In the papers this week 13 – 19 Feb 2010

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MEP calls for EU inquiry into Tesco supplier charges; Children used as 'cigarette mules'; Fall in circulation for all of Republic's daily newspapers



19 February 2010

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Following the Irish Times report earlier this week on Tesco’s demands for six-figured ‘pay to play’ money, Labour MEP Alan Kelly has said he wants an EU inquiry to investigate the charges. He intends to write to the incoming European commissioner for competition, Joaquín Almunia, to ask him to “launch an investigation into the behaviour of supermarket multiples and the effects of their behaviour on both producers and consumer choice”. The paper also reported the findings of ShelfLife’s supplier survey – the full results of which can be read here.

Tesco has been telling individual suppliers they must pay up to €500,000 to have a presence in its 119 stores around the country, The Irish Times’ consumer affairs correspondent Paul Cullen reported at the start of this week. Suppliers told the paper that although other large retailers made demands of a similar nature, that those made by Tesco are much bigger in scale and breadth. Tesco responded that “normal negotiations are under way with a range of suppliers”. However, economist Jim Power subsequently called on the Competition Authority to investigate.

Shoppers are paying up to five times the price of basic foodstuffs, with, for example, a tonne of potatoes retailing at up to €1,600 even though growers get just €360 per tonne. A Fine Gael survey of 30 vegetable growers supplying Ireland’s major supermarket chains also found suppliers are being asked to hand over "Christmas money" to buyers and foot the bill for special offers through extra payments from 10% to 30%. The Irish Independent reports suppliers must also give rebates of 2.5% to 5% after every monthly payment and bear the cost of last-minute cancellation.

National Consumer Agency (NCA) chief executive Ann Fitzgerald endorsed the introduction of a grocery code of practice in the Irish Independent this week. She argues that “suppliers should not have costs imposed on them unexpectedly or unfairly by retailers.” However the agency head also states: “This is very different to a protectionist stance, which does damage consumers, and is a mechanism to equalise the relationship between businesses to ensure fair play. Consumers will suffer if unfair commercial practices are left unchallenged.”

Lobby group Retailers Against Smuggling has said children are being used as mules by tobacco smuggling gangs to go door-to-door delivering packets of cheap cigarettes in housing estates. Speaking at an Oireachtas Justice Committee meeting, the body told TDs and Senators that leaflets were also being dropped into homes with a mobile number to order deliveries of knock-down cigarettes. National spokesman Benny Gilsenan added that the problem was rampant in the Balbriggan area of Dublin.

Over 1.6 million counterfeit cigarettes and 325 bottles of vodka were seized by officers from Revenue’s Customers Service in Co Louth on Wednesday. The Irish Times reports one person was arrested after the goods with an estimated retail value of €720,000 and potential loss to the exchequer of €603,000, were seized.

All Irish-published daily newspapers and most Sunday newspapers recorded lower circulations during the second half of the year. The Irish Times reports The Sunday World remains the paper with the highest circulation in the Republic, selling an average of 270,453 copies. The ABC report also found has 2.3 million monthly users and the economic challenge for newspapers now, according to The Irish Times MD Maeve Donovan “is to find ways to expand their revenue base and fully take advantage of this rapidly expanding customer base.”   

Nestlé has beaten its targets for 2009. The Irish Independent states the world’s biggest food group – and manufacturer behind Nescafe instant coffee, Maggi soup, Gerber baby food and Perrier water beat – achieved 4.1% growth in underlying sales last year. This put it ahead of rivals Unilever and Danone and and also beating a poll forecast of 3.9% growth. Under the "Nestle model", the group has said it now aims for 5 to 6% underlying growth per year over the long-term.

The Irish Times reports sales of Pernod Ricard’s brands in Ireland have declined. However, the Irish arm of the drinks group, Irish Distillers, said there were some encouraging brand and sector performances in the six-month period ending 31 December 2009. The Jameson brand outperformed the market, while Absolut also grew its sales. The West Coast Cooler brand was a star performer, rising by 91% over the period, as a result of new products.

Supervalu is the favourite contender to replace Toyota as co-sponsor of the All-Ireland senior football championship. The Irish Independent reports the GAA has organised a press conference for Monday morning to announce the new sponsor. The new deals follows the departure of car maker Toyota after two years of a three-year deal which was due to expire at the end of this season’s championships. Toyota were co-sponsors of the football championships with Vodafone and Ulster Bank for the past two seasons – with the cost per company per year believed to stand at €1.5m.

In fact, SuperValu is now the largest advertiser in Ireland, according to an Irish Independent report. The retailer spent €21.3m on press and TV ads last year, followed by Harvey Norman which spent €20.3m. Gilette manufacturer Proctor & Gamble slipped into third place meanwhile – after cutting its ad spend to €19.9m from €24m in 2008.   

A Nigerian king-in-waiting who was fired after he overstayed a Tesco time-off deal for regal duties in his home village has been awarded €10,000 compensation for unfair dismissal. The Irish Independent reports that an Employment Appeals Tribunal found Tesco had failed to "adhere to any of the procedures" when it dismissed Edward Agbaje, of The Sycamores, Edenderry, Co Offaly – including not providing  Agbaje with a representative during his disciplinary hearing.

Greencore’s success in selling off its malt business last week will help the group achieve its ambition towards becoming an international convenience food group, according to The Irish Examiner. The paper reports a successful result for Greencore at a time when production at its Athy plant could be reduced to 60% of capacity this year – French group Axereal has agreed a price of €116.25 million.

Asda has vowed to accelerate openings of smaller stores after its out-of-town outlets were left out in the cold during the freezing winter weather. The Irish Examiner reports the retailer plans to open three small format stores towards the end of March as part of a programme to add 10 stores that will create 6,000 jobs this year. Kantar Worldpanel statistics showed Asda lost market share for the first time in over two years in January, which CE Andy Bond attributed to the weather. “We have far fewer stores than our competitors, so our 18 million customers have to drive a little further to get to us,” he said.

Retailers were heartened by a much-needed St Valentine’s multi-million euro boost last week. The Dublin Chamber of Commerce confirmed in The Irish Independent that Valentine’s week was "significant" for retailers as shops recorded a boost in sales of lingerie, jewellery, cosmetics, flowers – and even cream for the strawberries. Howver ISME’s Mark Fielding cautioned "Anything is welcome but we would need 15 Valentine’s Days in a row to make up for the loss of sales due to the weather in January."   

ISME has claimed that because SMEs are more labour-intensive than other businesses, that they are disproportionately affected by higher labour costs. Chief executive Mark Fielding told The Irish Times: “The percentage of value-added in a multinational is 8% of wages – in other words, 8% of all money spent is on labour costs. For SMEs, the figure is 48%.” However a SFA survey found many small firms reported the most significant price increase when it came to costs, were those that came under a Government remit – with energy costs top of the list.



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