In Ireland last month, data revealed that inflation rates were running at a 15-year-high of 6.2%, placing intense pressure on the Irish government to introduce price dampening measures and apparently prompting a price war amongst the food stores which erupted this week.
Maurice Pratt, Tesco Ireland Managing Director, commented: “The price cuts are in a series of reductions right across the economy which should result in a much needed turnaround in inflation rates. Inflation is not solely a government responsibility. It is not good enough that everyone should wait for a government move on Ireland’s most pressing economic problem.”
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Tesco first entered the Irish market in 1997 and now controls 75 stores, in which the prices of 52 products have been reduced by up to 37%; two litres of milk now cost 86p from £1.09 and a 1.2-kilo chicken costs £2.24, down 36% on the previous retail price.
Before Tesco is attributed with a philanthropic gesture towards the consumer however, the motives of the food giant have received sceptical attention from food experts. The company was shamed by a recent survey which revealed that prices are higher in Ireland than in England, and that shoppers in Dublin paid up to 60% more than their counterparts in Belfast and London. Michael Kilcoyne, chairman of the Irish Consumers Association, commented: “I’m wondering if Tesco can reduce prices now, why couldn’t they have done it before and saved families even more money?”
He also queries whether the supermarkets are taking the hit on their profit margins or forcing down those of the producers: “It would be bad for everyone if Irish producers were put to the wall because of this.”
It is possible that the sole motive for the price cuts was to put pressure on the other food superstores in Ireland. Food is big business there, accounting for almost 23% of Ireland’s Consumer Price Index.
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By GlobalDataDunnes Stores responded immediately by matching prices on Tesco’s staples and tripling the loyalty card points available for the rest of the week. This privately owned Irish company is facing its own battle meanwhile against the German food giant Aldi, which opened the first of its Irish superstores at the end of last year, and is now providing extremely competitive prices for consumers in Cork and Dublin. Its plans to open stores throughout the country threaten the long-term future of Dunnes which, despite slashing some prices by 50% earlier this year, cannot compete with the might of the Aldi chain.
For the time being, however, the competition is heating up. With Tesco insisting that the cuts represent a fundamental repositioning of prices and pre-empt further reductions, and with the Government believed to be considering a repeal of the Groceries Order, which bans the low cost selling of groceries, things can only get better for the cash-strapped consumer.
