National Consumer Agency report on grocery prices

Details of the latest NCA report on grocery prices here. Highlights include the fact that the prices of branded grocery products fell by 14% between between January 2009 and July 2010, the fact that there is almost no difference in the cost of a basket of branded grocery goods between the four main retailers (including SuperValu) and the fact that price competition in the Irish grocery market mainly takes the form of promotions and special offers and by juggling small price changes on specific items.

Six stores were visited, but because the multiples (though not SuperValu) operate a policy of national pricing, prices in any one store are representative for the group as a whole. The data collected is made available in an accompanying spreadsheet, although the link did not appear to be working when I accessed it this morning. The discounters Aldi and Lidl were not included in the survey. Conor Pope in his analysis piece on the survey in the Irish Times today suggests that retailers may be able to `play´ the survey by keeping prices low on the items likely to be included while giving prices free rein on less common items.

The NCA Chief Executive Ann Fitzgerald says that the findings suggest that competitive pricing is still not a feature of the Irish grocery market and to address this there is a real need for a new entrant to the market to offer consumers a real alternative. According to Paul Cullen’s report in the Irish Times, she called for a removal of the cap on the size of retail units under planning regulations, claiming this would stimulate competition by encouraging a big overseas retailer to come to Ireland.

In a variant of the glass half-full argument, one might argue that similar prices are actually a sign of a very competitive market and emphasise more the fall of 14% in prices of branded goods over the past 18 months. However, the previous discussion on this blog regarding Ireland’s high food prices in an  EU context suggests that Ann Fitzgerald has a point.

25 replies on “National Consumer Agency report on grocery prices”

“According to Paul Cullen’s report in the Irish Times, she called for a removal of the cap on the size of retail units under planning regulations, claiming this would stimulate competition by encouraging a big overseas retailer to come to Ireland.”

What does Ann Fitzgerald base this on? How is putting small shops out of business and thereby creating local monopolies after the peripheral megastores have wiped out the opposition going to help things? What benefit are the silo-ized Competition Authority promising in lieu of job losses, monopolies and devastated urban centres?

Mega-retailers such as Dunnes and Tesco must be delighted that once again the Competition Authority is coming to their aid on an issue worth huge amounts of money to them. TPreviously Ms. FitzGerald campaigned for the abolition of the Groceries Order. This allowed them to engage in predatory pricing on some items while compensating by raising the price of other items.

The most effective competition which has caused the multiples to lower their prices is Aldi and Lidl coming into the market. These two retailers, which do not build mega-shops on the outskirts of towns, have started to hurt the big retailers when the public became penny-conscious in the recession. Constructing mega-stores away from other retailers is an effort to avoid price competition by promoting convenience. People do not construct mega-stores so they can lower their prices.

Chairwoman Anne Fitzgerald said: “If the Cabinet decides to abolish the Groceries Order, it will be a very good news day for consumers in Ireland. It will certainly mean far more price competition, which we’ve been lacking up to now, and it will benefit in particular the poorest among us who spend most of their income on food.”

Firstly, I agree with everything Zhou just said.

But also I’d like to add that a policy of national pricing is unjustifiable for groceries. The overheads, staff costs and rental vary significantly across the country, and a system of national pricing serves no purpose except to conceal the lack of competitive pricing.

I’m all in favour of national pricing for some things, but not the panoply of goods available in grocery stores -that just eliminates local competition -and for grocers, local competition is the only effective competition.

There is nothing particularily wrong with the work organisations like the NCA do. But, I suspect that the retailers’ organisations had a point when they said that organisations such as the NCA always like to justify their own existence in their findings, so they will always find lack of competition, even when they report price falls that are probably unparallelled anywhere in the world in the period covered. During the same period, January 2009 to July 2010, grocery prices in Northern Ireland have actually risen quite sharply, in contrast to the 14pc fall the NCA found in the Republic.

