Fears for Irish suppliers if UK regulators OK Sainsbury deal
Irish brands such as Fruitfield, Kerrygold, Barry's Tea, Jameson and Cheesestrings could find themselves caught in a barrage of price cuts amid intensifying concentration among UK grocery chains.
With Sainbury's, the UK's second-largest grocery chain, having agreed this week to buy Walmart-owned Asda, the UK's third-biggest, retail analysts are predicting a renewed wave of grocery warfare there.
And Food Drink Ireland - a unit of employers' group Ibec that represents the country's food sector - has warned that downward pressure on Irish suppliers is the likely outcome if the deal is approved.
Bord Bia - whose chief executive, Tara McCarthy, met Sainsbury's CEO Mike Coupe in March - said her agency has put in place an action plan following the merger announcement.
"Bord Bia's London office have been following up with the main Irish suppliers affected by the merger," she said. "In addition, Bord Bia, with support from a number of UK-based retail experts, is set to develop a comprehensive risk and opportunity analysis report on behalf of the industry."
Mr Coupe promised this week that prices on everyday products would be slashed by about 10pc if the takeover is approved by the UK's competition watchdog.
The UK accounted for 35pc, or €4.5bn, of Irish food and drink exports last year, according to Bord Bia. A raft of Irish food brands are sold by small and large Irish companies in the UK.
Companies including Kerry Group and Valeo, which own brands such as Cheesestrings and Kelkin respectively, could find themselves in the price-cut firing line.
Valeo sells Kelkin products into both Asda and Sainsbury's, and also sells brands such as its Chef sauce at Asda and Rowse honey at Sainsbury's. Valeo declined to comment.
Apart from its Cheesestrings product, Kerry group also owns the UK's top sausage brand, Richmond and also produces own-label meals for grocery retailers in the UK. Richmond sausages are made in the UK.
Suppliers in the UK have already expressed fears that their margins will be squeezed even further by retailers as the grocery war heats up. Now those fears likely to hit Irish suppliers already bracing for the impact of Brexit.
"A merger between Sainsbury's and Asda would result in substantially increased buying power for the combined entity," said Food Drink Ireland director Paul Kelly. "Downward pricing pressure on suppliers is therefore one of the likely outcomes if the merger is approved."
He said that the deal "adds another layer of uncertainty" to the business environment faced by Irish food and drink exporters to the UK and follows major weakening of sterling in the past 24 months, which makes euro-priced imports from Ireland in the UK increasing expensive. He pointed out that some retailers are increasingly focused on buying domestically sourced products, particularly for meat and dairy.
"It clearly points to the need for Government to take all measures to ensure Irish food and drink exporters remain cost competitive, particularly in areas like insurance, labour and utility charges, in order to maintain hard-won market positions in the UK grocery sector," said Mr Kelly.
Bord Bia said it's liaising with "key contacts" in Sainsbury's and Asda "to help provide feedback to current suppliers".