Tesco vows to combat Northern exodus with price slash

THE country’s largest supermarket chain is set to launch an all-out attack in a bid to stop shoppers heading North, promising to slash prices.

Tesco’s chief executive, Tony Keohane said the supermarket will do its utmost to bring prices in line with those in the North in the coming months.

Mr Keohane refused to rule out a price war among Irish supermarkets saying consumers can expect cheaper products and more discount ranges.

“We are not going to sit back. We feel we are presenting a challenge to Aldi and Lidl with a wider choice for consumers,” he said.

In an internal memo obtained by a British grocery journal, Tesco said it feels cross-border shopping is damaging its brand in the Republic of Ireland.

The memo shows despite having 47 stores in the North, Tesco does not have a strong presence in border towns such as Newry and Enniskillen, where rivals such as Asda have benefited from the influx of southern shoppers.

“We are always disappointed when any customer leaves a store in the community they are in for somewhere else,” said Mr Keohane.

Tesco said cheaper goods, Britain’s lighter VAT regime and the value of sterling was seeing 4% of the Republic’s e12bn retail and grocery trade seep into the North resulting in e500m worth of sales being lost.

Chief executive of the Consumers’ Association of Ireland, Dermot Jewell, said the move to bring prices down is long overdue.

“The reason this is happening is because shoppers are going North and they don’t like it,” he said.

Tesco said sales in Ireland soared 5% to a record e3.1bn in the year to the end of February 2009.

Tesco recently introduced euro/pound price parity for clothing ranges in Ireland, but has all but ruled out offering the same deal on other ranges.

In the year to the end of February, clothing sales soared 45% but demand for alcoholic drinks, household products and flowers all fell.

The value range launched by Tesco earlier this year accounted for 7.5% of sales in the year.

Like-for-like sales in the year, when its 16 new stores are stripped out, show a 4.2% fall in sales.

“It has proved to be a challenging year both for us and our customers, as the economic contraction has affected both customer confidence and spending, particularly in the final quarter of the year,” said Mr Keohane.

Meanwhile, shopper numbers at Irish stores fell more than 4% in the first three months of the year, compared with the same period last year. In March the figure plunged by 8%, according to research from services firm, Experian.

Confirming the exodus of shoppers to the North the figures show numbers there jumped 7% in March compared to last year.