Groceries price war is over, says watchdog

 

THE PRICE war between major food retailers is over and there is little evidence of competition in the market, according to the National Consumer Agency.

The prices of branded goods fell significantly in the first half of last year but have remained virtually static since, the agency’s latest grocery survey shows.

There is virtually no difference in the price of branded goods in Tesco, Dunnes Stores and Superquinn, and almost half the items surveyed cost the same in all three stores.

Agency chief executive Ann Fitzgerald said this showed the big retailers were in “a comfortable place” once again, and their margins were “unacceptably high”. She called for a removal of the cap on the size of retail units under planning regulations, claiming this would stimulate competition by encouraging a big overseas retailer to come to Ireland.

The price of branded goods fell by an average of 14 per cent from January 2009 to July 2010, according to the study.

Retail Ireland claimed that consumers had benefited from “deep” price cuts, and there was no longer any reason to go North to shop.

Fine Gael accused the supermarkets of cartel behaviour and playing out a “phoney” price war.

RGdata, which represents independent grocers, criticised their omission and those of discounters Aldi and Lidl from the research, which did not survey own-brand goods.

The consumer agency survey compared the price of a basket of 103 branded grocery items in Tesco, Dunnes Stores and Superquinn, and a basket of 87 items when SuperValu is included.

It showed there was virtually no price difference on branded goods between Tesco, Dunnes Stores and Superquinn, with a difference of only €1.14 or 0.4 per cent between the cheapest and most expensive basket. The three stores between them control over 70 per cent of the market.

The basket was cheapest in Dunnes Stores at €279.62. It cost €280.76 in Superquinn and €280.69 in Tesco. This compares to a difference of 4 per cent in July 2009 between the cheapest and dearest for a basket of 68 items.

On the basket of 87 common products surveyed across Tesco, Dunnes Stores, Superquinn and two SuperValu stores, the total difference between the cheapest and most expensive was €5.75, or 2.4 per cent.

“The results show that while grocery prices have dropped across the board over the past 18 months, there is evidence that the most powerful retailers in the State . . . are still price matching in core branded items to a significant degree, albeit at much lower levels than in 2007 and 2008,” Ms Fitzgerald said.

“This suggests that competitive pricing is still not a feature of the Irish grocery market, and to address this there is a real need for a new entrant to the market.”

The survey shows that retailers are now competing mainly on the basis of special offers and promotions and by juggling frequent but small price changes on individual items. Ms Fitzgerald said consumers would prefer to see sustained price cuts, rather than two-for-one offers on items that end up in the bin.