Regarding the EU report, discussed here on 29th June last, although it was published only a few weeks ago, it was was based on prices in early 2009 when the euro was its peak against sterling (and the dollar), a fact that managed to be ignored in most media commentary at the time. As private organisations doing similar work are usually far more up-to-date in these matters than the Eurocrats are, a more accurate current picture of relative price levels in Ireland can be obtained by looking at what they show. There have been a number of such reports in recent months, all of them showing that price levels across the board in Ireland have fallen rapidly relative to all other EU countries in the past couple of years. No doubt this will be reflected in an EU report in a couple of years time.

The Mercer cost-of-living survey (link below) is the best known of these private reports. But, it is for cities rather than countries. The last one was published in June and was based on prices in early 2010. It showed that Dublin was only the 42nd most expensive of the 210 cities covered, down from 25th most expensive in early 2009 in early 2009. Bear in mind that lots of the cities are from the Third World, so naturally they are a lot cheaper. Of EU15 capitals, Dublin was only the 9th most expensive, down from 4th most expensive in early 2009. Based on recent inflation figures and exchange rate movements, Dublin will certainly have dropped quite a few more places since early 2010.

Looking at the NCA report, it looks as tough there was a near 30pc fall in grocery prices in Ireland relative to those in the UK between January 2009 and July 2010. This results from (a) the 14pc fall in Ireland reported by he NCA (b) a 5pc rise in the UK during the same period (c) a near 10pc fall in the value of the euro relative to sterling over the same period. This has contributed to my forecast, posted here in November 2009 and derided at the time, that cross-border shopping trips to Newry would plummet to virtually nothing in early 2010, proving to be among my better forecasts.

While on the subject of prices, what matters far more of course is prices relative to incomes or, in other words, the number of hours of work needed to purchase items. Despite the fall in nominal wages in Ireland in the past couple of years, it is quite likely that the number of hours of work needed to purchase grocery items has also fallen for the majority of people at work, if the NCA figure of a 14pc fall in grocery prices between January 2009 and July 2010 is correct. That raises the question of why retail sales volume (emphasise ‘volume’) of grocery items has fallen in that time. It is clearly not because these items are less affordable – they are more affordable, as the NCA figures show. This is a major difference between the recent/current (take your pick) recession and the 1980s recession. Back then, retail sales volume of grocery items fell because prices soared (inflation was 20pc annually for several years) far faster than incomes, so the items became less affordable. This time round, because of the price falls, the real incomes of the majority of people at work have risen during the recession. Mine certainly has. The fall in retail sales volume in this recession appears to be entirely because of a sharp fall in consumer confidence (although partially reversed in recent months) and people being scared into saving far more of their incomes. The best thing, those unfortunate enough to be jobless in Ireland at the present time, could do is to encourage those, who are fortunate enough to be at work, to go out and spend, spend, spend. Real prices have never been so low, so why shouldn’t they, other than the fear of economic Armageddon which the media are trying to instill?

In similar vein, there used to be an annual index, called the Big Mac-index, which compared the number of hours of work needed to buy a Big Mac in different cities across the world. Now, apparently, it has been replaced by the Ipod-index, which is based on the same idea, namely take some ‘highly uniform product that is available everywhere with the same quality’, and compare the number of hours of work needed to purchase it in different cities across the world. The results of the last Ipod-survey were published in August 2009 (link below). Dublin came out of it very well, being the 5th cheapest city in the world (in terms of number of hours of work needed to buy an Ipod), the 2nd cheapest in Europe, and the 1st cheapest in the EU. Only 10.0 hours of work were needed in Dublin, compared with 11.0 in London, 13.5 in Munich, 15.0 in Paris, 19.5 in Lisbon, 43.0 in Prague, 45.5 in Warsaw, and 68.5 in Budapest. Looking at the figures for the east European cities in particular, one can see how far below Ireland their real living standard is, why so many from there wish to live in Ireland, and why, once growth is more fully restored in the Irish economy, there is a reasonable prospect of a renewed inflow to Ireland from eastern European countries, since a young person moving from Prague, Warsaw or Budapest to Dublin will see their real income (as measured by the Ipod-index) quintupling or more. As any comment on immigration is likely to be misinterpreted, I should make it clear that I welcome this prospect.

