Irish market has ability to meet Tesco challenge

THE reaction to Tesco's arrival into the Irish market has been interesting. After expressing initial reservations when the news first broke, the company's trade unions appear reassured about its intentions.

Following a meeting with the company's representatives, the Minister for Enterprise and Employment, Richard Bruton, said he was confident about commitments given by Tesco in relation to working with Irish suppliers. But some of these suppliers appear still not to be convinced, and some business lobby groups have expressed fears that business could move from Irish companies to British ones as Tesco replaces Quinnsworth products with its own brands.

No doubt in the years to come some Irish companies will lose out. On the face of it the ones most at risk are distributors, rather than manufacturers. One area where Tesco is likely to try to save money is through bulk purchasing, which in some cases may involve by passing Irish wholesalers. A logical move for the group would be to set up a centralised Irish distribution centre to serve its new acquisitions North and South, to which manufacturers could deliver directly.

But Irish business has no reason to complain about the entrance of the British supermarket giant. After all, we are never slow to welcome a major investment from an overseas multinational into the Republic and major Irish companies have invested heavily abroad. Tesco's acquisition is just one more example of how businesses are increasingly operating across international boundaries. And the signs are that its entrance could also provide many new opportunities for Irish business, as well as increased competition in the market to the benefit of consumers.

Tesco has a good record. As reported on the opposite page, Tesco has operated very successfully in Scotland, where it went out of its way to meet local concerns, after the acquisition of the William Lowe chain of stores. It already spends £500 million annually in the Irish economy. And given that it will be relying on the development of a positive consumer image, it is likely to bend over backwards to meet any reasonable requests from Irish consumers and business.

Company executives have already taken the time to meet a number of business lobby groups and Minister Bruton and discussed all these issues at length. And Tesco will realise that Irish consumers are used to Irish branded products and will thus move slowly to change the range in its Irish stores.

It is now up to businesses here to respond to the opportunities provided by Tesco's arrival. For many it will open doors to supply not only the stores here, but also other parts of the Tesco group which is fast expanding across Europe. Tesco has also committed to discussing developments with existing distributors and wholesalers and discussing how they might fit in with its new plans.

For consumers, the arrival of Tesco also promises yet more competition in what is already a cut throat marketplace. A price war should not be anticipated. Rather, Tesco is likely to concentrate on attracting business through increasing choice, improving service and offering add on products such as loyalty cards and possibly even financial services. And there is no reason why Dunnes Stores and the independent retail chains should not be able to respond to this challenge.

There has been some unease expressed about the volume of British retailers entering the Irish market. But what will happen in the years ahead is simple. If these stores meet customer demand, they will prosper. If not, they fail. The domestically owned retail sector is also strong and there is no reason why it should not be able to rise to the challenge posed by the invaders from across the water.