Discount retailer to test price over brand

In any other retail category, the arrival of one of Europe's biggest retailers into the market would make the local competition quake but not, it seems, in the case of the grocery trade. Aldi, the German discount grocery retailer, is currently fitting out its first Irish store on Parnell Street and Irish consumers will be able to buy food at rock bottom prices.

In Aldi's 350 UK stores, shoppers can buy beans for 9p, a loaf of bread for 17p and a jar of instant coffee for 41p. However, the mood among most major grocery retailers is that not only is competition in general good, but that Aldi's offering puts it so much in a retail niche of its own that with it does not pose a significant threat.

What makes the German supermarket chain so unique is that they do not sell known, mainstream brands. Irish consumers almost certainly will not recognise any of the brands on offer, so Aldi will be testing whether price alone can take preference over the confidence that buying a known brand brings. However, the market for branded products is changing. Most supermarkets stock an ever-growing list of increasingly more sophisticated own brand products and Marks & Spencer, for example, only sells own brand goods.

The market for own brand goods in Ireland is estimated to be about 11 per cent but industry forecasters predict that that will rise to 20 per cent in the near future and continue growing, judging by European and US trends.

Iceland, the UK frozen food retailer which has been in Ireland for four years, is more familiar with Aldi than most Irish retailers because in the UK they are side by side on several sites and are viewed as offering a companion range of food items. "Aldi offer 80 per cent grocery, 10 per cent chilled and 10 per cent frozen," says Ron Metcalfe, area manager for Iceland in Ireland, "and we sell mostly frozen food, 65 per cent own brand, 35 per cent branded, so they do not pose a threat to us."

He thinks that unless Aldi puts a considerable emphasis on marketing, it will have a difficult time entering into the Irish market.

"Irish consumers are very loyal to Irish brands," he says, "look at how much emphasis Dunnes and SuperValu put on being Irish." He feels that Iceland had an easier time coming into the Irish market because Irish people were already familar with the name, something that is not true of Aldi.

While the two supermarkets are often to be found side by side in the UK, that won't be the case in Parnell Street. The nearest grocery retailer to Aldi on Parnell Street is a Spar outlet and Josh Joyce, marketing manager for the Spar chain, says that while there is bound to be a curiosity factor, the two stores appeal to different markets. "In a sense, I'm surprised at Aldi's timing," he says, "I might have expected them here 1992 but the economy is now so buoyant and consumers are much more educated in terms of brand preference."

The real losers may be Irish food companies who see another foreign chain who will not be inclined to stock their products.