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Londis – GB only; Mace – Northern Ireland only
In this months issue 2 NEWS 10 MARKETING IRISH AD AGENCIES ABROAD Global companies have worn a path to advertising agencies in New York and their counterparts in London, but the market is changing. 12 NEWS
- BARRY GROUP TO OPEN 12 NEW OUTLETS
30 EU RULING CAUSES CONCERN 34 DO YOU KNOW YOUR BUSINESS? Learning more about your business customer profitability by carrying out detailed analysis will be more beneficial than knee-jerk cost cutting. 36 ARYZTA ERRS ON SIDE OF CAUTION
16 LONDIS DOWNSIZES The Londis Group severed relationships with more than 40 stores last year as it reviewed its credit risk because of the economic downturn. 18 NEWS FEATURE
- €150M “SHRINKAGE”
20 NEWS FEATURE
- GROOMED TO BE IRISH
Despite the recession, Irish men are spending more than ever on personal grooming. 22 DUNNES STORES CHALLENGE PLASTIC BAG LEVY Dunnes Stores has secured leave from the High Court to challenge the validity of the plastic bag levy. 24 NEWS 28 MUSGRAVE RESTRUCTURES In “extremely difficult market” conditions the Musgrave retail group is to shed 143 jobs in Galway.
Despite its recent good results there is little optimism about future growth for the food group, Aryzta. 40 BWG AT FOREFRONT OF CONVENIENCE RETAILING
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Small Print Todays Grocery Magazine is circulated to all proprietors, directors and managers of all relevant manufacturers and distributors, to every cash and carry, every multiple supermarket, group head office and wholesaler, all group affiliated shops and Londis outlets in addition to over 6,300 unaffiliated independent retailers and the country’s leading offlicence outlets. All articles are copyright of Todays Grocery Magazine and cannot be reprinted without the written permission of the editor. All letters to the editor of this magazine will be treated as having been submitted for publication. The magazine reserves the right to edit and abridge them. Disclaimer While every effort has been taken to ensure that all information is accurate at the time of going to press, neither TGM Ltd or Todays Grocery Magazine accept responsibility for any inaccuracies or omissions. Please note that the opinions expressed in the articles are strictly those of the authors.
Will consumers fall for Love Irish Food? It will be interesting to see how the Love Irish Food marketing initiative, which was launched by several home-based food and drink companies as an independent entity, will work out over the coming months. The multimillion-euro promotion was launched amid a big fanfare, followed by a not-insignificant controversy over its logo. It is said to be the biggest campaign ever of its kind in Ireland and involves a website, a dedicated PR campaign and a heavyweight media and marketing push around the new brand in a bid to change consumer attitudes and buying behaviour. The aim, its organisers contend, is to safeguard the future of Ireland’s food industry. After all the fuss about Tesco’s new policy on shelving Irish brands, some of the biggest grocery marketers in Ireland felt they could stomach no more. While Guaranteed Irish has tried to do its utmost to highlight the need for consumer support for Irish goods, a combined effort, with handsome funds to match, was a surer bet. Love Irish Offd (LIF) is supported by some of the biggest names in Irish food.
Avonmore, Barry’s Tea, Batchelors, Flahavan’s, Odlums and Tayto are among the indigenous brands supporting the initiative. It has also gained support from British companies Cadbury and Britvic (which produces Ballygowan and Club Orange, among others). Relative minnows like Cully & Sully, Glenisk and Shellfish de la Mer are in on the act too. Yet some large Irish food groups are noticeable by their absence, not least Kerry Foods, whose brands include Denny, Cheestrings and Freshways. Colin Gordon, chief executive of Glanbia Consumer Foods, along with Jim Power, economist said research ahd shown that consumers were eager to support Irish brands. Not alone that, but they recognised that this support for Irish brands could have implications for jobs and the wider economy. Irish Farmers’ Assocation boss Padraig Walshe was at pains to point out that the Irish food industry employed 300,000 people from farm to plate, and accounted for over half of exports from Irish owned producers. Last year, Irish food and drink exports netted
€8.2bn. Whether or not LIF can convince shoppers to buy Irish is another thing. Guaranteed Irish could freely lobby Irish consumers until the EU cried stop in 1984, saying that it contravened the ethos of the union by encouraging preferential treatment in an open market. So Guaranteed Irish became a limited company, relying on members’ subscriptions. Ireland in 2009 is not dissimilar from the recession-torn country of 1975, which Guaranteed Irish was first mooted and disposable income was rationed. But consumers have experienced far greater affluence and developed cosmopolitan tastes in food and drink which could hardly have been anticipated back in the mid-70s. Much has been made by LIF of the emphasis consumers put on distinctive branding when shopping. Its research showed that 84 per cent of respondents believe there should be a symbol that clearly differentiates Irish brands - in other words, products made in Ireland, using Irish ingredients and providing jobs.
M&S plan rejected An Bord Pleanala has told Marks & Spencer it cannot build a 2-storey extension to the rear of its store in The Jervis Centre on Mary Street, Dublin 1 because if could interfere with the operation of the Luas. This decision overturns an earlier one by Dublin City Council to approve the development subject to over 20 planning conditions. M&S wanted to develop the building as part of a wider plan to expand and revamp its store. It wanted to demolish a two-store structure to the rear of the store and build a 10-storey retail, commercial and residential scheme fronting Upper Abbey Street and Liffey Street. This would have provided an extension to the ground and first floor level retail space located mainly in the six-storey Mary Street building with seven floors of 42 apartments above.
Irish retailers making far bigger profits Consumers are paying over the odds for their groceries because multinational retailers are making up to three times the profits in the Irish market as they do elsewhere, according to a new report. Retailers are behaving unethicially by using their market power to impose unfair conditions on suppliers, the report by the Oireachtas Committee on Enterprise, Trade and Employment claims. Demands by retailers for “hello money” and other secret payments from suppliers are “common practice”, the report states. Suppliers are frequently required to make payments and provide services “considered to be outside acceptable business
practice”. The report, backed by committtee members from all the main parties, calls for the introduction of a statutory code of practice to ensure fairness in the grocery sector as well as a system for measure compliance with the code. David Byrne, former attorney general, was appointed as a facilitator by Tanaiste Mary Coughlan, in the development of the code of practice. However, Ms Coughlan’s intention was to iintroduce a volunary code to begin with. Legislation currently being prepared to merge the National Consumer Agency and the Competition Authority would then be altered to include a specific provision allowing for the introduction of a statutory
code. This might not be introduced if the sector managed to agree on the principles of a voluntary code. Byrne is expected to report back in three emonths, after which it will be up to the new Minister, Batt O’Keeffe, to decide how to proceed. The committee’s report also calls on the industry to agree a method by which the profit figures of retailers and suppliers, as well as other relevant data, could be put into the public domain. It was drawn up in response to claims by many Irish prdoucers and suppliers that they are being subjected to unfair demands by big retailers fighting a price war. Fifty suppliers were approached to participate but ony seven
MEPs have rejected proposals for colour-coded warnings on packaging as a means of warning increasingly obese consumers of the dangers lurking in the food they consume. However, mandatory
country-of-origin labelling for chicken and fish moved a step closer following the committee vote by MEPs recently. Members of the European Parliament’s public health and food safety committee also voted
to introduce labelling showing whether free-range or battery eggs were used. The defeat of proposals for a “traffic light” system is seen as a victory for big food companies which lobbied vigorously against it.
agreed, even though anonymity was guaranteed. No retailers were contacted during the compilation of the report. “The report clearly highlights the disproportionate market power that large retailers retain in the irish retail market and the disadvantages that this places suppliers and other retailers in, when seeking to conduct their business,” said committee chairman Willie Penrose. Retailers, some of whom have already appeared before the committee, are expected to be invited to return to answer further questions and give their response to the report. Suppliers who participated in the researchh claimed prices are still much higher in Ireland than elsewhere. They put this down to our lower pouplation density and the retailers’ “insatiable” appetite for margin. Ireland is regarded as a “massive profit centre” for retaiilers who see consumers here as an ideal opportunity to make “superlative” profits, it is claimed. One supplier said the retailers’ margin on his product was 32-35 per cent in the UK, but 45-50 per cent in the Republic.
Food warning labels ruled out by EU
February-March 2010 3
Glanbia in talks on sale
Glanbia has entered negotiations with the Glanbia Co-operative Society, its 54 per cent shareholder, about the sale of the comppany’s Irish dairy and agri businesses to the co-operative. If the deal is passed, the food conglomerate’s dairy processing, consumer products and agribusinesses in Ireland will be 100 per cent owned by the co-operative. Glanbia’s Irish property businesses and related joint ventures in Ireland would also be included in the sale.
While the company declined to give any indication of a possible valuation figure for the Irish dairy business - which represents approximately 50 per cent of the company’s revenue stream it is likely that the cooperative will fund the takeover through the sale of a pecntage of its shareholding in the public limited company. Such a co-operative move would involve a “significant reduction the Society’s ownership in the group”, according to Glanbia. Analysts estimate that this would involve at least 35 per cent of the company coming on to the market. Credit Suisse is advising Glanbia on the transaction while KPMG Corporate Finance is acting for the coperative. It iis expected that an agreement may be reached in the coming weeks, with a deal closed by the end of the second quarter.
