The Irish grocery trade is facing a major shake up with two of Germany's giant discount chains planning to open multiple outlets and Wal-Mart, the world's largest retailer, apparently signalling its interest in taking over Dunnes Stores. Margaret Heffernan of Dunnes Stores refused to be drawn on reports that she has had discussions with Asda, the UK supermarket chain recently taken over by Wal-Mart. Mrs Heffernan said she has discussions all the time with leading retailers and she would be making no comment on the report.
The London-based specialist magazine, Retail Week, reported that Allan Leighton, chief executive of Asda, has already visited Dunnes Stores in Dublin, and has been running the slide rule over the company.
A deal with Wal-Mart would revolutionise the food trade in the Republic, which is dominated by Tesco and Dunnes Stores. Wal-Mart's international success is partially based on its aggressive US-style supermarket pricing. The company's buying power is also seen as a big weapon.
Since moving into the UK last June, it has announced that its Asda chain will be reducing its prices by between 5 and 10 per cent over the next 18 months to match those in Wal-Mart.
The move has already forced Tesco and Sainsbury's to drop their prices. Dunnes Stores has streamlined its operation in recent years, moving upmarket and greatly expanding its stock.
Its operations would dovetail well with Wal-Mart, which specialises not only in food but in clothes and other merchandise. Dunnes's ownership of some of the largest shopping complexes in the country, many of them ranging in size from 75,000 to 110,000 sq ft, would have obvious appeal for the American giant. Dunnes's largest outlets are at Cornelscourt (95,000 sq ft), Blanchardstown (110,000 sq ft); Donaghmede (110,000 sq ft), and Bishopstown, Cork (80,000 sq ft).
It has a considerable number of stores between 70,000 to 75,000 sq ft and plans to open an 80,000 sq ft outlet in the new Swords Shopping Centre next year.
The speculation about WalMart's intentions comes at a time when the German discount chain Lidl is reported to be planning to open over 100 supermarkets in the Republic between now and next summer.
Although Lidl has been actively looking for stand-alone sites in Dublin for almost two years, the company was recently upstaged by its rival, Aldi, when it opened its flagship store at Parnell Street, beside the ILAC centre.
The Aldi store has been almost continuously packed since it opened and last Saturday some shoppers queued for up to an hour before being admitted.
The success of the operation has taken most of the convenience stores by surprise. With both Aldi and Lidl preparing to open a range of outlets in Dublin and other centres, retail experts predict that Spar and Centra franchisees will also be forced to cut prices.
Down the line, the major supermarket chains can also expect to have to trim their prices. The Germans plan to gain a foothold at the bottom end of the food market through heavy discounting on a limited range of own-brand labels.
The two groups operate on a margin of 3 to 4 per cent, as against margins of at least 11 per cent in many supermarkets.
