Groceries down 14pc but retailer price war cooling
Published 11/08/2010 | 05:00
'Competitive pricing is still not a feature of the Irish grocery market'
CONSUMERS are paying 14pc less for some groceries than they were 18 months ago -- but a government agency says prices could be even lower.
A study has shown shopping around for branded goods doesn't pay off as the big three supermarket groups charge almost identical prices.
The National Consumer Agency (NCA) found a difference of just 0.4pc between Tesco, Dunnes and Superquinn on the price of best-selling goods, such as Kelloggs Cornflakes, Brennans Bread and Coca Cola.
It also found while prices for these items had dropped 14pc since January 2009, most of the price cuts happened early last year. NCA chief executive Ann Fitzgerald said this suggested the grocery price war was over.
"We are concerned that the competition we saw last year is disappearing," she said.
Ms Fitzgerald warned supermarkets not to jump on the bandwagon of grain shortages in Russia to hike prices over the coming months.
"What we would not want to see is retailers protecting their margin and using things like grain shortages to continue to drive up prices," she said.
"That's always the danger -- that they cotton on to an excuse that may not be valid and use it to drive up prices."
Ms Fitzgerald warned that consumers would not get real competition on price until the Government took action to attract a new player to the Irish grocery market by removing arbitrary planning restrictions.
She said the State should remove a cap on store sizes, which deters larger chains -- such as Asda and Costco -- from opening up in Ireland.
Ms Fitzgerald also said the Government should give local consumers a say when planning permission was being sought for new stores.
"Competitive pricing is still not a feature of the Irish grocery market and there is a real need for a new entrant to the market to offer consumers a real alternative," she said.
While the survey found a dramatic increase in the number of special offers by supermarkets, research also showed that 80pc of consumers would prefer to see long-term lower prices, rather than cherrypicked special offers.
However, Ms Fitzgerald said that it still paid to shop around because there was real competition in the own-brand sector, driven by Aldi and Lidl.
The NCA had not surveyed these, as in the past it had run into difficulties with retailers about comparisons between own-brand products.
However, it would adopt a "much more sophisticated approach" in future and carry out unannounced price surveys of own-brand goods and of particular sectors, such as dairy foods and baby products.
Fine Gael's agriculture spokesman Andrew Doyle said the survey revealed the dominance of a small number of players offering marginal price differences. "It is quite clear from the level of price matching that despite the phoney price war waged by supermarkets, their pricing structure more closely resembles that of a cartel than a properly competitive market," he said.
It was difficult to believe supermarkets had taken the hit on the 14pc drop shown and the veil of secrecy over their profits meant there was no transparency for consumers, Mr Doyle added.
However, Retail Ireland, the IBEC division representing retailers, reacted angrily to the call for greater competition.
"It stands logic on its head to highlight a 14pc price fall over the last 18 months and then suggest that there is a lack of competition in the market," said its director, Torlach Denihan.
"How can a state agency complain after we have experienced the largest price falls in the eurozone? This smacks of an agency struggling to justify its existence."
And RGDATA (Retail, Grocery, Dairy and Allied Trades Association), which represents smaller grocery stores attacked the survey as "fatally flawed" because it concentrated on a limited number of products and retailers.
"The survey is selective and not comprehensive and cannot be used as a basis to justify statements about the state of the market in Ireland," said its president John Foy.
The survey shows a basket of 103 branded items cost €279.62 in Dunnes, €280.69 in Tesco and €280.76 in Superquinn, a difference of just €1.14 or 0.4pc. The price gap has narrowed from 4pc a year ago.
Eurostat figures show that Irish food prices -- including branded and unbranded products -- fell by 8.4pc in the past 18 months, compared with an increase of 0.5pc in the rest of the EU.
But as the second most expensive country in Europe for food, Irish prices were starting from a much higher point.