TESCO IRELAND is seeking price cuts of up to 20 per cent from Irish suppliers to guarantee their place on the shelves of its newly reconfigured stores.
Industry sources say leading suppliers have been told they will have to drop the prices of the goods they supply to the retail giant if they are to continue to have their brand displayed prominently in its stores.
The new strategy applies initially to 11 Tesco stores near the Border, where the chain this week cut prices by up to 22 per cent.
However, the price cuts, which are being funded by importing branded goods directly from the UK instead of using local distribution channels, are expected to be introduced in the company’s other stores in the coming months.
Sources say Tesco’s demands are likely to cause job losses in a sector already reeling from the effects of the recession and cut-throat competition.
There was no immediate reaction yesterday from Tesco’s retail rivals but its aggressive stance is widely expected to spark another round of a price war.
With Tesco’s shelves increasingly filled with UK imports, it is widely expected that competitors will place renewed stress on their Irish credentials or product base.
Industry newsletter Retail Intelligence yesterday said Irish brand-owners have been told to bring their pricing into line with those of internationally-sourced goods. While Tesco has said its commitment to Irish suppliers remains unchanged, the newsletter claimed the presence of big Irish brands has already been reduced hugely.
It quoted one Irish supplier as saying: “If they bring this in across all their stores I will lose 50 per cent of my business.”
Another claimed he would lose 65 per cent on business for one of his top brands.
“I am either number one or number two in most of the categories my brands are in yet now I get less space than brands that no Irish consumer has ever heard of.”
Two major suppliers contacted by The Irish Timesdeclined to comment publicly, citing the importance of Tesco to their business.
Both pointed out that if their goods were not given a prominent display on Tesco shelves, customers would not be able to find them and sales would inevitably decline.