In the papers this week 23 – 29 May 2009

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Tesco Ireland attempted to hide new distribution policy; Barry's Tea loses out in new Tesco plan; Northern Foods drops 5% on last year



29 May 2009

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Tesco attempted to hide its new policy of buying directly from UK suppliers, according to The Irish Independent. A leaked internal report stated it was a key objective that this policy should go unnoticed. Tesco’s aim was "to deliver an efficient value chain on key categories, that is invisible to the Irish customer and the UK commercial team, but allows Tesco Ireland to utilise Tesco UK scale."

Moreover two thirds of Tesco’s Irish suppliers strongly believe they will have to let staff go because of this new policy, reports The Irish Examiner. An online survey by Irish International BBDO was sent to 32 senior managers in Irish FMCG companies that supply Tesco. Of 27 respondents, 63% said they strongly agreed that Tesco’s trading and sourcing policy would put jobs under threat at their company and a further 11% agreed.

Meanwhile, Paul Cullen writes in The Irish Times that Tesco Ireland has changed the layout of nine more stores to give more space to UK brands but hasn’t yet passed on lower prices. Apparently supplies of Barry’s tea ran out in the Douglas, Co Cork stores two hours after the new planogram was introduced.

Profits at Northern Foods were down 5% to €55 million in its last financial year, reports The Irish Times. The British-based company which owns Green Isle, the Irish manufacturers of Donegal Catch and Goodfella’s pizzas, reported pre-tax before tax for the 12 months ended March 28th were £47.5 million (€54.8 million), down from £50 million the previous year.

Retailers are leading an upward momentum on European stock markets, reports the Irish Times. Tesco and Royal Ahold, the Dutch owner of Stop Shop supermarkets in the US, where among those who saw shares rise. However Danone dropped 5% after Europe’s biggest maker of baby food said it planned to raise €3 billion in a rights offer.

The Irish Independent reports supermarkets are not passing “massive price drops for basic foodstuffs” on to consumers. New Central Statistics Office (CSO) figures show that prices paid to farmers have dropped by 18% in the last year, yet consumers only saw a 0.6% decrease in food prices.

A new report by PricewaterhouseCoopers shows Irish newspapers have fared better than those elsewhere, in the face of a global reader migration to the web.  Ireland’s “deep rooted, traditional newspaper following" means "the migration from print to online media is not expected to impact the sector to the same extent as other countries," claims PwC.

IFA President Padraig Walshe has pointed to "a massive abuse of market power by retailers,” in The Sligo Champion. “They know full well that at current prices, liquid milk producers are losing 10 cent per litre for every litre they produce. Yet the supermarkets and dairies keep squeezing producers and maintain a tight grip on their own margins," said Walshe

Mobile top-up firm Paypoint has reported a 13% increase in full-year profit driven by strong growth in transaction values, states The Irish Examiner. The British-based cash and internet payment firm, which recently added more terminals in Ireland and Britain, said revenue increased 5.8% to £224.4m.

Department store Marks & Spencer (M&S) saw its Irish like-for-like sales drop 7.7% last year, making it the worst performing part of its international division. One financial analyst accused M&S of fudging the question of how it would have performed if sterling had not dropped so dramatically, in The Sunday Tribune.

Dunnes Stores looks set to revive plans for a central distribution unit, reports The Sunday Tribune. Senior executive Dick Reeves, is said to be heading this project. While Tesco sources believe its facility in Donabate has helped it address the problem of products running out in shops, anecdotal evidence suggests Dunnes suffers this problem.

Sugar prices in London and New York rose this week, reports The Financial Times. India’s domestic sugar production is on course for a record decline this year. As a result, India – the world’s largest sugar consumer – is set to shift from being a sugar exporting nation to a net importer. This expectation has helped drive international raw sugar prices up by a third this year.

Tesco chief executive Sir Terry Leahy scooped a cash and shares bonus of £3.7m last year, boosting his annual pay to more than £5m. After 30 years’ service, including 12 years as chief executive, Leahy has also accrued a pension pot worth £12m. The Guardian also reveals that Tesco directors received an average pay rise of 5.4%, with the executive board amassing a total of £21m in pay and bonuses.

And more than 207,000 employees at Tesco are scooping share bonuses worth a total of £98million after the retailer’s record annual results, The Daily Mail reports. The retail giant said all staff – from checkout workers to store managers – who have worked with the supermarket giant for at least a year by the end of February are eligible for the free shares, offering 3.6%  of salary, up to a maximum of £3,000.

The Daily Mail is concerned that fuel prices could soar after a Saudi Arabian minister said the economy could withstand higher prices. Ahead of a meeting of the Organization of the Petroleum Exporting Countries (Opec), oil minister Ali Al-Naimi said the global economy had strengthened enough to withstand prices as high as $80 a barrel.

It was a case of “last orders” at Ireland’s oldest brewery this week. The Irish Times reports the Beamish brewery on Cork’s South Main Street site since 1690 has pulled down its shutters for the last time. Owners Heineken are move all operations to its Lady’s Well brewery in the city.



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