The price war among the Irish supermarket multiples will not come as good news for many of Ireland's small grocers, but the consumer and Government will welcome yesterday's moves by Tesco and Dunnes Stores.
While Tesco managing director, Mr Maurice Pratt, portrayed its decision to cut the prices of 52 staple grocery items as Tesco's contribution to reducing inflation, trade sources have no doubt that Tesco is more concerned with safeguarding its leading position in the Irish grocery market and the strong gains it has notched up in recent years.
The recent arrival of the German cut-price chains Aldi and Lidl are also factors in Tesco's decision, sources added.
According to recent figures from consultants Taylor Nielsen, Tesco's share of the £5 billion Irish grocery market is 23.4 per cent, a rise of 1.4 percentage points in the past year. Tesco, which entered the Irish market three years when it acquired Quinnsworth/Crazy Prices for £630 million, increased its sales last year by 6 per cent to £1.12 billion. Industry sources believe Tesco's gains have been largely at the expense of Dunnes Stores.
Dunnes has never disclosed its market share or its turnover, but is thought to have sales of about £1 billion and market share, according to Taylor Nielsen, of 22.7 per cent. Dunnes instant response to Tesco's price cuts is seen in the trade as a move by the group to preserve its market share and prevent further "nibbling" by Tesco and the Musgrave-owned SuperValu/Centra chain.
SuperValu/Centra is the third major player in the Irish grocery industry and claims a 25 per cent market share, although this is disputed by some industry sources who believe its share is closer to 21 per cent. Unlike Tesco and Dunnes, which own or lease their stores, the SuperValu and Centra outlets are individually-owned and operated on a franchise basis from Musgrave, where the stores benefit from Musgrave's centralised purchasing and distribution network.
While Senator Feargal Quinn might enjoy a high profile, his Superquinn chain is a relatively minor player in the market with a market share of not much more than 9 per cent, according to Taylor Nielsen. Superquinn's chain of stores is far smaller than Tesco, Dunnes or SuperValu/Centra and is largely centred on greater Dublin and larger towns in Leinster.
Unlike the UK where the market is dominated by a small number of giant multiples such as Sainsbury, Tesco and Wal-Mart/ Asda, the Irish grocery market is far less concentrated. When the owner-operated SuperValu/Centra stores are excluded, the market share of the three big chains - Tesco, Dunnes and Superquinn is less than 55 per cent with "independent" retailers having 45 cent. In contrast, "independents" have no more than 8 per cent of the British market.
For the Government, a protracted price war may take some of the pressure off inflation, currently running at 6.2 per cent and forecast to rise to 7 per cent.
Food products account for almost a quarter of the consumer price index so any reduction in prices will have an impact on inflation and the Government's effort to keep the Programme for Prosperity and Fairness intact.