Samantha McCaughren: 'Tesco feels the squeeze of polarised grocery market'
The topline figures for the Irish grocery market for Christmas 2018 painted a very upbeat picture for supermarkets. According to Kantar Worldpanel, the grocery market grew by a healthy 3pc over the 12 weeks to December 30, with the research firm hailing it as "a record festive period" for retailers.
But few grocery retailers were patting themselves for a job well done.
While the so-called multiples are not facing quite the same woes as grocers on the beleaguered British high street, the market here is extremely competitive.
The Competition and Consumer Protection Commission (CCPC) recently published a detailed analysis of the degree of local competition facing upmarket food chain Donnybrook Fair before it cleared its acquisition by SuperValu and Centra owner Musgrave.
It found that within a 10-minute drive of Donnybrook Fair on Baggot Street in Dublin city centre there are almost 300 rival outlets. That includes 24 Centra stores, 22 Tescos, 58 Spar stores, 116 independent stores and three Marks and Spencer outlets. There are also 12 discounters within that distance.
It might be expected that a city centre store would have a huge number of alternatives on its doorstep, but competition is intense in other parts of the city, according to the CCPC tally.
There are 136 outlets within a 10 minutes drive of the Stillorgan Donnybrook Fair outlet.
Dozens of those competitors are small independent operators but well over half are outlets owned by large chains such as Dunnes.
The competition was less intense in locations such as Malahide and Greystones, which is to be expected given the less densely populated nature of these stores' catchment areas.
But nonetheless, the CCPC research is a clear illustration of the cut throat nature of the Irish grocery scene.
Over in the UK, much attention was given to the announcement from Tesco last week that it will cut 9,000 jobs and ditch meat and cheese counters in dozens of stores. The retail giant said it was adapting to changing habits which mean fewer people are doing a big weekly shop.
Tesco said it does not plan to make any significant changes to bakeries this year.
However, Clive Black of Shore Capital said while such clarification might offer some relief to Tesco's bakery teams, it does not give any assurances on bakeries in future years.
He believes that taking out speciality counters may cause ripples around the wider market which may benefit supermarkets with a strong commitment to counter services.
Morrisons and independent grocers came to mind in the UK - in Ireland Dunnes Stores with its ever more Epicurian counters would no doubt get a boost, as might SuperValu which is also moving up the value chain.
Black believes that the main focus of Tesco's immediate efforts are in the UK, not Ireland, "not least because Tesco has many more large stores with more extensive counter arrangements than is the case in much of Ireland.
"But perhaps it is inevitable that an increasingly pared-back Tesco is on its way," he added. The company has not yet commented on any plans for Ireland, but stepping back from fresh counters would be quite a bold move for the company which has to carry out a delicate balancing act in Ireland.
The market share pattern in the UK is quite different from Ireland.
In the UK, Tesco commands 27.8pc of the grocery market, while Aldi has 7.4pc and Lidl has 5.4pc. In Ireland, Tesco's position is weaker with a 22.3pc share, while Aldi has 10.8pc and Lidl has 10.5pc.
In Ireland, Tesco had a flat Christmas, while Dunnes and the discounters claimed the stand-out performances.
Aldi and Lidl continue to own the value side of the market.
Dunnes has marked itself out by bringing more specialised food into its stores with the likes of Sheridan's cheese and James Whelan Butchers providing high quality counter expertise.
In an increasingly polarised grocery market, will a pared back Tesco find itself in the squeezed middle?
Goodbody shareholder Fexco is unlikely to let the idea of an exit from the business slip away too easily. But now that a deal to sell the business to Chinese investors has fallen through, there are no obvious buyers for Goodbody at the moment - and certainly not at the €150m price tag previously agreed.
As reported in these pages last week, a dividend might go some way to appeasing staff and management that had mentally banked the Chinese windfall.
But, as the financial whizzes at Goodbody know all too well, the tax implications for dividends are quite different from the capital gains tax that would have been liable under the sale of the business.
A sale would still be a preferred option for the shareholders.
In any case, Davy certainly jumped the gun with its new advertising campaign which recently proclaimed that the firm remained the country's only Irish-owned broker.
Sunday Indo Business