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Tesco sales suffer as Dunnes plays the 'loyalty' card


Tesco's battle to woo Irish shoppers hasn't paid off. Photo: Getty Images

Tesco's battle to woo Irish shoppers hasn't paid off. Photo: Getty Images

Tesco's battle to woo Irish shoppers hasn't paid off. Photo: Getty Images

TESCO'S battle to woo Irish shoppers hasn't paid off -- despite the hundreds of millions spent on price-cutting campaigns.

The supermarket behemoth, headed by Tony Keohane, has seen its share of the grocery market dip over the last year, while its old rival, Dunnes Stores, has gained ground, according to the latest figures from consumer research firm TNS Worldpanel.

The figures, which cover the 12 months running up to June 14 this year, show that Tesco's share of the take-home grocery market has fallen from 26.4 per cent to 25.8 per cent. Margaret Heffernan's Dunnes Stores, meanwhile, increased its share from 23.7 to 24.1 per cent.

Tesco has been unsuccessful fending off the advance of the German discounters either -- the market share of Lidl and Aldi has increased by more than 11 per cent.

Tesco's slump could be explained by its ongoing struggle against the public perception of it as a British retailer. Only one in 20 shoppers believe Tesco is the supermarket that stocks most Irish produced goods, according to a shocking new survey by Empathy Research.

The survey, published by Checkout magazine last week, found that almost half of shoppers believe Dunnes Stores stocks the most Irish produced goods.

"There may be some negative sentiment about Tesco out there," said David Fitzsimons, chief executive of Retail Excellence Ireland.

"Shoppers may feel that Tesco is a big global player rather than an indigenous one. One of the reasons Dunnes is doing well is its 'The difference is we're Irish' tagline."

Although Tesco Ireland said that between 40 and 50 per cent of its sales are Irish products, a recent move by the company to source internationally branded products from its British headquarters outraged Irish suppliers and farmers.

"Instead of buying through Irish distributors, Tesco is buying through its British headquarters," said John Ruddy, editor of Checkout.

"This has led to much criticism of Tesco as some believe it has failed to support the Irish supply chain. Tesco isn't as strong a supporter of Ireland as SuperValu is, but despite this, it is still a big Irish buyer."

A spokesman for Tesco said the supermarket "remains as committed as ever to Irish products".

"All fresh beef and lamb sold in Tesco Ireland stores comes from Irish farms, while all of our fresh milk is produced by Irish dairies," said the spokesman. "When in season, up to 80 per cent of our fresh vegetables are Irish. We are one of the world's biggest supporters of the Irish food and drink industry, purchasing €2bn worth of Irish food products each year."

The spokesman said that the current Tesco campaign -- its nationwide roll-out of price cuts recently introduced in its Border town stores -- is strengthening its market position. Tesco has invested more than €100m on this roll-out -- the same amount spent on its Cash Savers price-cutting campaign last July.

"Tesco claimed the Cash Savers' campaign was successful, but it's gone now and they've since reverted to branding as 'Ireland's biggest discounter'," said Mr Ruddy.

"Cash Savers was a short-term move and it also seemed to cannibalise sales from high- end products. The last thing any retailer wants to do is to give customers too many opportunities to trade down.

"Last autumn, Dunnes got into heavy price discounts based on their Value Club scheme. That really worked and helped to grab market share. Tesco's reaction to that scheme has only really come since last May."

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