Tesco price cuts could spark all-out retail war

THE move by supermarket giant Tesco to slash prices could spark a nationwide price war and help stop the flow of shoppers over the border, it has been claimed.

However, food industry leaders and farmers warned that an all-out price war would threaten thousands of jobs among suppliers and distributors.

Tesco prices were cut by up to 25% yesterday morning on thousands of ranges of household goods and groceries at 11 Tesco outlets in border counties.

The move – which the company says cost them €100 million – is expected to be rolled out across the rest of the 116 stores in the Republic.

The company said it will pass on substantial savings by switching to buying in products directly from suppliers, mainly in Britain, and cutting out distributors in Dublin.

Shoppers from the Republic spent €550m in the North last year.

Chief executive of the Consumer Association of Ireland, Dermot Jewell, said it would be “unusual” if other major retailers did not follow Tesco in offering reduced prices in order to compete.

“This is a significant signal and points to quite a level of change in the retail market.

“I think it would be unusual if others did not go down the same route,” he said.

Mr Jewell said he hoped the move would bring more transparency into the pricing structure of major retailers and increase competition in the sector.

“The fact that you will have two brands sitting alongside each other will bring an element of direct competition which will help in these recessionary times,” said Mr Jewell.

In a statement SuperValu said it was committed to providing Irish consumers with the most competitive prices as well as the best value, quality and range of products and services.

“In addition, our SuperValu and Centra retail partners in border areas have been running a promotion to offer the 400 top-selling products to their shoppers at the sterling price equivalent for the past eight weeks,” the statement read.

Dunnes Stores did not respond to enquiries by the Irish Examiner.

Asda welcomed the Tesco move but insisted shoppers from the Republic will still make significant savings by buying groceries in the North.

Tesco Ireland chief executive Tony Keohane said the new prices were “long-term, structural changes” and are not just temporary promotional prices.

He insisted that Irish products familiar to customers would not be taken off the shelves but would remain alongside a new choice of less familiar and cheaper brands.

However, Paul Kelly, director of industry representatives Food and Drink Industry Ireland, said the strategy will threaten homegrown Irish brands.

“We think this is a black day for the Irish food industry,” he said. “We are very concerned at the implications this will have for the availability and range of a lot of well-loved Irish brands.”

Padraig Walshe, president of the Irish Farmers Association, said food producers are being pushed into the frontline of an imminent supermarket war.