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Rd. Vortex

Do we really live on a 'treasure island' for the big supermarket chains?

The major players really don’t want to say how much money they’re making from you.

IRELAND HAS A well-earned reputation as “treasure island” for the biggest grocery retailers – a “honey pot” where supermarket chains could make three times the profit on the same goods they sold elsewhere.

But the arrival of more competition in the form of the German discounters has finally put a dent in those windfall profits, according to one industry analyst.

Dr Clive Black, the head of research at UK-based Shore Capital, a leading retail analyst, told that Ireland had historically been a “very soft market” for grocery chains.

In a 2010 report his firm said Ireland was the most profitable market in Europe for Tesco, which then accounted for nearly 30% of the local trade.

As a result of that (soft market), not just Tesco, but a number of supermarket chains enjoyed very high margins in the country,” he said.

The same year, an Oireachtas committee which looked at the sector heard retailers were squeezing suppliers while holding onto profit margins that were three times higher in Ireland than overseas.

Fine Gael TD Andrew Doyle, who led a later investigation into the grocery industry, said at the time it was “no wonder it is said in the UK that Ireland is a ‘treasure island’ for Tesco”.

Oireachtas Agriculture Committees Reports Fine Gael's Andrew Doyle, right Mark Stedman / Photocall Ireland Mark Stedman / Photocall Ireland / Photocall Ireland

No transparency on profits

It remains near-impossible to even gauge how much money the major players are reaping in the domestic market as none as none are required to publish accounts detailing the profits on their Irish grocery business.

That comes despite recommendations from the second government probe into the grocery sector just over a year ago that the grocery giants be forced to announce their take to make the trade more transparent.

It said, among other plans, that “legislation should be introduced to force the publication of profits and turnovers of the large multiples and large processors operating in this country”.

Food and non-alcoholic drink prices in Ireland remain nearly 11% higher than the eurozone average and over 16% more expensive than the UK, the latest Eurostat figures show.

While the committee noted some of the costs of doing business, like wage, rent and utility bills, in Ireland were higher, those factors alone didn’t account for the long-term differences in pricing.

Over the last year the total take for the three dominant chains in Ireland, Tesco, Supervalu and Dunnes Stores, was worth about €6.5 billion out of the estimated €9 billion market, according to Kantar Worldpanel Ireland.

KWP3 Kantar Worldpanel Ireland Kantar Worldpanel Ireland

None would reveal whether they operated on higher profit margins on their billion-euro incomes in the Republic when contacted this week.

Ireland the ‘honey pot’

Doyle told the reason for the high cost of groceries in Ireland was still the “$6 million question”, although he had seen supermarkets referring to the country as the “honey pot” of the global grocery trade.

The best thing that can happen to everyone’s advantage is competition, under rules that everyone will adhere to,” he said.

Draft laws based on the committee report are currently out for consultation, but they don’t include any extra rules for supermarkets to disclose profit margins.

However, according to Black, the long-term trend of windfall profits in Ireland had ”dramatically reversed” in recent years on the back of powerful price competition from newcomers Aldi and Lidl.

He said Tesco, in particular, was suffering and could post a loss in Ireland over the next six months because of a big fall in sales, which have gone down more here on a like-for-like basis than anywhere else in Europe.

Tesco Trolley johnblackmore johnblackmore

But Black said he believed it was more to do with “commercial sensitivities” than worrying about shoppers’ opinion that supermarket chains wanted to keep their regional profit figures secret.

Tesco said it “publishes more information about its financial position than most of our competitors”, while the Musgrave Group, which operates SuperValu outlets, said it was “the only grocery retailer operating in Ireland which publishes its annual accounts each year”.

Dunnes Stores, the only unlimited firm of the major players, which means it doesn’t have to make any of its finances public, didn’t respond at all to questions.

READ: Tesco, SuperValu and Boots stores slapped on the wrist for overcharging >

READ: Thousands of Dunnes staff are only one step away from mass strikes >

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