"BOTTLENECKS" IN the grocery sector at wholesale level and in local markets will require continued monitoring, the Competition Authority said yesterday.
A high concentration of operators at the wholesale level of the grocery supply chain and potential difficulties for retailers entering local markets are a cause for concern, the authority said as it published two reports on the sector.
The report finds that seven wholesale operators control more than 95 per cent of the Irish grocery sector, with Musgrave and BWG holding an almost 80 per cent share of the total €3.6 billion in wholesale groceries turnover in 2006. The combined turnover of grocery retailers in the State is estimated at €14.6 billion, of which €11.6 billion is due to the sale of groceries.
Wholesale affiliates, or brands such as SuperValu, Spar and Centra where the outlets are owned locally but use the name under licence from a wholesaler, are now acting more like vertically integrated multiples like Tesco and Dunnes, the authority said. Musgrave has adopted a national recommended pricing policy for its brands, while other affiliates suggest price menus depending on the size and location of the store.
There are 3,500 independent retailers in the State, but the number has declined steadily between 2001 and 2007.
The authority's mapping of the retail and wholesale grocery supply chain in the Republic was carried out following the Government's decision in 2006 to abolish the Groceries Order, which prevented retailers from selling certain grocery items below cost.
Competition Authority chairman Bill Prasifka said price trends in the period following the abolition of the "incoherent" Groceries Order showed that there had been a "structural shift" in the market. But a temporary fall in Groceries Order items was swiftly eliminated by the global spike in food commodity prices.
"The Groceries Order was a monument to human stupidity," said Mr Prasifka, who said there were similarities between the work of the Office of the Director of Consumer Affairs in enforcing the order and the activities of Cork businessman Denis Manning, who was convicted last year of assisting Ford dealers in the operation of a price-fixing cartel.
A third report, due to be published this summer, will consider if the retail planning process creates barriers to entry for new companies, including those that operate in Northern Ireland such as Morrisons and Asda. Musgrave group chief executive Chris Martin said the report showed that the consumer was "clearly the real beneficiary" of a "highly competitive" groceries sector.