Topaz expect €20m op profit Irish owned fuel supplier Topaz expects to generate an operating profit of over €20 million for the year to the end of March 2010. This will mark a significant turn-around for the business over fiscal 2009, when it slipped into the red following a €17 million hit relating to volatile oil prices and a major investment in rebranding its service stations. Accounts filed with the companies office show Topaz made an operating
loss of €500,000 in the year to the end of March 2009. This compared with a surplus of €28.6 million in the previous 12 months. Ireland’s biggest fuel group made interest payments of €19.1 million on its debt last year, which was offset by interest received of just over €1 million.
Aldi branch near Martello Tower Low-cost supermarket chain Aldi has been granted permission to build a branch on the Portmarnock coast, opposite one of Dublin’s most popular beaches. Fingal County Council granted permission for the supermarket in the grounds of the White Sands Hotel on the Strand Road opposite the Portmarnock Martello Tower and beach, despite having recieved more than 50 objections to the plan. The supermarket and off-licence development will have a75-space car park, and will involve demotion of some hotel buildings. Objections centre on the effect the development would have on one of Dublin’s best beaches known as the “velvet strand” and on the increase in traffic, particularly in summer months. Local Portmarnock Labour Councillor Peter Coyle said he believed the decision was made in error based on a “colouring mistake” on the county development plan. Prior to 2005, the area was zoned as residential. However, this was seen as unfairly limiting to the hotel which had been on the site since
the 1930s. To allow the hotel to build complementary facilities such as a leisure centre or a swimming pool, the councillors decided to include a provision in the 2005 development plan to give the hotel lands their own zoning. This zoning was included as a “local objective” to “retain the primary use of hotel on this site”. However, the colour used in the development plan map to indicate the new zoning was the same as that used to indicate suburban centre zoning. Aid “picked up on the colour”, Coyle said and made their application on this basis. “The county manager should have intervened and it is very disappointing that he didn’t.” Coyle said he had appealed to county manager David O’Connor to become directly involved: “I am now going to appeal the council’s decision to An Bord pleanala and I will seek an oral hearing.” A spokesperson for Fingal Country Council said the council does not comment on individual planning applications or decisions.
Workers get €2.5million Around €2.5 million in unpaid wages was recovered last year for workers who were found to have been paid less than their statutory minimum entitlements following investigations by the National Employment Rights Authority (NERA). In its report for 2009, NERA said over 6,000 workers received money back on foot of its investigations, with €410 being received on average per employee. The report showed that in the catering sector only 21 per cent of employers inspected by NERA were found to be compliant with industrial relations and othere legislation governing
pay and conditions. Following inspectiions by NERA, more than €736,000 was recovered for workers in the sector. The report said there was a compliance rate of 27 per cent in the hotel sector, 28 per cent in the retail grocery area and 27 per cent in electrical contracting. Around 7 per cent of employees inspected were found to be in breach of the national minimum wage legislation. As a result of such inspections, nearly €200,000 was recovered for workers. However, it also emerged that the number of inspectiors available to NERA to police such legislation is falling as a result of cutbacks and the Government’s moratorium on recruitment. NERA director Ger Deering said there were now 69 inspectors working the in agency, down from 80 in 2008.
Food company Denny was confirmed as instigator of the Walsh Family series, a poular series of comic webisodes performed by the five-person Dublin comedy act Diet of Worms. Denny commissioned the series, which looks at a family in the 1980s and 1990s through successive ‘home moves’. It’s a further deparure
from the norm for a brand that, untl about a year ago, relied mainly on conventional advertising. “We wanted to bring people a fun taste of home, so we supported the Diet of Worms in their humorous presentation of the Walsh Family,” said Tricia Burke, marketing manager of Denny.
Coca-Cola sues over land deal Coca-Cola is suing a businessman over substantial losses allegedly suffered over his failure to honour a contract of May 2008 to buy 9.3 acres of lands near Tuam, Co Galway, for €6 million. The lands are now valued at €1.4 million, Coca-Cola Bottling Company (Dublin) Ltd claims. Mr. Justice Peter Kelly found John McCann had advanced an arguable defence against the company’s claims which required the case go to a full plenary hearing and disentitled the company to summary judgement. CocaCola had argued there was no arguable defence. Mr. McCann, Crossmaglen, Co Armagh, alleges he cannot perform the contract due to the company’s own conduct. He claims the company, for its own business reasons, breached an agreement with him to lease premises on the site for its drinks distribution business and had since ceased distributeion from the site, where it had been based for 30 years. This, combined with the economic downturn and a fall it the value of the site, resulted in
his bank refusing in December 2008 to finance the project further, he claims. He claims the May 2008 contract was to involve the sale to him of the lands on which the company’s drinks distribution warehouse was situated and he was to build a new warehouse to be leased back to the company at a rent of €280,000 annually, with upward-only rent reviews every five years. An agreement to that effect was to have been executed without delay but a draft agreement was not given to his solicitor until December 2008 and this was not detailed, he claims. In the interim, Coca-Cola Ireland had reviewed its business arrangements and he was informed in September 2008 the company’s new managing director had asked it to hold any progress on the Tuam depot until he had a full understandiing of the plan for the business across Ireland. Coca-Cola later discontinued its distribution business and he understood it now engages contractors to carry on that business.
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Bord Bia’s stages major marketing event About 166 new food and drink products developed by Irish companies were unveiled at a major Bord Bia marketing event. The food board brought 300 internatioanl food buyers and 100 Irish purchasers to Croke Park for a series of 2,400 prearranged business meetings with Irish companies to boost food and drink sales. The meetings were held on the same basis as “speed dating” which has proved a very satisfactory method of introducing buyers and sellers at previous events organised
intensive build up to the event involving Bord Bia staff working with the Irish companies through training workshops and seminars on broadening export reach, maximising sales pitches and analysing new markets. Through its network of nine overseas offices, Bord Bia has briefed the overseas buyers, with itineraries tailored to each of their requiremnets. It said this comprehensive approach guaranteed a more productive and worhtwhile event as each of th ebuyers would meet the most relevant potential suppliers.
by the food board. Aidan Cotter, chief executive of Bord Bia, said the event offered overseas and domestic buyers a unique opportunity to explore the capability, quality and export capacity of the Irish food and drink industry using a highly timeefficient formula. “Over 150 dynamic, established and emerging Irish companies will in turn be exposed to key buyers from the retail and food service sectors form Across Europe, the US and Asia,” he said. There has been an
During their time in Dublin buyers were able to take part in guided store visits, enjoy Irish food and drink tastings. In some cases they will undertake site visits to particular companies. The event, which is part of the food board’s major marketing drive, comes at a critical time for the food and drink industry which has been badly hit. The value of the irish food and drink exports fell by 12 per cent last year, or by just under €1 billion, to stand at €7.12 billion.
PR company contract defended The Deparmtnet of Enterprise, Trade and Employment has defended the handling of a public relations contract for the National Consumer Agency. A spokeswoman for the department said the tendering process for the contract was conducted “in accordance with all of the normal procedures. Those procedures were followed rigorously and they won it in the same way as any other organisation could have won it”. She was
commenting on a claim by Fine Gael’s Leo Varadkar that scarce cash was being frittered away by the body. Varadkar called on Tanaiste and Minister for Enterprise Mary Coughlan to investigate reports that the consumer agency had been paying €18,000 on average a month to public relations company Q4 since May 2007. The agency will be merged with the Competition Authority later this year.
The leader of the Irish dairy processing industry have undertaken to continue meeting under the aegis of the Irish cooperative movement to try to resolve the challenges facing the sector. Icos- the irish Cooperative Organisation Society - has been attempting to have the organisations work better together in sharing processing facilities, milk collection systems and to cut out duplication in the system. At their last meting, the chairmen and chief executives of all the milk processors in the State agreed to continue their discussion on closer cooperation. The industry focused on how to cope with an expected increase in milk output from farms when the EU ends its milk quota system in 2015. The quota system limits the volume of milk a farmer is allowed to produce, and when it ends Irish farmers are best placed in Europe to expand to meet the expected surge in demand
for dairy products globally. However, Irish creameries are now running at near full opearting capacity during the peak spring summer season but at off-peak times operates at only 60 per cent of the national capacity.”The dairy processiing industry is currently undercapitalised, and over the past two seasons, loss-making. This undermines the industry’s ability to fund any necessary expansion from margin,” said Jon Tyrrell, a director general of Icos.
