Tesco has been accused of using Irish growers and other food producers as “cannon fodder” in a battle to protect its market share and profits.
The accusation, voiced by an Irish farm leader, comes as Tesco price cuts last week, averaging 22 per cent in 11 of its stores along the Irish border, threaten to set off a full-scale supermarket war.
Discount chain Lidl was first to respond, announcing reductions on a broad range of products and promising that, unlike Tesco, they will apply across the Republic. Dunnes, SuperValu, Superquinn and Aldi are all expected to follow suit.
According to Tesco, which has a 25 per cent share of Ireland’s €10bn (£8.9bn) grocery market, to help achieve the price cuts it is now sourcing cheaper goods directly from the UK.
While the company says it remains “fully committed to supporting indigenous Irish suppliers”, they will be required to match the prices at which products can be imported. Already some suppliers have been asked to accept reductions of up to 20 per cent.
It is this approach that has alarmed Irish growers, already struggling on razor-thin margins.
Padraig Walshe, president of the 80,000-strong Irish Farmers’ Association (IFA) and a long-time critic of supermarket dominance, claimed Irish producers were being used as cannon fodder.
He said: “Tesco’s tactics will squeeze growers and farmers even harder at a time when they are already being forced to produce below cost. By opening this new pipeline for imports, it is pushing Irish food producers into the frontline of a supermarket price war in which they are likely to become the victims.”
Fuelling farmer anger is the revelation in a confidential document leaked to the Irish Times that Tesco’s Irish profit margin, always a closely guarded secret, was 9.3 per cent last year - compared to under six per cent in the UK - and is expected to rise to 9.5 per cent this year.
Walshe complained that the company was squeezing producers rather than reducing that margin, and called on the Irish food sector “to resist any strong-arm tactics by retailers to maintain their profits at the expense of producers”.
