by Pádraig Hoare
Wholesale and retail company Musgrave is to “invest heavily” in online grocery shopping as Irish shoppers adjust their shopping habits, its chief executive has said.
Chris Martin was speaking as the Cork-founded company announced profits before tax of €73m for the 2016 financial year.
The SuperValu and Centra brand owner reported sales of €3.7bn, while shareholder funds were €249m at year end.
SuperValu had sales of €2.67bn for 2016, an increase of 2.4% over the previous year. Centra had sales of €1.59bn in 2016, a 3% increase on the previous year’s performance.
Mr Martin said there had been “a clear focus on cost reduction and the delivery of a transformation programme” which began in 2014 to turnaround the business and return to growth following the recession.
He added that the “strong performance” in 2016 was due to investing in its brands and the cost reduction.
The company sees an increase in online food sales as a major opportunity for growth.
“We’re absolutely embracing online shopping. I would say we are leading in many respects. Online is clearly running away in the non-food sector like textiles and electricals. In food it has been different. If you look around the world, the market with the biggest penetration of online is the UK which is around 6-7% of the total grocery spend. In Ireland, we are around 1.5%.
“What we saw last year is that our online grew by about 22%. So far this year, it has grown by around 24%. We’re investing heavily,” he said.
Mr Martin said SuperValu apps, as well as short cooking demonstration videos on social media sites, were proving popular with consumers. Cities like Cork and Dublin would be key for online grocery shopping growth, he said.
“That is all going back to the agenda of how the consumer is changing the way they shop. That is where we see further opportunity above the stores we are opening.
“Digital is absolutely changing the way retailers are talking to the consumer. I don’t think it will grow the same as non-food but it will do so in the major conurbations like Dublin and Cork,” he said.
Mr Martin said SuperValu’s venture into the Chinese market was still just “a toe in the water” and it remained to be seen how much growth was possible.
Musgrave began selling 40 SuperValu own branded goods such as breakfast cereals, coffee, jam, biscuits via China’s biggest online shopping company, Alibaba in March.
He said: “The work with Alibaba is a start and it is early days. It is a building block. We are focused on exports and where it goes to takes time. The reality of it is step by step.
“Clearly you hope there is exponential growth but the key for us is to make sure we get the foundations right, and then give it a springboard for success. It’s low volumes at the moment.”
Musgrave plans come as Ocado boss Tim Steiner said the UK online grocer’s chances of licensing its technology to a US counterpart have been boosted by Amazon’s acquisition of Whole Foods Market.
Mr Steiner, who for years has been talking up the potential for international partnerships, said Ocado is holding conversations with a number of US grocers.
Meanwhile, Irish retail body Retail Excellence said it was calling on the Government to reduce VAT by 3% in Budget 2018, saying it would “protect retailers from the worst excesses of Brexit”.
This article first appeared in the Irish Examiner