Dairy processors to meet challenges
Marketing Irish Ad Agencies abroad
Until now, global companies have worn a path to the door of advertising and marketing companies on Madison Avenue in New York and their counterparts in London, but the market is changing. Tom Holmes, a veteran of Saatchi & Saatchi and other major advertising players, is working to refashion the industry. The idea behind his company, Creativebrief, is simple. Using its website, companies with contracts to fill post their details online and inspect the work of advertising agencies that might be able to carry out the job. “Major companies increasingly want to take their business out of the major centres. They know creative talent is everywhere. This allows the smallest agency to perform at the same level as the latest industry
The smallest agency can perform at the same level as the largest industry player
player,” he says. So far, Creativebrief has put €550 million worth of business through its books on behalf of clients such as Tate & Lyle, Diageo etc. Russian Standard Vodka - the second-biggest advertising spender in the UK - used Creativebrief when it was planning a television, cinema and print campaign for the UK, though this contract did go to a London agency. Too often in the past, major companies went down paths previosuly travelled when they had advertising and marketing contracts to fill.”They often don’t know where to look; they are too busy to keep in
touch with everything that is happening,” sayd Holmes. He believes the changing trends offer major opportunities for Irish advertising and marketing companies to cast their net into wider and deeper ponds. “There are huge opportunities for them to get involved,” he says. “We put everyone on a level playing field. We don’t vet the agencies’ work. The brands can look at that for themselves, but we put everyone on the same plane.” Creative industries contribute Stg£65 billion a year to the UK’s gross domestic product, while their Irish counterparts - which include those working in cultural bodies, as well as the more commercial side of creativity - produce about €11 billion. Five or six years ago, advertising and marketing agencies in Dublin and Belfast were not interested in cooperatiing with each other, let alone looking beyond their shores for business, according to Holmes. “I want to inject a bit of confidence into the system: that they can look over the parapet, and we are getting the brands to look as well,” he says, adding “Irish agencies compare really well with their counterparts elsewhere.” McCann Erickson managing director Orlaith Blaney said clever marketing was more necessary than ever, and urged Irish companies and executives in the UK to consider using Irish creative talent in their
campaigns. Creativebrief charges agencies between Stg£2,500 and Stg£4,500 a year. For this fee, agencies can post samples of their work online, showing the final work that they produce and how it came about. “What we do is entirely unique,” says Creativebrief managing director Paul Duncanson, a veteran of the advertising business. “Agencies have long complained about the cost of putting together pitches. It can cost up to Stg£100,000. “If I am a client and I don’t really know what I am looking for, my friends will know a few agencies and I’ll ask them to pitch, without ever seeing what else is out there.” With Creativebrief, the approach is different. “Brands can have a look at what is out there, see who is doing interesting stuff and then put together a list of people to go further,” says Duncanson. Major brands will, in the future, spend more money to promote their business. “Private equity firms will have to understand brands. Before it used to be about holding on to a company for three years and then flogging it. Now it has to be built,” says Holmes. “More companies are going to be restructured, given the economic climate that is around, and that is going to require advertising and marketing. And Ireland is well placed to capture some of it.”
Barry Group to open 12 new outlets
Barry Group, the Corkbased whole food distributor, will open up to 12 new budget outlets before the end of the year under the discount brand, Buy Lo. The company launched the brand las August and already operates two Buy Lo stores in Ashbourne, Co Meath, and in Tralee, Co Kerry. Jim Barry, managing director of the Barry Group, said the group was in active negotiations with franchise holders to open five new Buy Low stores by mid-year and between five and seven more by the end of December. The company has just announced plans to invest €1.5 million in the expansion of its central distribution hub in Mallow, with the creation of 25 jobs. Due for completion in June 2010, the project will add 20,000 square feet to the existing 125,000 square foot hub, completing a €10 million overhaul of the facility dating back four years. Barry said investment in the facility would also support the company’s offlicence business, following the acquisition of the Carry Out chain of 50 off-licences in December. It will see Bary’s relocate warehousing and distribution for Carry Out, currently located in Cork city, to one centralised hub for all of the group’s activities. “Right now, we operate from two warehouses, which isn’t sustainable from an efficiency and capacity front,” Barry said.
“As our business model develops it is strategic to operate from one central distribution network so this expansion will consolidate the operations into one central warehouse based in
our Mallow HQ in Co Cork.” Barry Group employs 249 staff and supplies products to more than 700 stores around the country, including 244 affiliated stores in the Republic of
Ireland, operating under the Buy Lo, Costcutter, Carry Out and Quik Pick brands. It also has a wholesale business serving pubs, caterers, hotels and shops.
February-March 2010 13
New food business on the increase
Queries from individuals hoping to open a new food business increased by 50 per cent last year, the Food Safety Authority of Ireland said. The rise may reflect the downturn in the economy as people look for new business opportunities, authority chief executive Prof Alan Reilly said. The increase in new business inquiries to the
authority’s advice line also showed that people wanted to set up a food business in the correct manner, he said. The organisation launched a guide to food law for artisan and small food producers who had started or planned to start a new bsuiness. The guide covers the legal requirements needed for operating a food business, including safety,
Retail industry group retail Excellence Ireland (REI) has named a number of institutional landlords from whom it is requesting “closer co-operation” on the issue of rent. REI said it was appealing ot the landlords to “engage in meaningful discussion with their tenants”. The institutions it is seeking engagment with are AIB Investment Managers, Canada Life Assurance, Irish Life Assurance, Treasury Holdings, Ballymore Properties, Chartered Land, Eircom Superannuation
Fund, Harcourt Developments, Howard Euroscape, Shipton Group Cork and Lexeme Retail Property Group. It also listed Aviva London, which is the landlord at the Liffey Valley Shopping Centre in Dublin’ Alvonway Investments, a landlord at the Wilton Shopping Centre in Cork; Clancourt Management which owns properties in the Crescent Shopping Centre in Limerick and GVR Estates Management Service, a landlord at the Fairgreen Shoping Centre in Carlow.
traceabillity, training, hygiene, packaging and additives. This wil allow new members of the food industry to be “selfsufficient in setting up their food business is the correct way”, said Reilly. However, one of the biggest problems for local producers is the variation in interpretation of these laws by environmental health officers in different HSE areas, said Ruth Hegarty of Euro-toques Ireland, a group which promotes use of local producers’ products by chefs, “What is required of producers in Cork can be different from producers in Meath, so things are often not very clear,” she said. The amount of legal requirements for food producers was putting off new people from starting a food busiiness or holding people back from expanding because of the level of investment needed, she said.
Retailers seek closer co-operation
The industry body claimed many of its members had “proved their financial distress” by opening their accounts to their landlords, but in some cases this had been met with “an unwillingness” to reduce rents.
Hedge your bets
The right investment can help you beat price rises in everything from oil to tea. Consumers are being stung by price rises on everything from energy to food, but those in the know are hedging their costs with savvy investment choices. Motorists face higher prices in the coming weeks, according to the Automobile Association Ireland, average petrol prices hit €1.28 a litre in March with diesel at €1.18. This is despite oil trading at $80 (€59) a barrel - almost half the $57 peak reached in July 2008. Fuel giants blame the new carbon tax and the rising price of wholesale petroleum, which is up 17% since the end of January. The weak euro has also forced up costs because oil is bought in dollars. Meanwhile, householders are receiving weighty fuel bills after the coldest winter in 30 years. Soaring global demand for food and falling suppliers are pushing up the prices of “soft commodities” such as coffee and wheat - in January, for example, bananas were 22% more expensive than at the start of 2009, while the price of tea had risen 4%.
Guide launched for small ‘Outrageous’ says Gilmore producers
Queries from individuals hoping to open a new food business increased by 5 per cent last year, the Food Safety Authority of Ireland has said. The rise may reflect the downturn in the economy as people look for new business opportunities, authority chief executive Prof Alan Reilly said. The increase in new business inquiries to the authority’s advice line also showed that people wanted to set up a food business in the correct manner, he said. The organisation has launched a guide to food law for artisan and small food producers who had started or planned to start a new business. The guide covers the legal requirementes needed
for operating a food business, including safety, traceabillity, training, hygiene, packaging and additives. It will allow new members of the food industry to be “selfsufficient in setting up their food business in the correct way”, said Reily. However, one of the biggest problems for local producers is the variation by environmental health officers in different HSE areas, said Ruth Hegarty of Euro-toques Ireland, a group which promotes use of local producers’ products by chefs, “What is required of produceres in Cork can be different from producers in Meath, so things are often not very clear,” she said.
UK retailers slash prices
Britain’s biggest retailers cut their prices by half this Easter in a desperate attempt to persuade consumers to spend amid rotten holiday weather. The savage discounting raised fears of a painful election run-up for retailers. Growing nervousness about tax rises, combined with the wintry weather, have put many families off spending, denting retailers’ sales and profit margins. Retail sales have appeared to bounce back in recent weeks. Analysts are expecting good news from Marks & Spencer after shoppers rushed out to buy coats and knitwear during the winter freeze. Rose, however, is predicted to paint a cautious picture about consumer spending for the rest of this year.
