Supermarket price war: retailers to ‘come out fighting’ after Tesco’s pledge to cut more than 700 grocery items

Ireland’s leading supermarkets are likely to follow Tesco’s lead in reducing the price of hundreds of products or risk losing market share, a retail analyst has suggested.

Tesco said it has cut the price of more than 700 products with the price cuts averaging 10 per cent and including both own-brand products and branded products covering grocery staples as well as household and health and beauty products.

A 10 per cent cut in the cost of a weekly shop would amount to savings of more than €500 when spread out over the course of a year and if it is replicated by Dunnes Stores, SuperValu, Lidl and Aldi, it could have a significant impact on household budgets as well as pushing food inflation lower.

Tesco Ireland’s commercial director Joe Manning said the discounts were applied to “a hugely diverse range of items including grocery staples [and] household products”.

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He added that the retailer has been working “very closely with our suppliers to manage their input inflation and their cost price pressures. As our costs are reducing from our suppliers, we are now able to pass those savings on to our customers.”

In response a Lidl spokeswoman noted that “the vast majority of products reduced are predominantly national brands which Lidl does not carry or carries cheaper own-brand options”.

She said that of the private label products reduced by Tesco, “the vast majority are still more expensive than Lidl everyday prices”.

She added that the discounter carries out weekly price checks on Lidl products versus competitors and “we are confident that we will continue to be significantly cheaper than other retailers”.

Minister for Finance Michael McGrath said on RTÉ Morning Ireland that the cuts are “very good news for consumers”.

[ Grocery prices stay high despite price cut in small number of staples ]

“Everybody has seen the really significant spike in prices over the last 18 months or so. So it could be a significant turning point in relation to grocery prices for consumers,” he said.

Damian O’Reilly of TU Dublin said that he had been unsurprised by the move as input costs have been falling for months.

“Other retailers may not be that far advanced in their negotiations with suppliers in the same way as Tesco was but I think that they will have to come out fighting to keep their market share,” he told The Irish Times.

“Somebody was going to do it and Tesco got there first and they got in well ahead of the opposition.”

He said the move was unsurprising “because there’s a lag of up to six months between a fall in input costs and in prices on supermarket shelves. This is not rocket science and if it takes six months to produce beans or whatever, they will have known months ago what the price was going to be today.”

Mr O’Reilly said the price falls were on about 20 per cent of their products and he said it was “good news for consumers”.

The president of the Irish Creamery Milk Suppliers Association, Pat McCormack, said that both farmers and all those who profess themselves to be alarmed by the current climate crisis would be “entitled to wonder whether all these hundreds of reductions have been sustainability-tested”.

He said that “as usual the price of food was deemed to be a matter for the supermarkets alone with no place or room for the longer-term considerations of sustainability and environmental consequences”.

Mr McCormack said it was time “to ask publicly why sustainability was to be the governing principle for farmers in rural Ireland, but a matter of choice or public relations for the corporate retailers – the most powerful link in the food-supply chain?

The Labour Party’s Enterprise spokesman Ged Nash said the move by “ultra-profitable Tesco was proof of “what we in Labour have been saying all along - that the supermarkets have been price gouging and taking excessive profits and there was room to reduce prices. Government should have been stronger on this.”

He said that while any move to cut prices for customers was welcome “shoppers across the country have been fleeced by large and secretive supermarket chains for far too long.”

Mr Nash said that “as sure as night follows day, other retailers will soon fall in line” and questioned why “did it have to take sustained political pressure from the Opposition and an outcry from shoppers to make this happen?”

His comments were echoed by Sinn Féin’s Enterprise spokeswoman Louise O’Reilly who said the reduction in the price of food items by Tesco indicated that “more could always have been done by supermarkets to help customers in the face of runaway inflation”.

“Price reductions are to be welcomed, but the newfound will of supermarkets to reduce food price items has been driven by public pressure,” she said. “At the beginning of March, the European Central Bank highlighted that corporate profiteering was contributing to price rises as firms used inflation as an excuse to increase profit margins. This is an unacceptable situation which needs to be gotten to the bottom of, and it is only through transparency this can be achieved,” she added. She said it was “essential that we know where profiteering is happening in order to devise appropriate and meaningful solutions that will benefit consumers without having a destabilising effect.”

At the end of May, new figures from retail analysts Kantar showed the cost of a basket of groceries was 16.5 per cent higher than it was at the same time last year. Although the rate of inflation last month was down, according to the data, the fall is only fractional – at 0.1 per cent.

The five leading supermarkets in the State recently reduced the price of their own-brand two-litre containers of milk, 454g packs of butter and 800g sliced pans by 10 cent, 40 cent and 10 cent respectively.

However, the move by Tesco goes a step further, with the average price decrease of 10 per cent, on a range of Tesco own-brand products including grocery staples, household, health and beauty products.

Some of the products that will see reductions are the Tesco sweet potato oven chips, the cost of which will be reduced from €3.30 to €2.19, Tesco Finest Balsamic Vinegar will drop from €5.50 to €3.32, a reduction of €2.18.

Other items included in the price cuts is the 1kg bag Flahavans Progress Oats, which will drop from €2.49 and €1.25, and the 252g Tesco Stone Baked Margarita pizza, which will decrease from €2.50 to €2.00.

Supermarkets were urged by the Government to reduce grocery prices during a meeting of the retail forum, a group of Government officials and industry representatives, in early May.