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It’s trolleys at dawn as Tesco declares price war with Lidl – The Sunday Tribune 10/08/2008

Tesco is fighting hard with its new Cash Savers campaign – a throwback to the yellow pack days of the 1980s – but it will find it hard to close the gap on German discounter LidlLast summer, a survey by Ireland’s new National Consumer Agency found only a €2 difference in the cost of 58 popular items bought in supermarkets. The survey was astonishingly blind to a new cultural phenomenon. It did not include German discount retailers Aldi and Lidl, two competing giants that have offered impressively good value to Irish shoppers since opening their first stores here in the 1990s.

But then something interesting happened. The little-known consumer awareness website, valueireland.com, cheekily dismissed the ‘national’ price survey as a ‘notional’ one, and did the shopping the NCA didn’t do. It compared 43 items of almost exact matches at Aldi and Lidl (albeit largely surveying less well-known brands stocked by the two chains).

The result showed Irish consumers could save €30 by shopping at the German stores. Tesco was the most expensive, at €121. This compared with Aldi’s €88.98, and Lidl’s even cheaper €88.68. It was the first of several investigations, official and unofficial, showing Aldi and Lidl giving Irish consumers a better deal than rival supermarkets. The German discounters now enjoy an estimated 7% share of the Irish grocery market. That’s three times smaller than Tesco’s share, but is growing every year.

Last February, the NCA finally clicked on the big picture. It produced a survey which found that, on a basket of 48 branded and non-branded groceries, Lidl was almost 17% cheaper than Aldi. But the most significant finding was that Lidl was up to 45% cheaper than SuperValu, 56% cheaper than Dunnes, and 52% cheaper than Tesco, on comparable items.

Last week, Tesco slashed prices across its grocery range, and introduced new, cheaper products. Under the UK multiple’s ‘Cash Saver’ scheme, up to 500 new own-brand products have been put on the shelves, adding to the 300 already there. Some 200 new branded products have also been introduced.

Tesco has also reduced the price of 3,000 products this year. This includes some items in the Cash Savers Range. It says it will reduce 2,000 more items in the coming months. The scheme is reminiscent of the Yellow Pack own-brand deals in the 1970s and 1980s. Cash Saver’s eye-catching black and yellow colouring harks back to the Quinnsworth era, when Tesco’s predecessor appeared eager to compete with its Irish rivals.

The 1980s were gentler times for Irish supermarkets. These days, competition is not so reserved. Nor does the stigma of shopping around for cheaper goods have such strong cultural resonance. Last month, another survey by the NCA found that almost a third of Irish consumers had changed their grocery shopping habits since the start of the year, with 61% and 54% now doing at least some of their weekly shop in Lidl and Aldi respectively.

Tesco’s introduction of the black and yellow is far more significant than a mere return to the old days. With household staples such as tea and coffee now garishly displayed in its specially appointed aisles, and several hundred other cut-price products sprinkled throughout its stores, this is a new, visually striking, aggressive style of merchandising.

The Cash Savers campaign is designed to match the gung-ho swagger of Aldi’s and Lidl’s recent newspaper ad campaigns. It is a determined fight-back by Tesco in a propaganda war where value is the new bottom line.

Ann Fitzgerald, head of the National Consumer Agency, does not see Tesco’s new move as a price war. She said the NCA is “monitoring the situation to see if they have genuinely reduced their prices or have simply repositioned certain products in more prominent places in their supermarkets to create the impression prices are falling”.

Tesco says Cash Savers is not a one-off promotion. Does that mean it will be willing to slash prices even more in a price war with Lidl? A Tesco spokesperson told us: “Our commitment on the Cash Savers Range is that we will not be beaten on price by anyone.”

A spokesperson for the remarkably tight-lipped Lidl told Money Talks: “Lidl is the recognised price leader in the Irish grocery market. We will continue to offer our customers quality products at the lowest price.”

When asked whether it would drop prices even lower in the event of more aggressive discounting by Tesco, the spokesperson appeared to imply that it would. “We will continue to offer our customers quality products at the lowest price,” she repeated.

And, in an obvious side-swipe at Tesco, she added: “The Irish consumer is too well-educated to be misled by PR hype without substance. Shopping with Lidl has proven that you can save while not compromising on quality. In recent newspaper advertisements we are highlighting these substantial quality and price differences .”

Michael Kilcoyne, vice-chairman of the Consumers Association of Ireland, believes Lidl’s newspaper ads have been giving Tesco a real run for its money. “Lidl has been picking a product each day from the new Tesco range (which Tesco has been advertising to show it is matching Lidl’s prices). Lidl then shows that its product is better value and better quality. It is really putting it up to Tesco.”

From what he has seen of Tesco’s new offers, Kilcoyne is not impressed. “I think a lot of it is a PR gimmick. There may be many new items, but how many of them will the ordinary shopper buy in a week? Not many, I would say.”

He notes that it is “extraordinary” when a major UK multiple appears so threatened by a supermarket chain such as Lidl which, up to now, has located the vast majority of its stores in rural and working-class areas. “In May and June, Tesco spent €4m on advertising in Ireland. That’s twice the amount it spent during the same months last year and makes Tesco Ireland’s second biggest advertiser after Diageo .”

There are signs, however, that Lidl is ready to entice more affluent shoppers. Last week, it was in the bidding for the lease of the former Habitat premises in the Grafton Street area, Dublin’s most fashionable shopping district.

Meanwhile, Tesco’s slogan may be ‘Every little helps’, but for increasing numbers of price-conscious Irish shoppers it’s more a case of ‘Every Lidl helps’.

Eddie Lennon

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