The big supermarket demands for money from suppliers to display food on their shelves was “like the kind of thing you expect to see in the Sopranos,” Labour Party leader Eamon Gilmore has said. He described the practice as “outrageous extortion” when he addressed a conference on the future of the Common Agricultural Policy in Tipperary. “In relation to agriculture and food, the free market can be good for consumers and for farmers. But left to do what it
pleases, it can be bad for both,” he said. “Take the outrageous extortion of the big multiples in the supermarket business. Powerful dominant players are extorting huge sums of money from Irish suppliers in exchange for the privilege of getting their food on to supermarket shelves,” “It is bad for suppliers including farmers who cannot get their produce onto the shelves of major supermarkets. It is bad for consumers whose choice is reduced. It must stop.”
The Applegreen chain of petrol stations recorded a sharp rise in revenues last year, but profits fell as the downturn took its toll on consumer spending. Petrogas, the firm behind Applegreen, had sales of €309 million in 2009, up from €239 million in 2008. However, after-tax profits fell by 36 per cent, from €4.7 milliion to €3 million. The company said this was as a result of tighter margins and falling consumer spending. Petrogas reported earnings before interest, tax, depreciation and amortisation - which reflects the company’s operating performance - of €9 million in 2009. This
was down from €10.1 million for the previous year. However, the firm said it was optimistic about an increase in profitability this year. It has implemented initiatives aimed at reducing supplier costs and overheads. Petrogas was established in 1992, and is owned by chief executive Bob Etchingham and company director Joe Barrett. The company launched the Applegreen brand in 2005. Unlike most petrol retailers, Petrogas either owns or has a longterm lease on all of its locations. It then licences out certain locations to individual operators.
Applegreen profits fall
February-March 2010 15
DOW N SIZES
The Londis Group severed relationships with more than 40 stores last year, as it reviewed its credit risk because of the economic downturn. Stephen O’Riordan, chief executive of ADM Londis, said the group had cut
stores in the group. O’Riordan said the credit review focused on stores “where there may be debt issues,” such as stores that had borrowed heavily for property during the boom years. “We felt that a sale
is important, but capital value is not the main driver for our retailers,” said O’Riordan. The shareholders will get a dividend of about €1,500 each for 2009, which is half the 2008 figure. O’Riordan said that he expected
credit lines to “exposed stores”, where there was a risk it would not be paid for products. The move was a major factor in a 21 per cent fall in revenues at the group last year, he said. Following the credit review, there are now just over 300 Londis shops around the country, down from 350 stores a year ago. The group had wholesale turnover made up of sales from the group to the individual Londis shops - of €269 million last year, down by 21 per cent from €341 million in 2008. Despite the falling sales, the group remained profitable with a pre-tax profit of €2.4 million, compared with a profit of €4.1 million in 2008. O’Riordan said he was pleased with the “resilient” results, given the poor economic environment. He said that sales were down by 10 per cent on a like-for-like basis, with the remaining 11 per cent drop accounted for by the lower number of
where you’re not getting paid for the goods is just not worth it,” he said. A “cost review” led to a 15 per cent cut in costs across the group, while ten people lost their jobs at the group’s central office, bringing staff numbers there to 70. O’Riordan said that the group’s shop owners had seen firsthand the effects of the recession. “There has been price deflation on food of about 8 per cent. Consumer spending is down, people are shopping around and all retailers have to compete on price. There was a premium being paid for convenience, but that is gone now,” he said. The downturn has also taken its toll on the value of shares in the group, which is structured as a private plc and owned by the shop owners. The shares were valued at more than €85 each two years ago, but are now worth €51.67. “This peaked in 2008, when all other shares peaked. The share price
sales at the group to be flat this year, which would be a “satisfactory” result. It is seeing the benefits of a strategic alliance with Nisa Today’s, a British wholesaler, from which it is sourcing an increasing range of products at better prices. “The deal has given us access to more than €6 billion of buyer power, and has helped our retailers to compete toe-to-toe withh the larger multiples,” said O’Riordan. He said that the group may dip into its €23 million in retained profits to acquire a wholesale business, although there is no specific deal in the pipeline. “We would very much like to acquire a business that is the right fit. It is a limited market but, in a recession, opportunities do arise and you have to be alert to those opportunities,” he said.
February-March 2010 17
€150m “shrinkage” TGM
Shoplifting is costing Irish supermarkets an estimated €150 million a year and pushing prices up for consumers, a retailing conference has heard. Globally, the retail industry loses an estimated $278 million each year - or 1.65 per cent of turnover - because of “shrinkage”, defined as internal and external theft and stock mismanagement. According to Adrian Beck, a criminologist at the University of Leicester retailers tended to blame the problem on external theft, when this accounted for only one-third of the Irish shrinkage cost of €450 million. “Shrinkage is always being blamed on outsiders. In South Carolina, they blame girl
gangs, the Finns blame the Russians, and the British blame east Europeans. But these are often urban myths and the roots of the problem lie in the business itself,” he said. Stealing was “all about opportunity” and was best dealt with by prevention through better design, better staffing and better procedures. While surveillance of staff had a role to play in cutting losses through theft, too often businesses relied on electronic technology as a crutch, he said. A well-
motivated staff was usually the best protection against theft. It was important to impose sanctions on shoplifters, but retailers would never be able to catch every one and it was better to “Design out” theft. The quality of fresh food is now the biggest factor influencing where consumers shop.
Consumers also perceived that the value of fresh food had improved the most of any food category in the past year. Retailers which fall down on providing fresh food are
“goosed”. Over 42 per cent of shoppers said they planned to buy more Guaranteed Irish goods over the next year, and large numbers also said they would buy more fresh foods, and Fair Trade and low-fat products. More say they will be bringing sandwiches to work and entertaining at home. One in four consumers said they shopped in Northern Ireland last year but the figures varied from 32 per cent in Dublin to 35 per cent in Connacht/Ulster to just 3 percent in Munster. Toiletries, detergents and alcohol were the products people were most likely to buy on cross-Border shopping trips.
February-March 2010 19
GROOMED TO BE IRISH G R OOMED
Despite the recession, Irish men are spending more than ever on personal grooming. According to new research from University of Aberdeen, more and more women are choosing feminine
men over their more rugged and masculine counterparts. So, it’s a case of in with Orlando Bloom and out with Arnie, as the changing face of masculinity continues. Some of the reasons given for the
rise in demand for the woman’s man are improvements in healthcare and a general increase in male grooming. Six out of 10 women now prefer more feminine men, the report found. The results suggests that as healthcare improves, more masculine men fall out of favour. That could be why feminine-lookng move stars like Johnny Depp and Orlando Bloom are popular now compared with the likes of Sean Connery in the past. While the recession has hit many high-end cosmetic and grooming outlets aimed at women, from nail bars to tanning studios, the share of the male market in grooming and cosmetics has increased. Irish men are now more comfortable buying skincare products and the range and availability of moisturisers and facial creams for men has expanded significantly. But while males in Dublin may be upfront and open about their grooming habits, across the rest of the country are Irish men okay to move beyond a bar of soap and a splash of aftershave? One of the companies benefiting from the broadening of Irish masculinity is L’Oreal, which has an extended range of products for men now available everywhere from supermarkets to chemists. Some of its products include a ‘hyrdra-energy eye care roll on’ designed to eliminate dark circles and eye bags under men’s eyes. As a sign of its growing confidence in a receptive male audience for its products, L’Oreal last year became one fo the sponsors of the Irish rugby team. “The male market is relatively small at the moment, but we expect to be significantly bigger in the future” says Louise Horgan of L’Oreal Ireland. “We are also convinced there will be a big male market in corrective cosmetics, but that is further down the road. We’re now selling in supermarkets and the products have specific areas of the store apart from the female sections.”
Dunnes Stores challenge plastic bag levy
Dunnes Stores has secured leave from the High Court to challenge the validity of the plastic bag levy. It is seeking a declaration that the regulations imposing the tax are invalid in a case that could have general implications. The Dunnes case involves a €36.4 million bill served on it for alleged uncollected and due payments arising from the levy. The company is disputing the Revenue Commissioneres’ tax assessments of November last, covering a four-year period, on grounds including that the definition of plastic bag in the 2001 regulations is “so uncertain” as to render the regulations invalid. Dunnes claims the levy relates to larger bags given to customers at point of sale to hold their shopping but the assessments wrongly include other bags for wrapping or hygiene purposes. The regulations, Dunnes alleges, are invalid because they are not for the recovery of “waste” as defined by the Waste Management Act. The company claims a plastic bag provided to a customer of a supermarket, service station or other sales outlet does not constitutte waste and does not become waste until the holder discards it or forms an intention to discard it. Counsel for Dunnes said the company has always been and remains a strong supporter of the plastic bag levy but it strongly disputes
the tax assessments. Dunnes is seeking orders quashing assessments made under the Wast Management (Environmental Levy Plastic Bag) Regulations of 2001. It is also seeking declarations including that
the 2001 regulations implementing the plastic bag levy are invalid and of no legal effect. Counsel for Dunnes said that dunnes did not accept the November assessments as it contended the plastic bags in relation to which
those assessments were made “were not subject to the levy”. The plastic bags in quesion were used in the company’s stores in Norther Ireland and also used for other purposes.
