Major opportunities open for grocery suppliers to NI

CHANGES in the retail grocery market in Northern Ireland will bring significant business opportunities for suppliers in the Republic. Bord Bia's recent report "Market Opportunities, Selling to the Grocery Market in Northern Ireland concludes that the Republic of Ireland's closest and most accessible export market is worth an estimated £1.75 billion. With a market of 1.6 million people in 540,000 households selling into Northern Ireland can potentially add an additional 47 per cent to the existing market of food and drink manufacturers in the Republic.

The economic indicators for Northern Ireland are all very positive - the economy is outperforming the rest of the UK on a number of levels the overall annual rate of growth of gross domestic product is around 3 per cent - more than half a per cent ahead of the UK national growth rate.

. the number of jobs increased by over 2 per cent in 1995 to achieve a record level of 571,000 and has, been rising faster than the UK throughout the 1990s.

. unemployment has fallen to 86,000 (11.5 per cent of the total workforce), the lowest since 1981.

. year on year manufacturing output grew by 6 per cent in the first half of 995, over double the UK average.

There is now a more positive trading environment between North and South. Latest CSO figures show total exports from the South to the North are up by ten per cent, of which 7 per cent applies to food and drink products. In the other direction, exports from the North to the South, although working from a lower base, are showing a 20 per cent growth. This positive trading environment is complemented by the removal of complex customs delays and an improving transport infrastructure.

Companies in Northern Ireland have been quicker to take advantage of the more favourable trading conditions, but Bord Bia believes that suppliers from the Republic - should at least match, if not exceed the growth in trade being achieved by their Northern counterparts.

A number of the traditional characteristics of the market are changing. Several of the UK retailing heavyweights are now trading in Northern Ireland. The market as it stands is very concentrated with four major buying points (Stewarts/Crazy Prices, Wellworths, Dunnes and Co op) accounting for around 70 per cent of the market.

Stewarts, with an estimated 32 per cent share, is part of Associated British Foods (which includes Quinnsworth). Wellworths with an estimated 24 per cent is owned by the Fitzwilton Group. Dunnes have an estimated 6 per cent and Co op another 6 per cent. The remaining is divided between M&S, Iceland, symbol groups and independents.

This breakdown of the market will look quite different by next year. Tesco's first store is scheduled to open this year, Sainsbury are working on three stores in Belfast, Coleraine and Ballymena and SuperValu already has five outlets trading. Iceland is expanding rapidly and Stewarts, Wellworths and Dunnes are actively fighting back with expansion plans and upgrading of their existing stores.

For any Irish company which can begin or is already supplying the Northern Irish retail trade, the UK multiples presence in the market may also offer an entree to the greater UK grocery market.

Significant opportunities exist for Irish suppliers with both the existing retailers and the new entrants to the market. The new entrants will demand a broad range of products.

Opportunities exist for high quality "own label" products for both existing and new entrants to the market. Traditionally in Northern Ireland, there has been a very low level of purchasing of own label brands with Marks and Spencer's St Michael brand being one of the notable exceptions. Own label penetration is currently low at 7.5 per cent.

Most retailers have now identified this as an area which will grow and where they wish to compete by having a broad range of gown label" products. Stewarts/Crazy Prices has launched its Premium Choice range and Dunnes has been increasingly active with its St. Bernard label over the past year. Hendersons plan to double its "own label" business and the new SuperValu stores expect 20 per cent of total sales to be in own label products. For Tesco and Sainsbury stores the norm would be 55-65 per cent in "own label".

Particular food and drink sectors which hold opportunity in Northern Ireland include meat and fish products, fresh fruit and vegetables, dairy products, bakery products, convenience foods and non alcoholic drinks particularly mineral water.

Any company already successfully trading in the Irish grocery market should have every confidence of success in the Northern Irish market. There are some differences that Irish companies should be aware of.

. the profile of the retail and wholesale trade in the North is different

. consumer habits can be different for example, dry packaged soup predominates in the Republic but canned soups is the preferred choice in Northern Ireland.

. TV Coverage - UTV is received by 62 per cent of homes in the Republic but RTE is only received by 33 per cent of homes in Northern Ireland.

Southern companies will only get one shot at getting new business under these unique opportunistic circumstances in Northern Ireland and they have to get it right.