Tesco: Rise of a retail giant
THE opening of Tesco’s latest supermarket received little fanfare last month yet the event marked a milestone for business in Ireland.
For the store in Castlepollard, Co Westmeath, was the 100th Tesco supermarket to open in Ireland since the British grocery giant arrived on these shores in 1997.
In the space of just a decade, Tesco has marched in, brushed aside Dunnes Stores, SuperValu and all other rivals, and has become Ireland’s biggest grocer.
“Tesco looked at this country some years ago and put forward a strategy for the long term — and it is now starting to pay them back,” says Dermott Jewell, the chief executive of the Consumers’ Association of Ireland.
“They have a determination to embed their company into the lifestyle of the average consumer — and it is a lot more than grocery Tesco are involved in.”
Earlier this year Tesco launched its own mobile phone service with the 089 code and the industry’s simplest price plan: normal calls cost 20 cent a minute at any time and texts are 9c each.
Just like in Britain, where Tesco is that nation’s biggest retailer with 1,800 stores, the chain is not afraid to take on retailers outside the traditional grocery market.
Today Tesco shelves in Ireland are as likely to stock televisions, computers and clothes as they are baked beans, cereals and fresh fruit.
Shoppers here can also apply for Tesco credit cards, car insurance, life assurance and even loans as the retail giant looks to take on the traditional banks and insurers.
Yet 10 years ago most shoppers in Ireland had never heard of Tesco, which had previously tried to crack the market in Ireland but failed.
But in 1997 Tesco made two crucial decisions:
nThe company snapped up 76 Quinnsworth and Crazy Prices stores in Ireland when Power Supermarkets was put up for sale by its owners Associated British Foods.
nTesco appointed Liverpool-born Terry Leahy as chief executive at the age of just 41.
Under Leahy, whose father is from Sligo and mother from Armagh, the Tesco name has become a familiar sight in streets from Taiwan to Turkey.
In Ireland alone the chain has gone from zero to 100 stores in 10 years — and is opening new supermarkets at the rate of one every five months.
The reason for Tesco’s success in Ireland and elsewhere is simple: the store does what its competitors do but better and more aggressively.
In the space of just a decade this tactic has helped Tesco leapfrog Irish retailers like Dunnes Stores, Superquinn and the Musgrave SuperValu Centra chain to become the nation’s biggest grocer.
And, remarkably, Tesco is also one of the world’s biggest buyers of Irish food and drink — buying more than entire nations like France.
In 2006 Tesco bought €654.8m of Irish food and drink for sales in its stores outside Ireland.
By contrast France, which is Ireland’s second biggest destination for food and drink, bought €606m of Irish produce — some €48.8m short of Tesco.
And in Ireland Tesco sold €832.2m of Irish food and drink in 2006, making a worldwide sales total of €1.93bn in Irish produce alone.
Today shoppers in the 14 countries where Tesco has stores are as familiar with Kerrygold, Guinness, Lir and Bewleys as they are with their own home brands.
Such familiarity and success, though, has caused concern among consumer campaigners in Ireland — and in the company’s backyard in Britain — about what the public and politicians regard as the dominance of Tesco.
In Ireland the company has a 25.9% share of the nation’s €13billion-a-year grocery market with Dunnes in second place at 24.5%, meaning half the market is controlled by just two companies. In Britain the Tesco group has a 31.7% slice of the country’s €128bn grocery market — almost double the 16.6% share of its nearest rival, US-owned family supermarket Asda.
Anyone peering into the future could well come to the conclusion Tesco would like to mirror its British success here and shunt its rivals into the sidings.
With 100 stores already and a new one opening every five months, Tesco’s number of outlets will soon eclipse the 120 operated by rival Dunnes.
Dunnes remains Ireland’s biggest retailer overall by virtue of its sales of clothes and household wares as well as foods — but on grocery sales the chain is second to Tesco.
To date Tesco’s success has also been helped by what Jewell calls thecomplacency of Irish retailers.
Retailers, including supermarkets and petrol stations, sold off land for housing so they could make a quick buck on the back of rising house prices over the past decade or so.
The result is a country with fewer petrol stations at a time when demand for fuel is increasing and stores unable to expand in size to meet rising consumer demand, he says.
No wonder Tesco is proving a hit with shoppers when the supermarket builds petrol stations alongside its new superstores.
Consumers, though, could be forgiven for thinking Tesco’s smaller rivals and Irish suppliers are entirely unhappy about the presence of the retailer from across the Irish Sea.
“Competition is good for the consumer and for the [grocery] trade itself because other stores have to modernise to stay up to date,” says Mark Fielding of small business organisation ISME.
“It is good as long as they [the big supermarkets] don’t get unfair advantage because of their size.”
But Fielding points to the planned IKEA furniture store in Ballymun, Dublin, as an example of how unfair competition can be in the ever-changing retail sector.
“Furniture stores in Ireland have for years had a set of rules saying they cannot be more than a certain amount of square feet in size,” he says.
“But the Government then changes the entire planning guidelines to allow IKEA in: that’s unfair because IKEA now has an advantage over existing stores.”
ISME, which represents 5,000 small businesses in Ireland, knows the might of big retailers like Tesco represents a threat to small traders like the greengrocer.
Although Tesco buys more Irish food and drink than ever before, ISME feels such a giant company could be doing more for the country.
“Imports from the UK are still up, yet Tesco and [fellow British retailer] Marks & Spencer are importing goods we would say could be found locally here,” he says.
If ISME gets its way then British retailers like Tesco could end up stocking more produce from Ireland than even Irish-owned stores.
And when Tesco is already more important than the whole of France as far as Ireland’s food and drink companies are concerned then who’d bet against that milestone being reached before long?
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