THE British supermarket giant, Safeway, and its Irish partner, Fitzwilton, may spend over £250 million over the next five years to build a chain of 20 superstores in the Republic, a move that would further intensify competition in the Irish grocery market.
The arrival of Safeway represents another major retailing investment in Ireland by a British multiple and follows the £630 million takeover of Quinnsworth/Stewarts/Crazy Prices earlier this year by Tesco.
Industry sources believe that the end result would be fierce competition to attract shoppers with the two British giants looking to take market share from the two main Irish supermarket groups, Dunnes Stores and Superquinn as well as the SuperValu stores run by Musgraves.
Ironically, yesterday's deal involves Musgrave buying 21 of the smaller Wellworth stores in Northern Ireland from Fitzwilton for a total of £67 million, although £55 million of this would only be paid when Musgrave exercises an option to buy the Wellworth properties. Until then, Musgrave would lease the stores from Fitzwilton.
Safeway Britain's third largest supermarket group - is setting up a joint venture company with Fitzwilton taking over the 15 biggest Wellworth stores in Northern Ireland as well as four sites in Bangor Cookstown, Downpatrick and Dungannon.
But that £77 million investment by Safeway will be only a precursor to a major expansion programme into the Republic which would see up to 20 stores set up in the major population centres over the next five years. Safeway chairman Mr David Webster would not be drawn on the location of the first stores in the Republic but he hoped the first store would open by the end of 1998.
"We would intend to set up in the major population centres but we will be flexible in the size of store we will set up to fit the various populations," said Mr Webster. He added that a typical Safeway store was 28,000 square fret, but that the group also has mid-size stores, between 15,000 and 20,000 square feet, in smaller locations.
If the stores programme goes ahead as planned - and that will largely depend on the availability of sites and planning considerations - then over 2,000 jobs would be created in the Republic by the Safeway/ Fitzwilton grouping. Safeway has already undertaken to protect 2,000 Wellworth jobs in the north and the four new stores could create up to 1,000 new jobs.
Mr Webster said that, contrary to what has been suggested, not all the stores planned for Ireland would be in out-of-town greenfield locations. He pointed out that in Britain, about one-third of the group's 420 stores are in town centre locations.
Fitzwilton chairman Dr Tony O'Reilly said that the joint venture is structured to take advantage of the tremendous opportunities offered by the changing food retail sector on this island".
The company's chief executive Kevin McGoran, said that the aim of the joint venture was to create an all-Ireland retailer. "We now have 19 stores covering the whole of Northern Ireland so that is effectively total coverage of the north, we are now in a position to move south. We've already done a lot of ground-work in terms of moving south. We're working on it at the moment, getting sites and developing in key areas," he said.
While Safeway and Fitzwilton look for suitable sites in the Republic, the joint venture plans a major upgrading of the Wellworth stores in Northern Ireland, which will be rebranded as Safeway stores. Finance director Mr Simon Laffin said that about £50 million sterling would be spent on upgrading the existing stores, adding services such as petrol stations, and creches.
A further £40-45 million sterling would be spent on new stores on the four development sites in Bangor, Cookstown, Downpatrick and Dungannon. These costs as well as the cost of expanding into the Republic will be borne equally by Safeway and Fitzwilton as 50-50 partners in the JVCo Joint venture company.
