Business Opinion: This week sees the start of public hearings into the price of food. Tesco, Superquinn, but not Dunnes Stores, are to appear by agreement in front of the Dáil Committee on Enterprise and Small Business to explain why they think food prices in the Republic are amongst the highest, if not the highest, in Europe. They will be followed at a later date by Lidl, Aldi and Marks & Spencer.
If previous committee hearings, such as those into practices in the insurance and banking industries, are anything to go by, we can look forward to the usual feast of grandstanding politicians and dissembling executives. The prospect of straight questions being followed by straight answers is remote in the extreme.
But, that said, the issue is a very simple one. It is why the price of a basket of groceries in the Republic is up to 25 per cent more expensive than the same basket in the North, often in branches of the same supermarket or convenience store chain.
Anyone wanting to understand this question would be interested in a recent study on the convenience retail sector from market research company Mintel, released last week. Two if its findings are particularly interesting.
The first is that a higher proportion of convenience shoppers in the North are from lower socio-economic groups, while in the Republic they are more likely to come from the ABC category.
The second finding is that almost two-thirds of the respondents surveyed in the North visited a supermarket or discounter once a week, while in the Republic the figure was closer to half.
The survey would seem to confirm that consumers in the North are more value-conscious and will try and shop in cheaper outlets. Convenience shopping would appear to be the preserve of those who cannot access cheaper shops, primarily one suspects because they don't have a car .
In the Republic something very different is going on. The middle classes seem much more willing to shop in convenience stores and pay the premiums they charge, the reasons being a mixture of trends identified by Mintel such as longer working hours, more mothers working full time, longer commuting times and less free time generally.
The shorthand for all this is the Celtic Tiger and it has resulted in a massive explosion in the convenience sector in the Republic, with the two main players - BWG's Spar franchise and Musgrave's Centra chain - embarked on very ambitious expansion plans, with hundreds of stores due to open over the next few years. The large supermarket chains are also chasing this business with smaller stores.
But all this competition has not resulted in lower prices, and if anything the opposite would appear to be the case. The explanation for this presumably is that the economic and demographic trends that are pushing people towards convenience stores are accelerating faster than the stores can open to cater for them. As a result they can continue to operate at margins consistently in the region of 20 per cent, significantly ahead of European norms.
If you accept all this, then all the chat that we will hear this week about repealing the ban on below-cost selling and limits on the size of out-of-town stores is largely redundant. These two piece of legislation are seen as the main regulatory restrictions preventing a competitive free-for-all that would bring lower prices, but in its wake force a large number of independent retailers to the wall as their margins came under pressure.
Needless to say the big retailers are pretty much in favour of abolishing the Groceries Order, which bans below-cost selling, and repealing the planning guideline that puts a cap on the size of retail outlets.
Ranged against them are the convenience stores and the independent supermarkets.
But if, as it appears, fewer and fewer people have the time to go shopping in supermarkets anymore, then price wars between the multiples will be of little benefit to them. Equally, they are unlikely to drive for 45 minutes to an out-of-town hyper market to save €20 on the weekly groceries.
In fact, the Mintel research would also call into question the validity of the solution suggested by the Tánaiste, Mary Harney, in her previous life as Enterprise, Trade and Employment Minister.
She, along with many others, has argued that what is really needed is a reawakening of consumer awareness. In an effort to bring this about she set up the consumer strategy group, which is due to report back to her successor, Micheál Martin, towards the end of the year.
Now it appears that all that will be achieved by raising consumer awareness is to make the time-poor new rich of the Republic even more stressed out and miserable. Not only will we continue to be ripped off, we will know we are being ripped off.