Shops charge five times price paid to farmers Retailers are charging consumers up to five times the prices paid to farmers for basic foodstuffs, according to a new report published by the Irish Farmers Association (IFA). A farmer gets just 2 per cent of the retail price of cheese, 33 per cent of the price of milk, and 36 per cent of the price of potatoes despite the fact that they bear the largest proportion of the costs involved. Over the past 15 years, the farmer’s share of the retail prices has declined significantly, the report says; from 51 per cent to 27 per cent for pig meat, for example, and from 60 per cent to 50 per cent for beef. The report notes that many of the products surveyed require only minimal packaging with little or no processing, and normally spend no more than a few days on supermarket shelves. While individual shares of prices for wholesalers and
retailers are not broken down, the report says powerful retailers are in the strongets bargaining position within the food supply chain. The IFA says a collapse in farm incomes has seriously jeopardised the ability of farmers too
maintain output. It claims aggressive competition for market share by retailers is undermining the price received by farmers to the point where the sustainability of family farm production is in jeopardy. “The large retail groups
in Ireland and across the EU through their buying power are forcing down the prices paid to food suppliers to totally unsustainable levels, yet their food businesses remain very profitable”.
Post office closes after 130 years of service The tiny mainland sub post office at Roonagh Pier, near Louisburgh, Co Mayo, closed at the weekend, having provided a lifeline for Clare islanders for 130 years. Over the decades, four generations of the seafaring island family the O’Gradys have in storms and swells, hail and sleet, sunshine and fog, transported love letters and epistles, notes and cards, parcels and packages to the from the windswept little post office. Coincidentially, three
generations of the Scott family, stretching back to 1879, have administered the office, which was once also a telelphone exchange and used to dispatch geese and turkeys by post. “Today is a strange day at Roonagh. I feel sad the post office is closing. You know, the Scotts were like an extentiion of our family,” said septuagenarian Chris
Brady, as he disembarked from his sons’ ferry the Clew Bay Queen. For over 60 years retired island hotelier and ferry company owner, O’Grady has collected and delivered the post at the remote post office. “When I look back now, I don’t know how I survived landing in this spot, said Chris, flinging the postbag
over his shoulder. Just like his grandfather, Austin, and father, Michael, before him, Chris has often risked life and limb landing at the volatile little harbour, renowned for its raging swells. The proposed computerisation of the country’s netwoork of post offices expedited 85-yearold Margaret Scott’s retirement. The mother of eight took over as postmistress after her husband Dick retired in 1969.
Greencore sells malt business
Greencore has signalled a further move away from its Irish business and an increasing focus on the UK and US convenience food markets with the announcement that it is to sell its malt business to French co-operative Axereal Union De Cooperatives Agricoles in a deal worth up to €116.25 million. The disposal, which had been flagged, will net the Irish-listed company €112 million upon completiion, subject to a €5 million reduction for net debt and about €5.6 million to fund a pension deficit at its UK pension scheme. In addition, the company will receive a deferred cash consideration of €1.25 million on the first anniversary of completion and cash consideration of up to €3 million depending on earnings. The group said it would use the sale proceeds to
reduce its borrowings. Its malt division comprises three malt businesses based in Britain, Ireland and
An Irish bio-tech company which is 50 per cent owned by NUI Maynooth is to enter the US market with the launch of an innovative food additive product which tackles disease and premature death in the world’s bee population - a major issue affecting food production in the US. Bemune was formed as a spin-out company from NUI Maynooth, where a research team has been developing the product for more than two years. It is hoped that the product, in the final stages of trials, will be launched on the international market
within six months. The company is in talks with a US firm about marketing it. Beemune intends to build a Research and Development centre in Ireland over the next three years, which will potentially create up to 30 manufacturing jobs. Disease and death in bees is the second biggest threat to crops after climate change according to the US Department Agriculture. Commercially managed honeybees- vital to production of up to 40 per cent of all fruit and vegetables - have suffered increasing ill health in recent years. This is due to
BEMUNE saves the day!
Belgium. It said that lands at Athy, Co Kildare, which were held by the Irish malt division, Minch Mart, would
factors including colony collapse disorder, which wiped out almost two-thirds of the global commercial bee population in 2007.
not be included in the sale.. A spokesman for Axereal said the French co-op fully intended to continue the Irish malt operation. David Wilkes, the current head of Greencore Malt, will assume the role of deputy chief executiive of Antwerp-based Boormalt Group, the subsidiary of Axereal which bought the malt business. Patrick Coveney, chief executive said the Irish business wuld generate €100 to €150 million in revenues this year, representing about 10 per cent of the company’s overall revenue. About 60 to 65 per cent of the groups revenues wre generated by its UK business, with the remainder divided between its European and US markets. Coveney and Greencore chairman Ned Sullivan stressed the increasing importance of the US market to Greencore’s strategy.
There were over 20 million commercial bee colonies worldwide that could benefit from the product.
Bank secures ruling over egg firm
Bank of Ireland has secured judgement for some €7.9 milliion against a Co Galway man who is facing trial in Britain in connection with an alleged multimillion euro fraud involving eggs being falsely passed on to British consumer as free-range organic eggs. A €7.9 million judgement against Pearse Piggott, and is wife Noelle Ballyglennon, Gort was issued. The judgement orders were not contested. The British authorities last year sought the
extradition of Mr. Piggott, who runs egg-distribution firm Pearse Piggott & Sons, over his alleged involvement in a fraud between 2004 and 2007 where eggs from caged hens were passed off to British consumers as being free-range or organic. Piggott, who has denied the charges against him including conspiracy to defraud, consented to his extradition. It is alleged that production numbers of eggs were altered, the names of the suppliers were incorrect
Harcourt redevelop GSC
Property firm Harcourt Developments has been given the goahead from An Bord Pleanala for a €200 million redevelopment of the Galway shopping Centre. Harcourt which is controlled by businessman Pat Doherty, has been attempting to secure planning permission for a development of the site on Headford Road for almost five years. The firm plans to build an 85,00 square metre mixed-use development in four blocks. The development will be carried ut in phases over five years
and the fraud netted a profit of Stg£1.59 million. In its action BoI claimed summary judgement arising from loans advanced to the couple between February 2006 and November 2007 to restructure existing loans, purchase a pub and adjoining investment property and to invest in certain residential and industrial property. The bank learned from media reports on June 11th that year that the British revenue was seeking the extradition of Mr. Piggott over his alleged
involvement in an egg fraud and later told the defendants they had 21 days to arrange payment of their loans. When propsals were not made concerning repayments, it issued letters in August 2009 demanding immediate repayment. Mr. Piggott in October put without prejudice proposals to the bank and payments of some €12,000 were also made.
Eason to take over H&H outlets
Eason is to acqurie the former Hughes & Hughes outlets at Dublin and Cork airports. The company has negotiated a new fiveyear licence arrangement for the outlets with the Dublin Airport Authority and will take over the running of five shops in Dublin and two in Cork. The m.d. of Eason, Conor Whelan, said he
was pleased that an indigenous brand such as Eason would be operating in such highprofile locations as Dublin and Cork airports. Whelan would not discuss the terms of the licences with the Authority other than to say that the parties were able to negotiate terms that were mutually satisfactory.
Eason has 54 outlets including 16 franchises and while it owns a number of properties it rents others. Including the staff at the airport outlets, Eason now empoys 1,700 people.
February-March 2010 27
MUSGRAVE RESTRUCTURES M U S G R AV E
The Musgrave retail group is to shed 143 jobs in Galway as part of a restructuring of its distirbution network. The company has said that “extremely difficult market” conditions had influenced its decision to close its Galway depot on the Tuan Road at the end of June. About 70 full-time and part-time staff will lose their jobs, while 55 staff have been given the option ot transfer to Musgrave’s distribution depot in Kilcock, Co Kildare. A cash and carry outlet in Galway will not be affected by the move, according to Musgrave Retail Partners Ireland (MRPI). MRPI and partners, SuperValu and Centra, said that the market contracted by 7 per cent last year. The company also said it initiated price reductions worth €235 million in
an effort to compete with price cuts in major chains and to combat the impact of cross-Border shopping. MRPI will still employ 1,550 staff, once Galway is closed with depots in Cork, Dublin and Kildare. The SuperValu and Centra network of shops employs a further 30,000 staff. Donal Horgan, managing Director MRPI said taht a 3o-day consultation period would begin with staff and trade unions. An outplacement programme would be put in place where transfer was not an option for those offered the choice, Horgan said. “This is a difficult time for all our colleagues on this site and our focus will be in assisting them as much as we can,” he said.
