A new price war between the major supermarkets, including the cutting of bread and milk prices by 20 per cent, has led to concerns that it may threaten the viability of the Republic's dairy farmers.
Tesco Ireland, Superquinn and Dunnes Stores have reduced the price of two litres of milk to 86p from £1.09 and are offering a large white sliced pan for 26p.
In particular, Superquinn's decision to source, for the first time, milk from Northern Ireland to be sold at 86p for two litres, was strongly criticised yesterday by the Irish Creamery Milk Suppliers' Association.
Mr Jackie Cahill, chairman of the ICMSA dairy committee, said that if such prices continued fresh milk could no longer be produced in the Republic. He said dairy farmers were going out of business in large numbers and their situation now mirrored what had happened to small bakeries here some years ago.
"The shops can stand it. It's only one item, but we would be very concerned about such prices. They are below the cost of production. This is bad news for dairy farmers," he said.
Mr Eamon Quinn of Superquinn said the group had tended to steer away from sourcing milk in Northern Ireland out of concern this could reduce consumption in the Republic but it was responding to increased competition in the sale of staples like milk and bread. It would, none the less, continue to sell milk sourced in the Republic.
He agreed the entrance of discount giants Aldi and Lidl into the Irish market had increased competition. Superquinn's reductions represented an average cut of 20 per cent on several products including butter, bananas, round steak and eggs. The reductions were in line with Superquinn's policy of constantly monitoring competitor prices, he added.
Ms Ailish Forde, director general of the grocers' association, RGDATA, said she believed the entry of Aldi and Lidl into the Irish market had contributed to the latest price reductions.
The situation demonstrated the importance of having a watchdog - in the shape of the Groceries Order - to guard against below-cost selling and also showed that, despite some claims to the contrary, there was intense competition in the Irish grocery market, she said.
The Groceries Order was introduced in 1987 after a price war between Dunnes and H. Williams and was intended to protect the independent grocery trade. It is due for renewal next month but the Competition Authority has sought its removal, believing it is anti-competitive. Independent retailers are urging the Minister for Enterprise and Employment, Ms Harney, to retain the measure, arguing its removal will spark a bitter price war.
Ms Forde rejected as a "nonsense" Tesco's claim that the reductions were a measure designed to combat inflation. Food prices were running at 2 per cent below inflation, she said.
She said she found it hard to see how a sliced pan could be sold for 26p and hoped the Director of Consumer Affairs would keep a close eye on the situation.
A spokesman for Dunnes would not comment on the price cuts, but Ms Sara Morris of Tesco Ireland said their price cuts followed the achievement of "internal efficiencies" in its supply and distribution chain. Tesco was passing on these savings to the consumer and there would be no increase in the price of other items to meet the cost of the cuts, she said.
Mr Maurice Pratt of Tesco said the supermarket was taking its own initiative to tackle spiralling inflation. "At Tesco, we don't think it's good enough for everyone to sit back and wait for a Government move on Ireland's most pressing economic problem," he said.
Tesco announced reductions in the price of 52 items.
A spokesman for the Director of Consumer Affairs said there was no evidence of any laws being broken as a result of the latest price cuts.
