Tesco's "price promise" is the latest in a long line of aggressive strategies rolled out by the company as it seeks to retain its number one slot in the Irish supermarket sweep in the face of an onslaught by Dunnes Stores and German discounters Aldi and Lidl.

This wheeze will see Tesco compare the price of the products you bring to the checkout with "comparable" ones selling in Aldi or Lidl (but not Dunnes Stores or Supervalu – the second and third most popular retailers in the State). If Tesco is dearer, you will get a voucher for the difference.

The price promise will apply to about 1,400 items. Because only Lidl and Aldi are in the mix, the comparisons will be made largely between own-brand items, which form the vast bulk of the German companies’ offering. Tesco reckons it will hand out about 13 million vouchers worth about €1 each over the course of the next 12 months.

It will compare about half a million shopping baskets each week, with up to 60 per cent likely to get a voucher, which will have to be used within 28 days. The maximum amount of vouchers a person can get is €10, while price comparisons at the Tesco Express stores won’t count – because Tesco charges more in those outlets than in its regular stores.

Will the promise work? Tesco is predicting it will have to give vouchers to most of its shoppers, which means that a majority of receipts it hands out over the next year will contain an admission that it is dearer than two key rivals.

This point was leapt on by Aldi, which issued a statement welcoming the “admission by Tesco that it is more expensive”.

Tesco will have anticipated such a move. While it knows that 60 per cent of the receipts it issues over the next 12 months will show that shoppers could have made savings by shopping elsewhere, it will hope that people will look at the savings – a euro here or there – and decide that travelling to an Aldi or Lidl, where there is significantly less stock and few branded products, is not worth the hassle. It has also not pinpointed where the savings were made, so the system is lacking in transparency. And consumers might question the wisdom of getting a voucher for a shop because it is dearer than another shop when they have no choice but to use that voucher in the dearer shop.

Checkout confusion
As promotions go, it is confusing. But Tesco has to do something to recover after a bad few years in the Irish market. While it still has the biggest slice of the supermarket pie, it has seen its market share fall steadily over the past three years, as Aldi and Lidl have grown strongly.

The latest supermarket share figures from retail analysts Kantar Worldpanel were published last week. They showed Tesco's market share declining again. It now has 26.6 per cent of the market, down from 28.6 per cent a year earlier. Even more troubling for the retailer is that it recorded a decline in sales of 6.5 per cent.

Dunnes Stores saw sales grow by 5 per cent, and boosted its market share by 1 point to 23 per cent. Aldi and Lidl both posted impressive growth rates of 23 per cent and 10.3 per cent respectively, although their combined market share of 14.5 per cent has dipped below the record level of 15.1 per cent they achieved in August. SuperValu’s sales remain in line with last year’s performance, with a slight dip in share to 19.5 per cent of the market, while Superquinn’s sales are down 1.8 per cent and its market share down slightly, from 5.3 per cent to 5.2 per cent.

"This is the 12th successive quarter of decline for Tesco, which has lost significant market share to the discounters over the course of the year," says David Berry of Kantar. "Its price promise campaign is clearly aimed at challenging the view that Aldi and Lidl are cheaper, and it will be interesting to see the response from shoppers over the coming months."

He says many of the grocery retailers have been actively targeting shoppers with money-saving vouchers in recent months, and this has led to a change in consumer shopping habits, with shoppers switching from the “little and often” approach to stocking up, making fewer trips, but purchasing more items per shop.

Store wars come and go, but another, potentially more problematic front is likely to open in the months ahead if the Oireachtas Agriculture Committee has its way. Last month, the committee published a major report on the Irish retail sector in which it accused big supermarket chains of displaying a chronic lack of transparency and of engaging in bullying.

It said large multiples and wholesalers were “exerting undue pressure on pricing” on producers, who were being coerced into funding promotions and discounts. Such producers were too afraid to reveal how they were being “squeezed out of the market” in case their products were taken off the shelves by hard-nosed retailers.

The committee’s shopping list is long, and if the Government buys into it, it will give most of the State’s big retailers night terrors. The committee wants a statutory code of conduct for the groceries sector to be implemented without delay, and a new role of supermarket ombudsman to be created. Big retailers will have to outline in writing their buying and supplying terms and conditions, and legislation will be introduced to force the publication of profits and turnovers of the large multiples and large processors.

Staples threatened
All of these moves are consumer-friendly, but some of the committee's ideas are less so. If it gets its way, using staple goods such as milk as a loss leader will be outlawed, while the report also expresses "serious concerns" about the growth of the own-brand sector in recent years. It accepted that own-brand can help drive the price of groceries down, but claimed there is "a dark side to the sector", and that own-brand products "give too much power to the retailer and make it too easy for them to substitute" one supplier for another.

Committee chairman Andrew Doyle denies that any costs associated with the establishment of an office for a grocery ombudsman or moves to ban below-cost selling will lead to higher prices for consumers. "It would be a lot easier to establish who will bear the costs associated with the statutory code if we knew about the big retailer profit margins – and the ombudsman's office does not have to cost a fortune," says Doyle.

When asked why all the big supermarkets in the State keep their profit margins a closely guarded secret, he says: "There was that leaked document which said Ireland was the honey pot for one of the major retailers, so maybe that is behind it."