February-March 2010 29
C ONC ERN
EU ruling causes concern at below-cost selling Anti-smoking group Ash Ireland has called on the Government to increase taxes on cigarettes after the European Court of Justice ruled that Irish legislation which empowers the Goverrnment to fix a minimum price for cigarettes violates European law. In a judgement handed down, the court found Ireland had breached a directive which sets down rules governing the calculatiion of excise duty on tobacco products. The case dates back several years, a period in which requests by the European Commission for information from Dublin somtimes went unheeded. In its ruling, the Luxembourg-based court said Ireland breached its legal obligations under European law by failing to provide data on the legisation to Brussels. The case arose from proceedings that the European Commission took against Ireland, France and Austria. The commission
argued that legislation in all three countries undermined free competition by curtailing the freedom of manufacturers and importers to determine the maximum retail selling prices of their products. Ireland maintained that there was no prohibition on
the imposition of minimum prices and argued that the system of minimum prices was justified under European law by the objective of protecting health and human life. In addition, Ireland argued that a tax increase could not guarantee “sufficiently high” tobacco prices “because that increase could be absorbed by producers or importers by sacrificing part of their profit margins, or even by selling at a loss”. The Department of Health said it was examining the implications of the European Court of Justice ruling, but said the “floor” price was introduced to deter people from smoking and discourage young people from taking up the habit. Ash spokeswoman Dr Angie Brown said she was extremely concerned by the
ruling and called on the Government to ensure prices were kept high. “Ireland has and is permitted to have a separate tax regime to all other EU countries and it is our view that the Government has every right to apply taxes which ensures that tobacco is sold at current and even higher prices.” The ruling was welcomed by tobacco company PJ Carroll which said the minimum prices had become irrelevant because of illegal sales. “Packs of cigarettes are being purchased up and down the country for as little as €3.50 on the black market.” Rival company John Player said the rulling would have no impact because of illegal cut-price street sales.
Fyffes profits up Fruit importers Fyffes shook off higher costs and unfavourable currency exchange movements to achieve a 33 per cent rise in pretax profits in 2009. But the company has warned of difficult trading conditions in the first two months of 2010 and it revised down its earnings expecations for the year ahead. Fyffes chairman David McCann described the 2009 figure as “a strong result” and the best since changes to European banana import regulations were introduced in 2005. “The group achieved the
necessary increases in selling prices to offset the negative impact of higher costs and adverse exchange rates,” he said. McCann said trading conditions had been difficult in 2010 as a result of the imapct of prolonged period of cold weather on demand and pricing, while the strengthening of the US dollar had also had an adverse effect. The Fyffes chairman said it was “appropriate and prudent” for the company to revise the group’s targets for 2010. It now expects adjusted earnigs before tax and write-offs to be in the
Buy large and pay more! Retailers in Ireland are frequently accused of mispricing their multi-pack or bigger-sized products to create the impression that they are better value when the truth is that they actually cost more. Sonme examples of this are “A two-pack of O’Hara’s Madeira cake sells for €4 and is labelled as a ‘great value pack’. That’s fine, but a single pack of the same cake is €1.99, which would make two bought separately 2 cent cheaper. If it seems as if this is excessively picky - after all it is only 2 cent - then read on. Complaining about an extra 2 cent for a ‘great value’ pack although valid may seem petty, until you check the weights. The single pack contains one cake which weighs 350g and the ‘great value’ pack contains two cakes which weigh 330g each - total of 660g. If priced at the same unit price as the single
pack, the ‘great value’ pack should sell for €3.75, not €4. So,the multiple make an extra 25 cent, or over 6 per cent on every ‘great value’ pack!. That wasn’t all that was spotted. Kellogg’s Rice Kirspies, 450g, selling for €2.50 while 600g of the same cereal cost €3.45. Lets say you buy one 450g pack a week for four weeks, it will cost €10, or you could buy three larger packs, which will weigh exactly the same as four of the smaller packs, but cost €10.35. So you pay an extra 3.5 per cent for a larger pack. An extra 6 per cent here, an extra 3.5 per cent there... no wonder the profits keep rolling in.
range of €14-€18 million its original target for 2009. The target is conditional on the group securing
selling price increases for its produts across all of its markets.
The economy here will resume growth next year and may enter a prolonged period of expansion according to National Irish Bank. In his latest quarterly commentary, the bank’s chief economist, Dr. Ronnie O’Toole, said the economy would “move sideways” this year wtih some sectors continuing to contract while others moved into the recoveryphase. He said next year the economy would “switch to a period of relatively rapid catch-up growth, with GDP increasing by 3.5 per cent. “Following its recession in the early 1990s, Finland enjoyed a prolonged period of high growth as the savings rate plummeted, unemployment fell and much of the slack in the economy got taken up,” said O’Toole, “The same is
likely in Ireland.” While last year was challenging globally for attracting foreign direct investment, the reputational damage suffered by Ireland caused its performance to be below the average. However, O’Toole said Ireland was well positioned to take advantage of a global upturn when it came. “Ireland had lost a significant degree of price competitiveness in the first two years of the millennium; half of this has now been clawed back.” He said cities would dominate the next five years of economic growth. “Policies such as the carbon tax and the curtailment of spending on public services, together with the sourcing of most new export jobs in cities, will act as drivers of urban growth.
NIB PREDICT CATCH UP
Rail snack prices head north Its the great train robbery - Irish-style. Passengers from the republic travelling on the Enterprise train between Dublin and Belfast are charged a third more for food and drink than their Northern Irish counterparts. Prices on the crossborder service in euros are up to 36% higher than those in sterling. This includes hot food,
sandwiches, hot beverages, bottled water and alcoholic drinks. The route is jointly operated by Irish Rail and Northern Ireland railways but the menu prices on their websties highlight the disparity between currencies. The conversion rate used is Stg£1 to €1.50, although it is at least two years since sterling was that strong. It has fallen steadily: 1£ was worht almost €1.11.Mars and Snickers cost 60p from the on-board trolley, which should work out at 66c. However, the euro price is 90c, 36% higher.
A cup of tea (Stg£1.35, €1.49) costs €2. A savoury pie with herb crust (Stg£3.95, €4.37) costs €5.80. Mark Gleeson of Rail Users Ireland, which campaigns for better services and conditions on Ireland’s rail infrastructure, said “They don’t update it on a regular bais and sterling has shifted significantly, in the past six months
especially. Catering on the Enterprise is operated by Corporate Catering, a company contracted jointly by Irish Rail and Northern Ireland Railways. Barry Kenny of Irish Rail claimed the differential did not affect many customers. “As customers on the Enterprise service ... tend to have both currencies, they can, of course, pay in sterling regardless of where they are in their journey or where they board,” he said. In the past, passengers have complained that fares are higher for journeys starting in the Republic.
Innovative Solutions A voucher scheme is giving traders access to innovative solutions thought up by colleges When he set up Morningstar Bakery in 2006, Daniel Knight knew he had the right recipes to create a selection of enticing traditional breads. What he found harder to perfect was an innovative way to help his business to rise like his loaves. By chance they came across Enterprise Ireland’s Innovation Voucher scheme, which pays for smal firms to pair up with the research departments of third-level colleges across the country to find innovative solutions to business problems. “We were using plain white labels and were thinking of using printer paper packaging, but we weren’t sure,” said daniel. They used an Innovation Voucher to get St. Angela’s College in Sligo to do market research for them. “It showed us that consumers reacted negatively to printer packaging, thinking of it as overly commercial. We are a traditional bakery where everything is done by hand, and that is our selling point.” The study also indicated that what they really
needed was a stronger brand identity, using traditional labels, but ones that spelt out clearly the health benefits of their artisanal breads. Since they added that to the mix, business has boomed. “In the two years since we got our innovaiton voucher, our turnover has doubled,” said Daniel. Innovatiion Vouchers are available to small frms with a business opportunity or problem they wish to explore, building links with the nation’s third-level colleges in an effort to increase innovation in busines. The initiative was a key recommendaiton of the Small Business Forum in its Small Business is Big Business report, published in 2006. It was introduced the following year. Initially limited to the republic, the scheme now includes 10 colleges in the north. Almost 2,000 Innovation Vouchers have been given to smal firms since, with 800 having been redeemed and the majority of the remainder still live. Each voucher is worth €5,000 and can be used to pay for a specific research project done by a nominated third level college.
