The Competition Authority has expressed concern about barriers to entry into the Irish wholesale and retail grocery sector and found that over the course of last year the price of products which had been covered by the Groceries Order climbed sharply, in two reports published today.
The first report, into the structure and operation of the retail and wholesale levels of the grocery sector, said that while there had been a doubling of grocery outlets and doubling of floor space since 2001 no new wholesaler-franchisors had entered the sector. It said that "entry on any significant scale seems difficult".
The vast majority of Ireland's grocery sector is controlled by just seven operators with the two largest wholesaler-franchisors, Musgrave and BWG Foods, accounting for almost 80 per cent of the €3.6bn wholesale groceries turnover in 2006 the Authority finds.
It said that while the number of outlets operated by the main retailer groupings had almost doubled since 2001, the number of independent retailers had fallen considerably over the same period reflecting a much longer term trend in the sector.
The Authority said there had been a trend toward the deepening of the relationships between wholesalers and their affiliated retailers such as Centra and Spar which in effect had mimicked the business model of the vertically-integrated retailers including Dunnes Stores, Tesco and Superquinn.
A second report looking at price trends in the retail sector considered the impact of the removal of the Groceries Order by examining the evolution of the aggregate retail grocery price trends since 2001.
Following the Government's decision to abolish the Groceries Order in March
2006, the Competition Authority began a review of the structure of the grocery trade to see how it responded to the new legislative environment.
During the nine month period following the removal of the Groceries Order, the price of products which had been covered by the Groceries Order fell by 1.5 per cent; while the price of non Groceries Order items increased by 2.4 per cent.
Since the beginning of 2007, however, the price trend for Groceries Order items was reversed and toward the end of last year, the rise in the price of Groceries Order items climbed steeply., something which has been attributed to the rise in world commodity prices of certain agricultural products such as wheat.
Up to November 2007 the price of Groceries Order items increased by 5.1 per cent while the price of Non Groceries Order items increased by 1.5 per cent.