Shake up of retail sector likely as UK giant moves in

IT MIGHT be an exaggeration to say that shopping will never be the same again. But Tesco's move into the Irish market will shake up the retail sector, as the British giant moves to develop the group which is already a market leader North and South of the Border.

Competition was already fierce, with Dunnes Stores starting to fight back to reclaim some of the market share grabbed by Quinnsworth and Crazy Prices. But now Ms Margaret Heffernan and her Dunnes management team face a competitor which has displaced. Sainsbury's as number one in Britain, and brings a whole new range of skills and expertise ranging from marketing and the use of technology to the addition of a range of add on products.

Customers can anticipate bigger and better stores, more choice - including a new range of own brand products - loyalty cards like Superquinn and perhaps before long the offer of opening a Tesco bank account or taking a Tesco insurance policy. In Britain, Tesco is also the largest independent petrol retailer and has a chain of in store pharmacies.

Suppliers and employees are naturally concerned, while some politicians decided to wave the green flag and express concern about the UK retail invasion. But transnational investment is now commonplace in retailing, as in many other industries, as businesses seek the size necessary to build profitability. As Mr Don Tidey, Quinnsworth chairman, said yesterday: "It is all about scale" in retailing and there was a certain inevitability that ABF - with no other significant retail operations - would look for a parent such as Tesco for its Irish operations.

The change of ownership from ABF to Tesco is, of course, switching from one British publicly quoted company as owner to another. The difference with Tesco is that, unlike ABF, it is a major retailer, owning 568 stores in six states, before its Irish buy. Under ABF Quinnsworth/Crazy Prices and the Stewarts stores in the North have been run from Ireland, building up local management and developing a network of local suppliers. So what will change under the new owners?

Tesco will tread carefully for two reasons. One is that it will be very conscious of the need to create a positive image of itself in the marketplace. The other reason is that it has probably not yet decided itself exactly what it should do. The deal was concluded in a matter of weeks and concentration has been on its terms. Now Tesco will sit down with Quinnsworth senior management - which remains very much in place - and plot the way forward.

Mr Tidey said the new owner may consider accelerating capital spending - it has committed at least £100 million over the next three years. The retention of the existing management team led by Mr Tidey and managing director Mr Maurice Pratt will also give continuity, besides retaining some control in Dublin, from where the operations in both parts of Ireland have been run.

An important decision will be whether to rename the stores. Tesco managing director, Mr Terry Leahy, said yesterday "it is way too early to reach a decision about the name over the door." As Mr Tidey pointed out, there is nothing to preclude the sale of Tesco own brand products in Quinnsworth/Crazy Prices stores - the key thing the consumer will look for is quality and value. However, a change to the Tesco name would seem a logical move before too long. Tesco is also bound to accelerate the introduction of own brand products - which accounts for half of all sales in its British stores.

But it has gone out of its way to reassure Irish suppliers, pointing to the £500 million it already sources from Irish suppliers such as the Kerry Group, Avonmore and Moy Park.

Inevitably, some of Quinnsworth's existing suppliers will lose business in the years ahead, while others will prosper from the opportunity of selling to the wider Tesco group, which has an annual turnover of £13 billion. Perhaps at greatest risk in the longer term are Irish distribution and wholesale companies, as Tesco is likely to source some group products from international distributors or directly from manufacturers.

Tesco points out that in other markets it has entered, such as Scotland and France, it has growth sales and purchases. It will hope to do the same here.