February-March 2010 33
K N OW
Learning more about your business and customer profitability by carrying out detailed analysis will be more beneficial than knee-jerk cost cutting. Most of those running SMEs might assume they know exactly what makes their business tick. But it is easy to confuse familiarity with fact. Ensuring your organisation survives 2010 and beyond means being able to answer two key questions: “Do I really know my business? and “Is what I assume to be the case actually the case?” In a thriving economy many businesses prosper despite, not because of, their best efforts. It is relatively easy to identify and exploit growth opportunities and, while mistakes are made, market buoyancy means thye rarely prove fatal if the core business is sound. Once a downturn begins this changes. Sales slow and customers start tightening their belts. Companies respond by cutting overheads to get breathing space. But as the crisis deepens they have to find other solutions, such as increasing value to customers awithout adding cost and trying to use existing resources to offer a wider range of products or services. However, such knee-jerk reactions are not always productive in the long term. Pioneer Security provides electronic security installation and maintenance to the upper end of the corporate sector. generally the company would expect to see a surge in installations in the last quarter of the year as companies spend their capital budgets before the year end. “This did not happen at the end of 2008 and by early 2009 we recognised that much of this was not delayed expenditure, it simply was not going to happen at all,” says operations director, Jochen Riehn who founded Pioneer with Martin Whelan in 2004. While it was tempting for Pioneer to try to make up for falling revenues by offering “budget” systems and service to a wider market, the partners resisted. “People opting for budget systems are far less inclined to take out maintenance contracts and all you end up doing is increasing your turnover with little or nothing to show for it,” says Whelan. Pioneer’s response was to stick
with its core business but to tweak its service offer to make it more cost attractive. “This has helped us maintain our reputation for high standards while increasing the options for customers,” added Whelan. Understanidng exactly which elements within an operation contribute to profits and which do not is essential. The same goes for customers. A customer may appear
significant when the value fo their business for a year is added up, but when this is balanced against the cost of servicing their account they may actually be costing money. “Taking a look at how profitable the customer is allows you to make a confident decision when it comes to key strategic issues such as resonding to pressure to reduce prices,” says Catherine Goodman of Business
Development Consultants, Goodman & Associates. “To assess a customer’s profitability take sales less direct costs. Ask ourself: does this customer take up a lot of your or your staff’s time? Are they mroe demanding than other customers? What is the cost of the time and energy you expend on their behalf beyond what they pay you?” The Pareto principle (also known as the 80-20 rule) states that for many
events roughly 80 per cent of the effects come from 20 per cent of the cause. Translate this into a corporate environment and it sugggests that 80 per cent of a company’s sales or profits will come from just 20 per cent of its customers. This is a crude measure but the principal is sound. “Often when you assess the real cost of demanding customers, you will discover that they
are not contributing to the profit in the business. In these cases you are better off investing your time in finding new customers,” says Goodman. Looking at the true profitability derived from each customers means being absolutely clear about what is being measured. Depending on the type of business a range of factors need to be taken into account, such as: product mix requirements; order size and delivery frequency’ special requirements incurring additional costs; discount levels; cost of extended credit facillities; and apportioning of all business overheads. This type of detailed analysis usually shows that customers who generate the greatest profit are those with the simplest requirements. Large customers tend to drive hard bargains and exploit their size to get perks such as special discounts and a premium service at no additional cost. Equally, fulfilling the requirements of a small customer may demand the same level of attention and cost as meeting the needs of a much larger one, but without the additional revenue. Detailed analysis can also reveal what elements of its product or service range are the most valuable in terms of profit. This type of analysis should not be a once-off. Today’s management information system facilitate the extraction of in-depth data at relatively low cost and give managers much greater clarity about where pfofits are being created and lost in their business. If it is done consistently, trends will quickly emerge that can be invaluable in helping businesses to set key benchmarks such as realistic selling prices. Quality information can help ensure that the business model is both fit for purpose and sufficiently flexible to respond in changing circumstances. For example, it can help a business clarify what its core business should be, based on criteria such as optimising return on capital employed. Duriing a downturn driving sales through noncore activity may yield short-term cash benefits. But it may also ultimately prove to be a distraction. It may also tie up capital that could be used more productively in developing new opportunities, for example in export markets.
February-March 2010 35
ARYZTA ERRS ON SIDE OF CAUTION changed forever by the economic woes of the past two years. Guidence for EPS for the full year remained at 224 cent, dampening the hopes fo some in the market. Some analyst estimates had crept higher in recent months, on expectations that some lift would filter through into customer patterns. The market would generally appear to be more optimistic than management, as the share price saw a lift after results. However, the company said “there was no glimmer of hope” as yet, despite the market appetitie for good news. The message from the company was the same as that of recent months - a challenged top line being offset by robust margin performance and good cash generation. “What we may ultimately need to be assured of is that, in the absence of a consumer recovery, Aryzta can strategise for top-line growth in what is a huge baked goods sector,” said John
Owen Killian Despite its recent good results there is little optimism about future growth for the food group, Aryzta. Aryzta boss Owen Killian was back in cautious form recenty as the company reported interim results. Killian is among the market’s most tight-lipped chief executives, and a noted openness about the company after the IAWS merger with Hiestand proved to be short-lived. This is probably due to the lack of light at the end of the tunnel for Aryzta at the moment. While the company is performing well in the current environment, it has seen no evidence of a lift in consumer spending. Some market insiders are questioning whether the market for the group’s fresh baked goods will ever reutrn to the growth levels seen before the recession, with concerns that the convenience market may have been
The recession has spurred consolidation in the convenience market, with more local shops joining up with flagship groups such as Spar or closing altogether.
O’Reilly of Davy. O’Reilly said that “limited meaningful national, sector or category data make it difficult to assess how well Aryzta perofrmed in the first half”, a period during which underlying revenue declined by 7.6 per cent. It is estimated that volumes in Ireand may have fallen by 20 per cent in the period. In terms of encouraging signs, Killian said that some shop owners were once again investing in the “theatre of bread”. This relates to how the products are presented. Key to Aryzta’s strategy is the marketing of its products. If a corissant is in a basket at the back of the store, it might not appeal to consumers but if the smell of fresh baked pastries is wafting near the cash desk, impulse purchases are more likely. For the past year, shop owners have been reulctant to spend any additional money on the presentation of products, but even cautions signs of new investment at this level would be welcomed. Another positive taken away from the results briefing was the fact that the company has invested in sales teams in Germany and France. While this put pressure on margins in euorpe, it bodes well for growth prospects in these countries. The share rice prose after the results were announced, which suggests that the market is more positive than Killian about growth potential.
... some sceptics in the market will need to be convinced that the company can continue on the same path it took during the boom years. While most analysts are quite positive about the stock, some market insiders are sounding a note of caution about the company. In the boom years, Aryzta enjoyed high margin business
with local convenience stores. It was a mutually beneficial relationship. The local stores needed Cuisine de France to attract modern consumers, while Aryzta (or IAWS) provided the ovens
free of cahrge, guaranteeing a channel for its products. recession has spurred The consolidation in the convenience market, with more local shops joining up with flagship groups such as Spar or closing altogether. This may impact on the margins for the Cuisine de France business in the longer term, with the branding of bread and baked goods becoming less important in these well-known chains. There may also be fewer shops to sell their goods in after the current shake out of the retail market. Another thorn in Aryztaâ€™s side is its investment in Grangecaste bakery in Co Dublin. While it is an impressive facility, it now looks to have too much capacity in the depressed environment. There is little hope of demand returning to double digits for some time to come, so longer term projections for demand may never occur. It was origiinally anticipated that this modern facility woudl supply the British market, but sterling has not moved in favour of Aryzta, and it now looks like a high-cost production centre from a currency point of view. The company could have the fire power for a large acquisitiion, given that its cash flow and balance sheet have continued to perform strongly. Investors will be keen to see evidence of renewed consumer spending on Aryzta products when its full-year resutls are reported. But some sceptics in the market will need to be convinced that the company can continue on the same path it took during the boom years.
February-March 2010 37
Trade surplus boost Irish exports fell 1 per cent by value in 2009, led by a decline in demand for computer equipment and electrical and industrial machinery, figures from the Central Statistics Office show. However, a decline in value of imports of more than 20 per cent gave rise to a trade surplus of €38.6 billion, 34 per cent higher than in 2008. Some of the largest declines were to Britain, which fell 15 per cent from €14.3 billion to €12.2 billion. Exports to Germany fell 21 per cent to €4.8 billion. However, exorts to the US rose by 5 per cent to €17.5 billion. The value of imports fell 22 per cent from €57.5 billion in 2008 to €44.8 billion last year, as demand fell for cars, petrol and computer equipment. The value of imported road vehicles plunged 72 per cent.
Taste no better for organic spuds
Months after a British governmetn body concluded that organic food is no healthier, organic potatoes have been given a roasting by Irish researchers who found they do not taste any diferent from regular spuds. A research team at the Dublin Institue of Technology asked 10 trained food assessors and 80 regular potato eaters to compare the two varieties on appearance, aroma, texture and taste. The professional assessors found the regular potatoes to be slgihtly softer, wetter and less sticky, while the regular eaters could not detect any difference. None of the group found that the organic spuds tasted better. “There are so many different views on this subject and I know some chefs may not agree with
us,” said Roisin Burke, a lecturer in culinary science at DIT who co-wrote the study. “There are other reasons why people eat organic potatoes, such as the lack of pesticides, but we found no difference in tastes.” Last August, researchers working fo the British Food Standards Agency claimed that a review of scientific evidence indicated that people who pay on average 60% more for orangic food in the belief that it is healthier are wasting their money. Conventional potatoes cost €1.06 a kg at Tesco compared to €2 for organic ones at The Organic Supermarket in Blackrock. Sales of Irish organic produce jumped 13.2% in the year to last July, valuing the industry at €124 million accordiing to Bord
Bia. Its research indicates that 73% of Irish grocery shoppers bought an organic product in the previous month, compared to 45% in 2008 and 20% in 2003. The perceived health benefits of organic food, conferrred through its “free from” status, is the most important aspect to Irish consumers. Bord Bia research has found that 73% say “not having added chemicals or pesticides” is the main benefit. The DIT researchers collected organic and conventional Orla potatoes from two sites in Navan which had been harested during Ocober and November 2008. They tested a batch every week for three weeks, examining colour, texture, dry matter content and acidity.