Sterling will have played a big part in the fall in branded goods. A high % come through the UK. I started my own business 3 years ago when € was around 70p then it moved to 94p and back down to about 82p now. It had been 87p a couple of months ago.

The effect for me was something I sold at €25 at the beginning, I am now selling at €20, a 25% reduction.

It would be interesting to know the exchange rate at both points in the survey.

Ann Fitzgerald also seemed to ignore promotions saying consumers just wanted the branded products to be cheaper all the time. So these surveys ignore the buy 2 get 1 free approach. We practically do all our shopping this way now. The question is are there more or less of these now than 18mths ago.

@ Ger
“But also I’d like to add that a policy of national pricing is unjustifiable for groceries. The overheads, staff costs and rental vary significantly across the country, and a system of national pricing serves no purpose except to conceal the lack of competitive pricing.”

You’re partially right but the outcome would be higher prices in the cities and Dublin in particular. The only real difference is rents, staff costs tend to be uniform (as negotiated with the unions) and overheads like ESB, insurance etc are also the same nationwide.

From a store chain point of view charging different prices in different areas would cause plenty of difficulties in terms of marketing promotions. It would also encourage customers to by pass their local shop to go to the cheaper one which may be a mere 10 miles away.


It is, perhaps, worth noting that, wrt to more and bigger retail sites, the UK Competition Commission came to a similar conclusion two years ago – Having the NCA in the Competition Authority may not be a good idea.

And there should be enough evidence that the big multiples will never engage in a full-frontal price war across all items that would benefit consumers – and, even if they were to, suppliers would be squeezed to maintain margins.


Yes, many prices have fallen – mainly because they had increased almost without bound during the bubble. And there is probably more to go. However, many prices in the state, semi-state and sheltered sectors have remained the same – or even increased. Still plenty of scope to increase real incomes.

And, since little rationality attended the animal spirits fuelling the bubble, why do you expect a comprehensive and widespread reversion to rational behaviour following the inevitable collapse?

@ Stuart

While I agree with the principle that national pricing is unjustifiable, it is not necessarily the case that the cities would end up being more expensive. While operating costs are potentially higher, the additional volumes of goods sold in outlets located in higher density population centres would potentially allow these stores to charge less per item but maintain overall profitability.


I completely agree with your assessment GER. To get a better handle on the effective level of competition in the groceries market as well as considerations for competition going forward, one needs to take an appropriate local definition of the market. Developments in the industry would indicate that major providers such as Tesco may end up having local monopolies in many areas of the countries, especially in small urban centres and rural areas as large stores will put small groceries out of business.

Bigger retail sites and lowering food prices go hand in hand. Inevitable to see end of small grocers, and to be honest when I measure the price difference and take a look at my wallet I won’t find it hard to choose which side I will be shopping in, my pity for the small retail is diluted in their pricing. Real and nominal mean nothing here, it’s the price on the box.
..and leave them pay over the price odds (through competition) for land while their at it…look at Aldi/Lidl price per site.
Ann Fitz is not far off the mark.

“While I agree with the principle that national pricing is unjustifiable, it is not necessarily the case that the cities would end up being more expensive”

My experience is non food. All our loss making stores were in the cities and the reason was the rents were so much higher (often 3-4 times) but there was loads of competition (cities probably got overshopped). We wouldn’t go into a small town if a competitor was there already.

But you have hit on a very important point, whether a store makes money or not depends basically on sales per sq ft and rent. In the business I was in sales per sq ft in Ireland were considerably lower than in Britain. Don’t know the story for sales per sq ft in the grocery sector. But if you have lower sales per sq ft a large proportion of your costs are fixed and on an all other things being equal basis you will need higher prices to survive.

By George Monbiot. Published in the Guardian, 10th August 2009

In 1998, the government commissioned a study of the impact of big stores on market towns(3). It found that when a large supermarket is built on the edge of the centre, other food shops lose between 13 and 50% of their trade. The result is “the closure of some town centre food retailers; increases in vacancy levels; and a general decline in the quality of the environment of the centre.” Towns are hit especially hard where supermarkets “are disproportionately large compared with the size of the centre”. In these cases the superstore becomes the new town centre, leaving the high street to shrivel.

