Anyone who is familiar with Tesco’s progress in the UK will be aware that the supermarket giant is used to posting pretty impressive results.
So it came as no surprise when the retailer announced in April last year that annual sales in the Irish Republic had topped E2bn for the first time in the 12 months to February 28, 2004, up 11.9% - or E227m in real terms.
Most alarming of all for rivals was that Tesco attributed the growth to its self-proclaimed policy of “consistently lowering prices” across its range of food and non food products, even before the Irish government’s decision to scrap the Groceries Order had been delivered. In the past year alone, it has invested E40m in slashing prices.
Its rate of growth certainly shows no signs of abating. At the latest count, the company now operates 92 stores in Ireland, including one Extra hypermarket, 58 supermarkets, 28 superstores and five Express convenience outlets, as well as a near-nationwide online shopping service.
It also added 860 more workers to its payroll last year, taking the total number of its employees in Ireland to more than 11,800.
Add to that the usual Tesco mix of a burgeoning non food offer, plans for further stores and a Personal Finance business that saw the number of Tesco credit cards issued to Irish consumers rocket by 50% to 20,000 - and it’s easy to see why the blue-and-white-striped warrior is tipped to clean up even further in a business climate where smaller rivals will soon no longer even get the minimal protection offered by the Groceries Order.
“Tesco’s progress has been frightening,” admits one competitor, pointing to the fact that all this has been achieved since its arrival in Ireland in 1997.
Another adds: “Now we’re just waiting for Tesco to massacre the market in Ireland in the same way it effectively has in the United Kingdom.” Not surprisingly, Dermot Breen, Tesco’s director of corporate affairs, disagrees with the doomsayers, pointing to the positives that the company believes it has brought to the market.
These include being the biggest single purchaser of Irish produce in the market, worth almost E1.1bn at the till, as well as adding E420m to its checkouts in the UK through food and drink sourced from the Emerald Isle.
Of particular value has been the own label business that Tesco has brought to Irish manufacturers in a market where own label products at its rivals would typically account for less than 20% of turnover.
Such endeavours led to Irish Taoiseach Bertie Ahern issuing what amounted to a ‘well done’ plaudit to Tesco in 2002 for what the retailer had done for Irish producers.
To this extent, Breen claims that worthy competitors will have nothing to fear from Tesco after the abolition of the Groceries Order, although it was notable that the retail giant relatively took a back seat during last year’s raging debate over the order as others pushed themselves to the front to defend the legislation.
“It has taken a long time to resolve, but we think it is a good thing for consumers,” says Breen. “We have already been in the business of bringing down prices for a number of years and this will help us to do that on a broader basis now.”
It remains to be seen whether consumers waiting for a super round of price cutting from Ireland’s major retailers will be disappointed or not, although Breen refuses to be drawn on Tesco’s price plans after the death of the order.
But, like some of its competitors, Tesco has pointed to the high costs associated with doing business in Ireland, although it has also made much of the fact that it claims to be cheaper than any of its rivals. In its submissions to the Department of Enterprise Trade and Employment in a debate over grocery prices in Ireland at the end of 2004, Tesco claimed it was 2% cheaper than Dunnes, 5% cheaper than SuperValu and 7% to 8% better value than Superquinn. It said its prices were up to 4% lower than even Lidl or Aldi.
“That is our strategy and we will always compete on price,” says Breen. “That is core Tesco philosophy.”
Despite the candour, Breen insists that Tesco will continue to not disclose its retail profits in Ireland, as none of the other major retailers disclose theirs.
In the meantime, he says, Tesco will simply continue to do what it does best - rolling out new stores and new offers for customers, although probably not at the same rate of expansion as in the UK because it doesn’t have anywhere near the same sort of land bank available.
Even so, in the past financial year, Tesco added some 200,000 sq ft of floorspace - the equivalent of six supermarkets - while, during the latest year, it is likely to add only about 110,000 sq ft.
Tesco’s progress is such that the critics who claimed Irish consumers would never accept the British giant have been proved more than wrong. It has consolidated its position at the top of the Irish retail ladder with a roll-out programme of 24-hour opening that now covers no fewer than 42 stores nationwide.
And it remains committed to expanding its modest Express network, although Breen insists that the roll-out of these fascias will be nowhere near the current one-a-week opening of the format in the UK.
With regard to the Irish retailing landscape following the abolition of the Groceries Order, Breen adds: “No one can be certain what is going to happen. It is a question of waiting and seeing how things turn out.”