Price of groceries down 14%

 

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 (NCA).

The price of branded goods fell significantly in the first half of last year but have remained virtually static since, the NCA’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.

NCA 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.

The NCA survey compares 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 for its sample basket. The three stores between them control over 70 per cent of the market.

The cost of this basket was cheapest in Dunnes Stores at €279.62, and most expensive in Superquinn at €280.76. The cost of the basket in Tesco was €280.69. This compares to a price difference of 4 per cent in July 2009 between the cheapest and dearest for a basket with 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, between them controlling 70 per cent of the market, 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 to offer consumers a real alternative.”

The latest 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 that end up in the bin.