were 28 per cent higher.

He said waste management costs here were 250 per cent higher than they were in the UK. In the UK, waste was thrown into "a big hole". A different approach was adopted in the Republic.

After giving his examples, Mr Fryett said he thought "that gives a pretty clear picture as to why retail prices of our goods tend to be higher here than they would be in the North or in the UK".

He added that it was the case, however, than many products were cheaper here than they were in the UK.

Mr Fryett said Tesco Ireland invested all its profits in its expanding Irish operation. There was no "repatriation of profits", he said. The two Tesco executives told the committee it had no issue with the restrictions on the size of supermarkets in the Republic or with the Groceries Order.

Senator Feargal Quinn, of Superquinn, said the grocery sector was getting more competitive and could become one where only global companies would be able to survive.

He said the Groceries Order discriminated against companies that operated only in the Republic. The Order imposed restrictions on the deals retailers could do with suppliers but multinationals could negotiate deals outside the State which were not subject to the law.

He said it was the only law he knew of in Europe that worked against the interests of companies from the State that had enacted it.

There was strong criticism of Dunnes Stores from a number of members of the committee after a letter from chief executive Mr Andrew Street was read out. Mr Street said the company did not want to take up the invitation from the committee to attend.

Mr Phil Hogan TD, Fine Gael, said it was "frustrating and totally unacceptable and an affront to the committee" that Dunnes Stores was not attending.

Ms Kathleen Lynch TD, Labour, said it was "incredible" that one of the biggest suppliers of groceries in the State would "refuse" to come before a committee of elected members.

Aldi told the committee it would not be appearing before it. The committee's inquiry into issues to do with the grocery sector continues today.

Multiple set to sell car insurance

Tesco Ireland is to begin selling car insurance, the company announced yesterday.

Details as to its plans will be released in the coming months, director Mr Dermot Breen said told the Oireachtas Joint Committee on Enterprise and Small Business yesterday.

He said the grocery multiple would be offering competitively priced motor insurance but refused to give any details as to what segment of the market the product would be open to.

In the UK, Tesco offers car insurance to persons aged 21 to 75 and with four or more years' no claims discount. Its insurance is underwritten by UK Insurance Limited.