Tesco price shift draws mixed reactions
Tesco Ireland's announcement of its new price structure, following its distribution switch, has drawn anger from suppliers but delight from consumers
19 May 2009
Last month Tesco Ireland caused controversy when it announced it was moving its international purchasing to the UK in a bid to bring down prices.
A source close to Tesco told ShelfLife at the time that the company’s pricing model, “format, layout, equipment, and ranges” will be allied more closely with the UK, and that the impact on the industry as a whole in Ireland will be “massive” when it implements its new price scheme.
The source also said that the move would impact “hugely” on Irish-based suppliers, and that “the vast majority” in the industry were already aware of the plans.
On 5 May Tesco announced its new range layout and pricing structure, launching at its border stores. Within the 11 stores the retailer made 12,500 price reductions by an average of 22%, with nationwide reductions on milk, meat and poultry; pricing Irish whole chicken at €2.49/Kg, Irish fillet steak at €27.49/Kg, and Irish fresh milk at €1.53/2L.
Dunnes Stores and Lidl have each responded with retaliatory campaigns, the latter dropping whole chicken under the St Bernard brand to €2.45/Kg, Irish fillet steak to €25.29/Kg, and Irish fresh milk to 78c/L.
The IFA has slammed Tesco for launching a supermarket war and for using Irish meat, milk and vegetable suppliers “as cannon fodder.” It criticised the retailer for squeezing producers and processors at a time when they are already “forced to produce at below the cost of production.” Reports claim that Tesco is demanding price reductions of 20% from Irish suppliers.
Shane Dempsey of FDII said that his members have reported a reduction of space and prominence on shelf of up to 65% at Tesco since it made the switch. According to Dempsey Irish retailers do not believe Irish suppliers “have the reserves” to compete with Tesco’s new cheaper ranges and that “jobs will be lost in the retail and supply sectors.”
Tesco has said so far customer reaction has been “excellent” and that their perception of availability of “favourite Irish brands” has been “very positive” also.