For years consumers have been paying an unacceptably higher price on some brands
DURING THE boom, apparently what concerned us most about grocery shopping was convenience. Come the truly terrifying prospect of unemployment rising to 600,000 and suddenly, we are concerned with price. It’s understandable, especially for families where unemployment is not a threat but a reality, not to mention those families facing pay cuts, levies and cuts in mortgage relief.
But are low prices the holy grail? Are there other major concerns, such as the long-term survival of the agri-food business, or the sustainability of rural communities? Or to put it more simply, such as keeping Irish jobs? Looking at the queues crossing the Border, it would appear that such concerns are way down our priorities.
Last November at a Bord Bia conference, economist Jim Power had some pithy advice. People crossing the Border to shop, he suggested, might wish to put the money they save into a bank account, so that they can afford flights to Australia to visit their sons and daughters in years to come, because those trips across the Border will reduce the prospects of those children ever having jobs in Ireland.
While low prices are not the be all and end all, nor should Irish people accept higher prices resulting from unfair practices. The Joint Oireachtas Committee on Enterprise, Trade and Employment has been charged with investigating the price differences between North and South, which are only partially explained by the collapse in the value of sterling.
Reading the committee transcripts, it is clear that Irish consumers have been paying an unacceptably higher price for years on some international brands. Despite the fact that we think we have an EU single market, in fact, the market in Europe is highly segmented, and Ireland has been treated as a high price region. Cormac Tobin of Unicare Pharmacies was able to give many examples of crazy price differences, such as baby wipes costing 140 per cent more here than in Britain.
Some international brands do little more than set up an office here, then proceed to slap on huge price differences, and until recently, retailers in Ireland were forced to buy from them. So when Tesco announced recently that it is going to procure international brands directly from the UK, thus securing far better deals on price, should we fall on our knees in gratitude to it for breaking up a racket? It’s not that simple. Are we to believe that Tesco is taking this initiative to benefit Irish consumers rather than to copperfasten its market dominance here? Furthermore, there are other international companies who have a genuine, long-lived presence in Ireland, so that they are virtually indigenous by now.
If Tesco buys directly from the UK, using the massive muscle of its parent company (the world’s third-biggest retailer) it will have huge implications for the Irish subsidiaries of these international companies. Jobs will be at risk for everyone from warehouse staff to lorry drivers to marketing managers.
Some international companies manufacture products in Ireland geared specifically to Irish tastes, and therefore for a market of some four million people. They can’t compete in price with products that are geared towards a UK market of 60 million.
Sources close to Tesco say they will continue to order the Irish-produced goods from the Irish subsidiaries. The question is, for how long? Those same sources estimate that the UK procurement model will result in the loss of perhaps 200 Irish jobs. In contrast, Jim Power reckons it could be closer to thousands. Tesco’s move will make it even harder for smaller shops to compete.
Furthermore, it will inevitably lead to the temptation to replace Irish products on the shelves with UK alternatives, although Tesco is adamant that it will continue to support Irish suppliers.
Tesco is an important Irish employer and has facilitated Irish products being stocked elsewhere in its international business to the tune of billions. However, as workers in Cork threatened with a change in conditions just for moving premises will testify, Tesco is a hard-headed player in a cut-throat market.
At the Oireachtas committee hearings, there were dark hints about practices by Tesco and the other big supermarket chains such as Dunnes and Superquinn, suggesting that they were squeezing the life out of Irish suppliers long before Tesco moved to UK sourcing.
The IFA’s Padraig Walshe declared bluntly that producers and suppliers are scared into silence and submission by the supermarket chains’ ability to put them out of business. Ibec’s Food and Drink Industry section also talked of suppliers struggling to meet increasing demands. Margins become so tight for suppliers that they either have to cut jobs, or in some cases, go out of business entirely.
Not unnaturally, the joint committee wanted to hear from suppliers threatened in this way. Somewhat grimly, Padraig Walshe pointed out that the last person to speak out only did so because he had been forced out of business and had nothing left to lose. Not a single supplier or producer was willing to go on the record about these practices.
Is it not extraordinary in a democracy to have such an imbalance of power that people are afraid even to complain? We all know about supermarkets causing smaller shops to close, and sometimes turning town centres into wastelands. We know that supermarkets have always squeezed suppliers, but what is happening today is on a far bigger scale. We need a code of conduct urgently, and the opportunity, as there is in Germany, for suppliers who are being targeted in this way to make anonymous complaints. Our current competition legislation is wildly inadequate.
Big supermarket chains act like they do because our current economic model is all about maximising profit for the benefit of shareholders. Sadly, that is exactly the model that got the banking sector, and therefore the entire world, into our current economic mess. Yet nobody is talking about reforming this shareholder profit model.
bobrien@irishtimes.com