Checkout nation: our new habits
AFTER BEN DUNNE opened Ireland’s first out-of-town supermarket, at Cornelscourt in south Dublin in 1966, he used to drive up from his Cork home every Saturday and park outside the entrance to marvel at the numbers going through the doors in search of the better value that he claimed beat them all.
Try as he might, Dunne snr could never quite get his head around how so many people seemed so attracted to something as simple as a shop on a Saturday.
We have come a long way, as consumers, since Dunne’s day. Now 155 shops, 116 of them in Ireland, bear his family name and serve hundreds of thousands of people thousands of products worth tens of millions of euro every week. While Irish shopping habits have changed and become, arguably, more refined, Ben Dunne jnr believes everything still comes down to one thing: price.
Following a well-documented rift with his siblings, Dunne has been on the sidelines of the grocery sector for nearly 20 years, but he l retains a passion for it and has total recall of every triumph and slight. “The 1960s and 1970s were great for consumers but even better for us. We were able to undercut the bejaysus out of our rivals. They could never match our prices. When I took over, I was a very aggressive retailer.”
He was behind Ireland’s bread-and-butter wars of the early 1980s. He found bakers who could bake him a loaf for 19p so he could sell it for 29p, well below the 55p that branded products cost. “Then Ray Burke rang me and told me to stop selling cheap bread because I was killing the country’s bakeries. He wanted us to prop up inefficient producers. ” That perceived affront still rankles.
Dunnes wasn’t the only game in town, nor the first. In 1959, 30 years after the first stack-’em-high, sell-’em-cheap supermarkets opened in the US, H Williams opened on Henry Street in Dublin. A year later Feargal Quinn opened his first Superquinn, in Drogheda.
Mattie Melia brought the Mace brand to Ireland at around the same time. His granddaughter Laura McGann is making a documentary about the early days of the Irish supermarket. Called The End of the Counter, her programme, which will be screened at Cork Film Festival this month, relies heavily on her grandfather’s Super-8 footage. The clips are soundless but his images are no less fascinating for that.
The footage shows young men dressed like extras from Mad Men wandering the cramped aisles of Ireland’s rural supermarkets and rubbing shoulders with young women dressed like Jackie Kennedy while their fathers and mothers shuffle past, looking bemused as they put Vim and Zip in their baskets.
“Mattie saw what was happening in England; local family-run shops were going out of business because they could not compete with the big supermarkets that were coming in. He knew that sooner or later this would happen in Ireland,” McGann says. “And he knew that hundreds of families around the country would lose their livelihoods to the corporations.”
Melia was on the money.
Today, Irish supermarkets are all about corporations. Big overseas names exploit the huge profits to be made on what international retailing circles refer to as Treasure Island, because the margins here are so high. How high is hard to say, as our supermarkets are notoriously secretive. Typically, a British supermarket makes profits of between 1.5 and 4 per cent; in Ireland, a leak from Tesco a couple of years ago showed that margin reaching 7.2 per cent.
And Tesco is the kingpin. The latest data from Kantar Worldpanel, which monitors Irish grocery habits, shows it increasing its market share to 28.6 per cent, from 27.8 per cent a year ago. Aldi’s performance is more impressive: its share of the grocery pie has increased by 30 per cent year on year. It now has 6 per cent; its main rival, Lidl, has 6.6 per cent. Dunnes has 21.6 per cent and Musgrave, which controls SuperValu and Superquinn, has just over 25 per cent. Other retail players, including Centra, Spar and Marks Spencer, make up 12.1 per cent of the market.
There is less room for the little man now, particularly when consumers’ money is so tight. According to David Berry, the commercial director of Kantar Worldpanel, Irish shoppers are keeping close control on their spending and are shopping more often for fewer items.
Irish consumers are also eschewing brands. For generations shoppers have displayed a loyalty to brands that our thrifty cousins in central Europe find baffling. In Germany, private-label (or own-brand) products make up more than 70 per cent of the average shopping basket.
Own-brand products have been a hard sell here, largely for historical reasons. In the early 1980s, Quinnsworth rolled out a “yellow pack” range of own-brand groceries. The quality was poor and the term “yellow pack” quickly became pejorative, and a euphemism for poor-quality jobs, products and lifestyles.
The bursting of the economic bubble changed all that, and Irish consumers are buying far more own-brand products. In 2005 just 9 per cent of what we bought was own brand. This year it will make up nearly 40 per cent of the average shop.
The big winners have been the German discount chains, which have increased their business from nothing to more than 12 per cent of the market in little more than a decade. When they opened, people went to marvel at the eclectic mix of unfamiliar own-brand foods sitting alongside the blowtorches, wetsuits and wheelchairs. The all-over-the-shop displays raised chuckles as we made our way to the tills with packets of exotic German ham.
WITH SO MANYpeople’s disposable income shrinking drastically, we are a lot less picky about where we buy groceries or what we buy. It is not only about the money. The German discounters deserve credit for they way they have nurtured relationships with some of the best artisan producers in the State, and much of the stock both sell is excellent.
Dunne believes the reason Aldi and Lidl are performing so well is that they never forgot the 80/20 rule of retailing: 80 per cent of sales come from 20 per cent of the products. “They stock the basics and cut the daylights out of them. When the Celtic Tiger was around people would not shop in Aldi or Lidl . . . You don’t hear that so much any more,” he says.
Irish people are shopping more online, and analysts predict a 400 per cent increase in this over the next five years as retailers develop smarter apps and slicker websites.
“Over the next five years the grocery sector will change rapidly,” Dunne believes. “Soon 80 per cent of a person’s shop will be done online with the rest sourced in local butchers and vegetable shops. All it will take is one big warehouse stocked with groceries that sell for 20 per cent less than Tesco. If Tesco started selling online at 10 per cent less than in store, it would go out of business overnight.”
For the online revolution to really take hold in the grocery sector, Dunne believes someone with money needs to join the dots. “If I was a young man I would be doing it in a flash. Why bother with shops with expensive displays and staff kitted out in uniforms and high-cost refrigeration display units? The current retail model is the most expensive way of doing it.”
Tesco disagrees and is putting its money where its mouth is. It is building ever bigger stores that are selling more and more stock. Its Extra outlets sell toys, hardware, electronics, prescription drugs, clothes, groceries, alcohol, books, furniture and more besides. Such a big Tesco will have more than 12,000 products under one roof.
This hypermarket model may see prices fall, as the troika hoped when it called on the Government to lift restrictions on retailers’ floorspace. But perhaps it won’t. Perhaps Dunne is right and supermarkets are a doomed anachronistic throwback to a time when retailers would sit quietly outside their shops just watching us spend money. Conor Pope
The word in the aisle ‘Now I just get what I need’