Speech by the Taoiseach, Mr. Bertie Ahern, T.D., at the Launch of the Report by Indecon Economic Consultants on the Impact of Tesco on the Irish Economy, in the Berkley Court Hotel on Wednesday, 21 November 2007 at 5.30pm
I am very pleased to launch this report by Indecon on the impact of Tesco Ireland on the Irish economy. The report marks the tenth anniversary of Tesco’s entry into the Irish retail market and gives us the opportunity to assess the nature and extent of that impact.
Tesco Ireland has a solid record of growth over this period: from an annual turnover of €1 billion and a workforce of 8,400 in 1998, to a current turnover of around €2.75 billion and a workforce of 13,000.
The Report shows the scale of the company’s contribution to the wider Irish economy, and in particular to the food and agriculture sector. Sales of home-produced products in Tesco’s Irish stores exceeded €900 million in 2006, of which food and drink products accounted for over €800 million.
The most significant statistic in the report is perhaps that exports from Irish producers, mainly in the food and drink sector, to the Tesco Group internationally totalled €655 million in 2006, close to double the figure of €350 million in 2001. If the Tesco Group were a country, this figure would make it the second largest export market for Irish food and drink products.
The growth in Tesco’s sales of Irish goods both at home and internationally shows what can be achieved when retailers work in partnership with local producers, and the report presents a number of case studies of Irish SMEs which have been assisted in product and process innovation through their association with the company.
I very much hope that this progress can be maintained, and indeed intensified, in the future. The Government believes that is great scope for Irish suppliers to sell more products across Tesco’s international network. The Tesco Group’s global sales are now in the region of €60 billion annually and it operates in over a dozen countries, including Japan, China, South Korea and, most recently, the United States.
With a market of this size, even a modest increase in the Irish share of the company’s sales has the potential to deliver major growth for the indigenous food sector. This is something we want to work towards in partnership with Tesco in the years ahead.
The company’s expansion also tells us a lot about the evolution of modern retailing. We see the diversification into areas such as financial services, petrol retailing, and mobile phones; the emergence of new forms of customer service such as online shopping; the adoption of more sophisticated methods of supply chain management; and the development of a range of store formats from relatively small-scale convenience outlets to very large hypermarkets.
These trends have of course led to criticism, particularly insofar as they have been associated with a rise in the market share and power of large retailers. Clearly, there has been an increase in market concentration in the grocery sector in recent decades. It is necessary to keep in mind, however, that there have been countervailing trends, such as the growth in convenience and forecourt stores and the emergence of farmers’ and local markets. Despite Tesco’s growth over the period, its 25% share of the Irish grocery market in 2005 was the same as that in 1998. Many would also argue that the growth of large retail chains has benefited consumers by providing a broader and better quality range of goods and services at affordable prices.
We want a retail sector that is characterised by effective competition and healthy diversity. There is a space and a role for large retailers, convenience outlets, specialist and niche stores, and local markets. It is important to ensure that a proper balance is maintained between these different market segments and that no one segment achieves a dominance that is detrimental to the interests of either consumers or producers.
The Indecon report carefully sets out the direct and indirect contributions that Tesco’s operations in this country and internationally make to the Irish economy. I hope that ten years from now a follow-up report will note a continued growth in these contributions in the form of additional employment for Irish workers, enhanced choice and competition for Irish consumers, and greater business opportunities for Irish companies, particularly for Irish food producers seeking an accessible route to world markets through the global reach of Tesco’s operations.
In conclusion, I would like to acknowledge the quality of the report prepared by Alan Gray and his colleagues at Indecon. It shows the huge impact of Tesco on the Irish economy and the potential for us to work together to further increase exports from the Irish food and drink sector throughout the Tesco network.
Thank you.
ENDS.