HOPES of an immediate full scale supermarket price war breaking out following Dick Reeves defection to Dunnes Stores from Quinnsworth may be a little premature. However, consumers can expect that the move will herald a renewed period of intense competition between the supermarket giants in the months ahead.
For Mr Reeves, who has joined Dunnes Stores as director of food and is effectively stepping into the role formerly occupied by Ben Dunne, the question is what strategy to bring to his new employer. And the key question is whether he wants to pursue the price cutting, aggressive approach favoured by Ben Dunne or instead use price as a selective weapon in a move which would see Dunnes move their food stores upmarket. In a complex market, he may well use a combination of competition on price and quality to try to catch up with his former employer.
In deciding on price strategy, Mr Reeves will be mindful that summer is a time when price wars rarely take place, as shoppers' behaviour patterns are interrupted by holidays. In addition a price war, which was not part of any long term strategy, might achieve little.
Industry opinion is divided on how aggressively Mr Reeves will compete on price. Whatever happens, however, price is certain to remain a crucial element of the competitive mix and consumers can hope to benefit from a period of renewed competition led by Mr Reeves in one corner and his successor as Quinnsworth/Crazy Prices managing director, Mr Maurice Pratt, in the other.
Below cost selling legislation rules out a price war on the scale seen in Britain. Irish retailers cannot sell many products at below cost, but they can "loss lead" in areas such as fresh meat and vegetables. In addition, there is nothing to stop them selling 500 lines at cost if they want, according to Mr Michael Campbell, the director general of the independent grocers association RGDATA. He believes that a price war in the autumn is a strong possibility.
Other industry experts are not so sure. Various structural aspects to the Irish retail business mitigate against price wars as effective tactics, believes Dr Tony Parker, the director of the Centre for Retail Studies at UCD.
Consumers here are not as price orientated as their British counterparts, according to Dr Parker. He points to the success of Feargal Quinn's Superquinn chain, which has successfully competed on areas such as service and quality rather than price alone.
It may be that Mr Reeves's will choose the up market route and seek to win back market share at Dunnes in the long term through this type of tactic. Those who know him say that Mr Reeves - a long term thinker in a somewhat short term business - will be looking for ways to build sustained market advantage, rather than achieve a quick fix.
His immediate task is to resolve Dunnes identity crisis. Over the last three years Dunnes, under Margaret Heffernan, has taken its clothing division up market. However, the food division, which is Mr Reeves responsibility, continues to be seen as lowcost rather than high quality. The group's stores throughout Ireland are a mixture of up market and utilitarian.
Mr Reeves tenure at Quinnsworth was characterised by good strategic thinking. The group dealt with the problem of identity by developing the separate Crazy Prices chain. It invested in its stores across the State to try and bring them all to a similar standard.
Until Mr Reeves decides what sectors of the market to target, it will be difficult for Dunnes to develop quality own brands. Mr Reeves has left his successor at Quinnsworth, Maurice Pratt, with the basis of a strong quality own label, Premium Choice, and will be keen to catch up. Over the last few years, Dunnes itself has introduced a number of new own label products such as cola, dog food, cornflakes and washing powder.
In formulating his strategy to take on his old employer, Mr Reeves win also take into account the danger that new enemies may appear. There is nothing that the British supermarket chains, already eyeing the Republic's market would like to see more than Dunnes Stores and Quinnsworth sapping their energy and financial resources in a protracted price war.
Mr Reeves will also have to concentrate on building a new team at Dunnes. However other potential recruits will want to wait and see how Mr Reeves fits into the Dunnes management structure, in which Margaret Heffernan and Frank Dunne both play a hands on role. Few outsiders have penetrated the inner core of the family owned group. Last year, new marketing manager Nigel Reddy left after a few months in the job.
On the other side of the fence, Maurice Pratt's first priority will be to consolidate after his unexpectedly rapid promotion. While the focus may be on Dunnes, Quinnsworth will also plan to regain the initiative. Consumers will hope that lower prices will result as the two combatants go to war.