The consolidation in the Irish retail sector has taken another step with the decision by Tesco to centralise distribution of its non-food and non-chilled grocery products at a centre in Ballymount in west Dublin that will be operated by the British group, Exel Logistics.
This is the first stage of a three-stage process which will see all of Tesco's products being distributed from three dedicated centres - the non-food and ambient grocery centre in Ballymount; fast-moving groceries from a facility in Tallaght and chilled/frozen goods from a new facility for which Tesco has already sought tenders.
It is understood that Dunnes Stores is currently considering a similar move to centralise its distribution and may seek tenders from distribution operators shortly. Musgraves is currently establishing its own dedicated chilled foods warehouse and distribution centre in Lucan, Co Dublin and a separate chilled and fresh food warehouse in Cork.
To establish its centre for the Tesco business, Exel has paid £2.3 million (€2.92 billion) for Sydney Cooper Distribution, the company that until last year handled substantial portions of Dunnes Stores' non-food distribution. The loss of the Dunnes contract almost led to the closure of Sydney Cooper, but the take-over by Exel and the contract from Tesco to supply all its 76 stores has secured Sydney Cooper's future.
From this month on, all non-food items and slow-moving grocery lines such as baby food and toiletries will, in phases, be delivered to Tesco stores from the Ballymount centre. This will be fully operational by early next year and will handle 11 million cases of goods a year. It will be followed by a £3 million refurbishment of the Tallaght centre for distribution of fast-moving groceries such as tea, coffee and bread.
A spokesman for Tesco said that the tenders for the chilled/ frozen foods centre may mean either the construction of a new centre or use of an existing facility operated by one of the distribution companies. A decision on this will be made before the end of the year.
The spokesman said that this will streamline Tesco's distribution operations. "Instead of 150 trucks and vans from various suppliers calling daily to a store like Tallaght, suppliers will instead deliver to the distribution centres and the stores will then get just three deliveries a day from each of the three distribution centres."
It is expected that the restructuring of Tesco's supply chain to three dedicated distribution centres will be completed within three years.
The purchase of Sydney Cooper Distribution and the Tesco contract is Exel's first move into food distribution in Ireland. Exel, owned by the British group NFC, has operated in Ireland since 1989 in the consumer and petro-chemcial sectors. Last year, it expanded its operations into the electronics sector when it paid an initial £9.5 million sterling for Walsh Western Logistics, with a further £10.5 million due in deferred profits-related payments.