The prospects for small shops were dim enough during the boom. As the supermarkets closed in, independent stores in the UK shut at the rate of 2,000 a year between 1997 and 2004(4). Now they’re in much bigger trouble. A report by the Local Data Company at the end of July suggests that 12,000 independent shops have already closed in England and Wales this year(5). Tesco, by contrast, has been mopping up. In April, for the first time, its turnover exceeded £1bn a week(6).

Tesco’s application is riddled with questionable statements. It maintains that the new store “will provide a minimum of 140 additional full and part time jobs”(7). But the superstores’ own research shows that every large outlet causes the net loss of 276 jobs(8). That’s hardly surprising: independent shops employ five times as many people per unit of turnover (9).
Once the store is built, we will quickly be deprived of choice. As the first wave of customers peels off and the income of the independent stores declines, the quality and range of their produce falls, driving more people into Tesco’s arms. From that point on, the collapse becomes unstoppable.

I think myself that we are too late in the retail game for building megastores. Certainly, the market isn’t growing fast enough in Ireland now to make it attractive to go out and build one. Myself, I think the future for food retailing is online, although there are many difficulties to be overcome.

Practical question: there is now a lot of relatively well positioned retail real estate available, something that was not true two or three years ago.

So why do Aldi and Lidl not take advantage of this and open more of their medium-sized stores? One example is the Docklands area in Dublin, which would greatly benefit from a Lidl and/or Aldi and there would clearly be plenty of business for it.

@all re national pricing policy
The wallmart model was one of a loss leader whereby it would enter a town and open more stores than required for the population.
These stores would cut prices and forces the competition out of business. Once the competition was gone they could then close down the worst performing stores and up the prices, and make the remaining stores competitive.
Unless you are planning on taking this approach for an entire country in one massive grab for market share, a national pricing policy makes this impossible.

Also for big supermarkets I would doubt the property costs are much more than say 10percent (I know way more for smaller high st. Units such as clothing or electonics stores) of turnover. Stores such as tesco have massive turn over but fairly small margins. If for example the max difference in Rent/turnover is 30percent (which is high) and rent only make up ten percent of turnover, then the max reduction in pricing that could
Be passed to the consumer would be 3percent. This would be the max value with all shades between. The retailer would not be able to advertise special offers or low prices universally which would mean significantly greater advertising costs.
Besides, a high cost property should have a higher turnover to reflect this, otherwise it is a poor choice of site.
I was in Dunnes in Rathdowney recently and I can’t imagine they have a lower rent/turnover ratio than a proper town centre location!!

Tesco’s application is riddled with questionable statements. It maintains that the new store “will provide a minimum of 140 additional full and part time jobs”(7). But the superstores’ own research shows that every large outlet causes the net loss of 276 jobs(8). That’s hardly surprising: independent shops employ five times as many people per unit of turnover (9).”

This seems obvious to me but it is never highlighted. How many jobs did IKEA ‘create’ when it opened. And those jobs that John Gormely apparently stopped being created recently.
In times of full employment these larger enterprises free of labour to engage in other more productive enteprises such as in the export sector. Stores like Aldi and Lidl have a great business model where they actually pay there staff fairly well but have far fewer. They don’t have 8 different types of baked beans with there branded wrappers facing you perfectly, but that is a luxury many can now live without.
I think they are great and provide the choice of less choice (under one roof) but they do not create jobs.
Jobs in retail will only increase when demand increases

does anybody feel we don’t get decent value for money on groceries? bearing in mind this is an island and much of what we buy has to be shipped here, the fact that similar baskets cost similar prices isn’t surprising, the tags on the shelf often show the price eg: in tesco some products have a tag with ‘this costs x here and y in dunnes and z in super valu’, can they not compete on the basis of other products? a commoditized basket being of similar price is likely a good thing, you can then determine where you are getting value on what you buy outside of the ‘standard’.

