A new chain of low-price grocery stores is to be set up in the Republic as part of a deal between the Irish wholesalers, Vantage, and the British company, Costcutter Supermarkets.
Existing retailers will be invited to join the chain, which will use the Costcutter brand name and keep prices down by operating tight margins in "no frills" stores.
They will be based all around the State, but particularly in Dublin, and will be supplied by Vantage which is believed to have paid a "nominal" fee to operate the franchise. There are more than 100 similar outlets already based in Northern Ireland, where price reductions are achieved by using existing shop fittings and carefully managing stock.
The company expects most of the stores to be operated by existing retailers who will pay an annual fee of £1,000, a once-off associate membership fee of £850, plus 1 per cent of annual turnover.
Vantage is 75 per cent owned by the Punch family from Co Cork through a company called Punch Holdings and grew out of the merger of three wholesalers: Garveys based in the north-east, McCarricks based in the Midlands - which retains a 25 per cent stake in Vantage - and the Punch family in the Munster area.
Punch Holdings, which employs 550 people, made pre-tax profits of £2.1 million in 1996, according to accounts filed with the Companies Office, on turnover of £76.9 million. The company says its turnover has increased to £100 million over the last two years.
Costcutter has 727 stores throughout Britain and Northern Ireland and has made dramatic gains in the retail industry since it was set up in 1986 by a former board member of competitors Spar.
The company is believed to have annual turnover of £600 million sterling and has been considering a move into the Republic's market for some time.
While the vast majority of small grocery and convenience stores are part of some retail/wholesale chain, Vantage expects to "poach" retailers from groups such as Supervalu, Spar and ADM Londis.
In recent months, industry reports have said that there have been some tensions within ADM Londis and retailers within the group may be one target for the Vantage group.
The former Dunne Stores accountant, Mr Michael Irwin, was recently appointed as managing director at ADM Londis.
In a separate development, Vantage is believed to have lodged a bid for the entire ADM Londis chain, which is being considered at present.
Retailing sources have said they do not expect the bid to be accepted and this may be why Vantage has decided to sign the deal with Costcutter.
A spokeswoman for Vantage refused to comment on the bid for ADM Londis last night, but the Belfast-based wholesaler, Hendersons, is reported by ShelfLife magazine to have offered to buy the group for about £10 million.
BWG is also reported to have bid for ADM Londis. The status of the Vantage bid is not now clear following the Costcutter deal.
