Grocery giant
Published: 01 February, 2007
Tesco Ireland is the lead player in the Republic's retail grocery market, ahead of Dunnes Stores; but it is experiencing its fastest growth in non-food items. The company's financial year concludes at the end of February and the next set of results will probably show its turnover has shot up to about E2.6bn. Its own brand portfolio accounts for 32 per cent of turnover. It is highly profitable and doesn't have to worry about the Dublin-based Competition Authority, so Ireland is proving a very worthwhile investment.
The company now has 95 stores in the Republic and while it has an ambitious programme of new stores, it won't disclose details for commercial reasons. But it is known to be planning Carton Park in Maynooth, Co Kildare, which will include a fashion and retail park with 34 units and a 6,500 sq m Tesco Extra supermarket, to be one of the largest in the country.
Tesco will also be the anchor at Coonagh Cross shopping centre, under construction in Limerick and due to open late this year or early next year, at a cost of e200m.
Last year, it opened six new stores at Clane (Co Kildare); Clonmel; Edenderry; Nenagh; New Ross and Tipperary town. Major extensions were carried out on Clearwater, Finglas in north Dublin and Killarney, while refurbishments were made on five others.
Another development it will talk about is its new e70m distribution centre at Donabate, north Co Dublin, due to open in April, replacing five existing centres in the Dublin area. Tesco Ireland chief executive Tony Keohane says it will handle all ambient grocery lines, packaged and processed, as well as some non-food products, for all its stores in the Republic. It will employ 600 people, adding to Tesco Ireland's current payroll of more than 13,000 employees.
Tesco came into the Republic's market 10 years ago, when it took over Quinnsworth and its 76 stores as well as Crazy Prices. Early on, it had the wrong effect on many Irish consumers by using marketing techniques straight from its UK operations. Tesco Ireland has since cast off its initial swagger and 'true Brit' image and become much more localised, a key part of its development strategy.
Now, Tesco Ireland claims to be the largest buyer of Irish food in the world, purchasing more than e1.5bn worth of Irish products from suppliers, while exports of Irish food to Tesco in the UK have blossomed to e420m a year.
Tesco Ireland also puts strong reliance on cut prices. It has just completed more than 10,000 price cuts it promised when the Groceries Order was abolished earlier this year. In the mass supermarket part of the market, it is competing not only with Dunnes Stores but with Musgrave in Cork (Centra and Super Valu).
German discounters Aldi and Lidl, having made a big impact in Ireland, are strong competitors, while at the upper end, Tesco has to compete with Marks & Spencer as well as specialised food retailers like Donnybrook Fair in Dublin. Competition is also increasing from the farmers' markets, proliferating across Ireland; even Dundrum Town Centre has one. Its Clubcard and 24-hour opening have also helped boost sales.
Tesco Ireland has developed other offerings, from electrical and clothes, to books and DVDs. Its financial services include car insurance, a credit card, life insurance and loans, while this summer, with O2, it is going to launch a mobile phone service, making Tesco the first virtual mobile operator in Ireland. And it now has eight store-located petrol stations, giving it an estimated five per cent of the retail fuel market.
Tesco has also been developing online sales since 2000, now operating from 17 stores across the country. In 2005/6, the company had online sales of e18.8m.
However, RGDATA director general Tara Buckley points out that when Tesco came into the Irish market, the supermarkets it acquired had a 26 per cent market share. "A decade on and after significant investments, it's still hovering around the same entry market share."
She says Tesco has had limited success breaking into smaller formats and hasn't been able to roll out its superstore model due to the planning regime in Ireland. Buckley adds: "The scale of Tesco presents a challenge, particularly in the pressure it can bring to bear on suppliers, to access terms that others in the market can't get."
But she believes Tesco Ireland is up against an aggressive, competitive and vibrant market, where local retailers are ahead of their game.