I don’t think the NCA did its survey justice by excluding the lidl and aldi either.

No matter where you live, stuff has to be shipped. Shipping over sea is not necessarily any more expensive than shipping the same distance over land to the European interior. Continental prices are subject to VAT and then of course there are all those crazy pinko labour laws and taxes on corporate profits that we simply don’t have here. Yet groceries are cheaper there. Something definitely seems to be wrong.

Yes why are lidl and aldi classed as ‘discounters’? What does that mean?

They are just good quality, low cost supermarkets. As I said above they have a slighly different business model that make savings by not providing a huge variety of branded products and not worrying to much about presentation. I love the way they are quiet and you don’t get lost, in and out in a few minutes, with lovely hams and cheese (no I don’t work for them). I enjoyed lobster for the first time recently.

Why are they focusing on branded products anyway. Surely if the prices are tight on branded products it suggests they are operating on lower margins. If some were significantlly higher in some outlets we would be saying the higher prices retailer are ripping us off.

The massive gap between branded and none branded products of identical quality is a sign that the brand holder is charging a significant premium.
Milk is a perfect example with Avonmore milk costing approx. 40% more than the exact same product. Surely marketing executives aren’t that expensive!

@ Karl,”does anybody feel we don’t get decent value for money on groceries?”.
Certainly if you focus on well known brands, perhaps Irish peoples loyalty to branded goods is part of the problem

I have no respect for this NCA which has become a symbol of what used be termed the Rip-off Republic. In 2004, I made a submission to the Consumer Strategy Group, which in its report recommended the setting up of this quango.

I recommended the launch of a value for money online comparison service (not produced by the likes of Accenture or Deloitte) which would provide benchmarks for key consumer items based on prices provided by a selected group of vendors.

Here we are in 2010, the CE earns as much as Ben Bernanke and used to head an insurance lobby group; a 14-strong board draws expenses to regulate this small outfit and about €400k has been spent on public relations. There is no online comparison service and we get these surveys which are no benefit to the typical taxpayer who lacks a knowledge as to what the benchmark price should be.

Just wondering if Polonius’ advice that “brevity is the soul of wit” has been taken to heart and the permitted length of a post has been shortened?

I got a ‘406’ error page earlier when I tried to make a single post on this thread.

@ zhou_enlai

The arguments for repealing the grocery order were always on shaky foundations and made almost no use of information economics. At the time some of the ‘evidence’ showed that Ireland had high vegetable prices, and so should repeal the order. This was despite below cost selling of vegetables being permitted (so shops are not left with rotting stock). In effect, repealing the grocery order has simply lead to the subsidisation of alcohol.

The problem is not lack of competitors, but lack of information. I would suggest that there should be a website maintained by a government agency. It would be obligatory for supermarkets to post their prices on the site. This way someone can prepare their shopping list on the site, and then the site would show the total price in each store. They could even have some sort of smart phone application for it. It should be easy for supermarkets to comply as their pricing is already computerised.

Finally, I found the report a bit misleading. Though the difference between the big 3 retailers on the entire basket was only €1.14, there were significant differences on some individual items (they provide an excel sheet). There is an 11% difference for seeded bread, 23.3% difference for Penguin Bars, 47% for Easy Singles, and 33.4% for Dennys Waifo ham. So there are savings to be made by bringing a backed lunch to work 🙂 Anyway, identical prices would be consistent with perfect competition (though I doubt anyone believes that we have perfect competition).

I assume the reason that Aldi and Lidl don’t appear in this survey is because they don’t sell these branded goods.

The survey results do not take acount of promotions (though details are included in the underlying spreadsheet), do not include own brand labels and does not include fresh produce so a good proportion of Irish consumers’ grocery expenditure is not covered. Would one expect prices of branded goods to be less dispersed between different supermarkets than these other categories, either because of manufacturers’ recommended retail prices or because consumers find it easier to make price comparisons on these goods? Who remembers exactly what you paid for lamb chops per kg last time?

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