The Engineering Culture

2.6.1 Irish Food Retailing Landscape

Ireland has a wide range of food retail formats encompassing:

• Supermarkets (Multiples)

• Convenience Stores and Newsagents (Symbol Groups)

• Non-affiliated Independents

• Forecourt Convenience Stores

• Street Traders (Moore Street, for example.)

• Ethnic markets (Asian, Polish and so on)

• Farmers markets

• Online portals

The supermarket and convenience chains include the following retail brands:

• Tesco

The grocery market within Ireland is increasingly being dominated by UK food multiples and European food discounters (Mintel, 2012).

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The trend since the late 1980’s in grocery retail has become one of ‘concentration’. In food retail, there has long since been a trend towards supermarket shopping at the expense of the independent retailers, whose numbers have been falling and will continue to fall (Forfás, 2000). This has been shown by the opening of numerous shopping centres which offer shoppers almost every kind of retail activity usually under one roof. The Stephens Green Shopping Centre opened in 1988 and was followed by others such as The Square in Tallaght in 1990 and Blanchardstown Shopping Centre in 1996. There are many other similar shopping centres in Dublin such as Liffey Valley Shopping Centre, The Pavillions in Swords, Omni Park in Santry, Dundrum Town Centre, The Northside Shopping Centre in Coolock and the ILAC and Jervis Shopping Centres (both in central Dublin).

Mintel (2012) also refers to this phenomenon.

“In addition to this, changes to the planning guidelines regarding the cap on the size of supermarkets within RoI have increased, putting even more pressure on convenience and independent stores due to larger store formats now being a viable option for supermarket retailers, which can thus offering a wider variety of products.”

This contrasts hugely with the situation in the early sixties in Ireland when there were over 26,000 retail establishments of which by far the largest type were grocery shops (Farmar 2010).

In Dublin, this is more accentuated as the Dublin region has traditionally had less independent retailers by percentage than the rest of the country. This is a phenomenon in most urban areas and is supported by statistical analysis. Dublin accounts for 31% of grocery shopping yet has only 16% of grocery shops. The lesser role for independent retailers in Dublin is mentioned as far back as 1998 by O’Callaghan & Wilcox (1998) and according to Forfás (2000), is due to retail areas being far more concentrated in the capital.

There is however some emerging evidence in the most recent research that the recession has seen shoppers return to the independent retailer as part of an overall shopping mix, with bargain hunters visiting many different retailers in pursuit of the best deals (Bord Bia, 2012). This finding is replicated in other research with similar

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claims that people are making “less use of hypermarkets in order to use smaller retail outlets” (Connery, 2013).

Linked to this is the very latest trend from the U.K. whereby the multiples themselves will open smaller stores (small formats). This move is designed to offer the geographical convenience to work or home bound customers at the same price as the hyper/supermarket format (Bord Bia, 2013a).

A huge factor in shaping the modern Irish retail landscape was the introduction in 1987 of the Restrictive Practices (Groceries) Order which prohibited below-cost selling of certain core grocery products (and alcohol). This was introduced to protect small local retailers from the perceived predatory habits of the large retail multiples.

The fear was that the multiples would indulge in below-cost selling and drive the smaller competitors out of business and then once the market-place was free of competition, the multiples could monopolise the food market and effectively charge any price they wished. This was legislated for by the Restrictive Practices (Groceries) Order 1987 which in common parlance became known as the ‘Groceries Order’. The legislation provoked much debate from a variety of stakeholders regarding the efficacy of the act and a continuing debate regarding the inclusion or exclusion within the act of alcohol. The act was finally rescinded on the 20^th March 2006.

2.6.2 Irish Food Purchasing Habits

Total Irish food retail sales have been in decline from €11,398 million in 2007 to

€10,370 million in 2010, with sales projections forecasting a return to growth of 3.91% in 2014 (SCB Partners for Bord Bia, 2011). Recent research reports that the market is now seeing positive growth of 1.2% to September 2013 (Kantar Worldpanel, 2013).

2.6.2.1 Value

With the onset of recession, Irish consumers have had to re-assess their perception of

‘value’ by either drastically reducing their shopping spend through seeking out the

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lowest possible prices for food and drink, or by controlling spending through foregoing treats and luxury items in food and drink. As a result, the Irish consumer is now a savvy shopper who has come to look for and expect deals even in premium ranges (SCB Partners for Bord Bia, 2011, p.9).

These findings are mirrored by Mintel in their August 2013 report, Attitudes to Food – Ireland, which tells us the current economic climate is affecting buying behaviour with consumers switching to discount retailers and own-brands. Food prices in Ireland are some of the highest in the EU (18% higher than an average taken from the other 27 EU member states) but the trend is slowing and food prices are now rising more slowly than in other EU countries.

Despite a continued incremental inflation, shoppers continue to restrict their spending and the annual average grocery spend per household stands at €5,400 in 2013 from a high of €6,134 in 2008 (Berry, 2013). To achieve this, they buy less, trade down, or buy cheaper. The recession has meant that the majority of food grocery shoppers (66%) choose the store where they do their main grocery shop based on price and offers (National Consumer Agency, 2013). This price conscious attitude is prevalent across all reports.

Of the retail brands listed in 2.6.1 above, the German retailers (Aldi and Lidl) are enjoying an increase in market share to a combined 13.8% by February 2014 (Kantar Worldpanel, 2014) and for the 12 weeks ending July 20^th 2014 continued to make gains.

The following are the latest percentages of market share for the main retailers:

• Tesco 25.6%

The continuing focus of consumers/customers would clearly indicate price consciousness as a key driver toward purchase choice. This is reflected in the

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emerging patterns of purchase choice and purchase decision making, and is also shown in the techniques adopted by many of the retailers in the Irish market. The multiples in particular are responding with a different marketing mix which reflects the new paradigm in Irish retailing. This includes offering group buying reductions, online savings and the ‘venture brand’

2.6.2.2 Own-brand

The shift to ‘own-brand’ products reached a level of 43% by July 2013. Retailers have reacted to this price-motivated move away from the established brands in favour of cheaper alternatives by creating so-called ‘venture brands’ which are in fact own-brand products, packaged and sold as own-branded items but at the same price point as own-label. Other retailers, keen to retain customers in the price conscious bracket are using offers, own-labels and BOGOF (Buy One Get One Free) to retain their custom.

This is another area of growth with 52% of Irish customers claiming to search for such offers. When added to the 43% that claim to have switched from premium brand labels to own-brand labels it is clear that consumer sentiment is price focused (Mintel, 2013a).

2.6.2.3 Technology and Shopping Around

Current commentators state that there is a small but discernable re-emergence of the traditional food shopping habits. Previous generations visited all the small shops such as butcher, greengrocer and baker, whereas today’s generation visits the local supermarket, the U.K. multinational and the German discounters (Healy, 2013).

This can be discussed in terms of technology. Many shoppers who wish to avail of best prices in more than one retailer are beginning to use smart phones and tablets to make instant price comparisons and this informs their purchases immediately (Bord Bia, 2013b). This report from Bord Bia supports the above by going on to say that many shoppers are returning to a method of shopping largely disappeared for a generation, namely the concept of visiting a number of stores including specialist stores to get the weekly shopping done at the best price. This is in contrast to the

‘one-stop-shop’ model so prevalent in recent years.

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2.6.2.4 Key Drivers Shaping Shoppers’ Attitudes

In summary, the key drivers that are shaping attitudes amongst shoppers are:

• Economic pressures (continuing austerity)

• Convenience issues (store location and opening times)

• Technology (online purchasing, apps)

• Transparency (traceability and provenance) (Bord Bia, 2013b).