The ESB is planning to open a new front in the energy price war by selling gas to domestic consumers - ending more than 80 years of suppling only electricity to households. The state company which says its plans are “preliminary” hopes to profit for the ending of
Bord Gais’s monopoly on gas supplies to households connected to the national grid. Flogas, owned by stockexchange company DCC, has made the first move under-cutting Bord Gais’s tariff by up to 9%. Airtricity is poised to follow in the coming months, having
delayed plans for a gas launch earlier this year. After losing 500,000 of its 2m domestic customers to new entrants in the past year, the ESB wants the freedom to retaliate by dropping electricity prices. This would involve ending the regulator’s price freeze at the ESB.
ESB spark gas price war
BWG AT FOREFRONT OF CO NEWS
As the country’s most experienced retail and wholesale business, BWG Group continues to be at the forefront of convenience retailing in Ireland, driving innovation and delivering high quality products and services through its SPAR and MACE store networks. Based in Ireland, BWG also has operations in the UK, and employs over 900 people directly along with an estimated 20,000 people through its various retail franchises. The SPAR network has been operated in Ireland by BWG since 1963 and is now a permanent fixture in the convenience retail sector in Ireland. The chain has long been recognised as a trusted brand, delivering quality products at a competitive price through its network of conveniently located stores. In addition to owning and operating the SPAR network, BWG also operates the MACE and Vivo brands, along with the XL network operated through the company’s Wholesale division. In total the company manages over 900 convenience stores in Ireland and the UK. The convenience retail space is extremely competitive and SPAR in particular continuously strives to exceed consumer and marketplace expectations in order to retain its leadership position as the country’s largest convenience chain. SPAR Ireland comprises over 470 high quality stores incorporating three formats designed to meet the lifestyle needs of its many and varied customers. Local SPAR stores are the nucleus of the network and form 40 TGm
the cornerstone of the local towns and communities in which they operate. They offer a comprehensive range of everyday products and services to cater to shoppers hectic lifestyles. SPAR Express represents forecourt shopping for people on the move and EUROSPAR caters for family and supermarket shopping, with a more extensive range of goods including fresh fruit and vegetables, baked goods, salad bar and deli. People’s shopping habits have evolved radically over the last decade, in line with their more hectic and diversified lifestyles. Traditional shopping and meal times are a thing of the past and most people now do weekly ‘topup’ shops or purchase meals on-
the-go. For SPAR, a large part of its success can be attributed to the company’s ability to develop strategies that adapt and respond to consumer trends. When it comes to standards and innovation in convenience retailing, SPAR is always one step ahead of the competition. One such example is its successful range of third-party partnerships. SPAR goes beyond the traditional deli counter to offer its customers more choice for sitdown dining and meals on-the-go. Many individual retailers have opted to participate in one or more of the bespoke partnership arrange-ments on offer, including: Treehouse Juice and Smoothie Bar; SPAR’s exclusive Signature
CONVENIENCE RETAILING growing emphasis on own-brand products. Across BWG Business Divisions, development of Own Brand Ranges has become a major focus. According to recent consumer research undertaken by Nielsen, ownbrand is highlighted as a key growth area for retailers with a major focus on price and value in the current economic climate. Over 80% of Irish consumers now claim to buy own-brand and 46% claim to buy more now compared with six months ago. According to Nielsen, SPAR is Leo Crawford leading the way in Ireland when it comes to own-brand Sandwich range; the pizza/pasta purchases in the convenience food concept, ‘Pazza’; and Kitsu retail sector. Figures show that Noodles. SPAR stores have also penetration of own-brand taken a significant slice of the (including ‘exclusive’ alcohol) in ever-increasing gourmet coffee the convenience market is market, with more than 300 inapproximately 6.3%, however store Insomnia and Tim Hortons SPAR is ahead of the market with Premium Coffee and Doughnut 7.1% participation. MACE has range counters. SPAR continues also extended its range in recent to explore opportunities for new times, through a link up with partnerships and food options Palmer & Harvey to introduce the that respond to the expanding ‘M’ Brand Range. taste buds of the discerning Irish Following a successful MBO in consumer. August 2006, BWG has steadily BWG has been driving a expanded the business and, in steady growth plan over the last the second half of 2008, few years, with the expansion and management completed a deal to remodelling of its store networks, acquire Mangans Wholesale. The involving revamped shop interiors result is that BWG now controls with revised store layout and the entire MACE store network in design, new food strategies and the Republic of Ireland. product offerings as well as a
This acquisition has given greater impetus to BWG’s plan to raise the profile of its MACE network in Ireland, emphasising the brand’s unique sense of place and strong community presence. On the wholesale side, BWG operates the Value Centre cash and carry business, operating out of 25 outlets in key population areas nationwide. In late 2008, the division commenced trading from a new, purpose-built North Road facility – just off the M50. Also part of the Wholesale division BWG Foodservice unit supplies the catering industry. In Britain, BWG owns Appleby Westwood – a SPAR wholesaler in south-west England with responsibility for 350 SPAR franchises. Chief executive Leo Crawford joined BWG in 1996 as managing director and was appointed to CEO in 1999. In October 2006, Triode Investments Ltd. a company controlled by Leo Crawford, John Clohisey and John O'Donnell completed the purchase of BWG Group from Electra. Leo Crawford is also the President of SPAR International, a role he was appointed to in 2005.
February-March 2010 41
Lemon Detox on the Rise
Known Stateside as the celebrity favourite 'Maple Syrup Diet (as followed by Beyonce and Madonna to name a few) and establishing itself as the leading detox programme in the UK, Lemon Detox is on the rise in health food shops nationwide due to the growing demand from customers. Says Cuka Clarke, MD of Pure Natural Products that distributes the product, “The uptake of Lemon Detox in the UK has been tremendous. We have seen an impressive growth of over 350% in the last year and popularity of the product continues to gain momentum at an astonishing rate as the likes of Planet Organic and Revital continue to reorder to meet demand. Sales are forecast to continue rising next year.” The internationally acclaimed five to 10 day detox programme is designed to cleanse the body from the inside out while helping shed unwanted pounds. It
also offers ‘relaxed’ versions where clients can replace one meal a day or one full day of food each week with the Lemon Detox formula. Due to its proven efficacy, Lemon Detox is fully endorsed by leading medical experts including Jan de Vries, leading naturopath and acclaimed author, Dr Janine Leach, President of the Naturopathic Society, leading nutritionist Amanda Griggs, Dr Michel Odent, one of the UK’s leading Obstetricians and Dr Elizabeth Adalian, Chair of the Homeopathic University. Sold in over 30 countries worldwide, Lemon Detox is a totally natural detox system that helps the body rid itself of wastes and toxins safely and effectively, enabling clients to both look AND feel their best. The health and beauty benefits of Lemon Detox include: Elimination of toxins Improved complexion
Thicker, more shiny hair Stronger, whiter nails Weight loss Retrained appetite Vitality Enhanced sense of well-being Made up of pure water, fresh lemon juice, either cayenne pepper or ground ginger and Madal Bal Natural Tree Syrup, it is this last ingredient that gives the body the essential nutrients it needs to sustain optimum performance and vitality throughout the duration of the programme. The Madal Bal Natural Tree Syrup was formulated in the eighties by an impressive specialist team led by Dr. K.A. Beyer (psychologist), Dr. Meywald (GP & Homeopath) Dr. Raabe (GP & ayurvedic doctor) and Kumudini Weerawarna (ayurvedic doctor, pharmacist and herbalist) and consists of four different South East Asian palm syrups rich in essential minerals and nutrients such as manganese, zinc, potassium and calcium. Five years and thousands of tests later, the result was a finely balanced mixture meeting all the mineral and nutrient requirements for the Lemon Detox Diet. This syrup now sells more than half a million litres each year to 33 countries worldwide. To make one glass of the Lemon Detox formula, mix the following into half a pint of hot or cold water: Two small tablespoons (or 20mls) of Madal Bal Natural Tree Syrup Two tablespoons of freshly squeezed lemon juice (about half a lemon). Use fresh lemons, not lemon drink or concentrat Half a pinch of cayenne pepper or ginger (adjust to taste) It is important to note that the Lemon Detox takes a full commitment to the programme for real, effective and credible results. The Madal Bal Natural Tree Syrup is priced £39.99 (trade price £26 per litre with minimum order of 6 litres) and is available via mail order. For further information or to order, please call 0845 370 1012 or 0845 370 1014 or visit www. lemondetox.com.