Overview of the Irish Retail Landscape

Ireland’s grocery retailers have demonstrated their adaptability over the two years of the pandemic, and with restrictions now easing, the sector remains in rude health, with tough competition for share of spend driving continuous innovation.

The Irish grocery landscape is dominated by five core players – Dunnes Stores, Tesco, SuperValu, Aldi and Lidl – with a number of convenience and symbol groups also boasting a significant presence in the marketplace: the Spar, Mace and Londis banners are operated by BWG Foods; Musgrave runs the Centra and Daybreak banners; while independent operators including Gala, Costcutter and Fresh The Good Food Market also have a strong presence. Forecourt players also boast a strong share – Applegreen, Maxol and Circle K being the largest.

Let’s have a look at some of the key operators.

Market Leaders

Ireland’s leading grocer, according to the most recent market share figures from Kantar (for the 12 weeks to 23th January) is currently Dunnes Stores, with a 23.1% market share, although its position at the summit is by no means guaranteed: SuperValu accounts for 22.2% of the market, and Tesco 22.1%. All three have traded positions in recent years in what is a highly competitive marketplace.

Family-owned Dunnes Stores has proven itself to be more than adept at holding its own over the years, with shoppers attracted by its longstanding Shop & Save promotional positioning (spend €50 and get €10 off your next shop), commitment to Irish suppliers, and improved product offering. Some renovated Dunnes outlets, such as its flagship Cornelscourt store in south Dublin (first opened in 1966) or in St Stephen’s Green, are akin to Harrods Food Hall or Paris’ La Grande Épicerie, without the price tag to match.

Dunnes, which still retains the ‘Better Value Beats Them All’ messaging coined by its founder, Ben Dunne, close to 80 years ago, was also an early pioneer of private label in Ireland with its St. Bernard brand. The retailer continues to raise the bar for store brands today with its premium ‘Simply Better’ range.

Operated by Musgrave Group, SuperValu boasts a network of independently-owned stores around Ireland that are very much embedded in their local community. Given the pride and passion that many of its franchise holders have in their stores, many SuperValu outlets (particularly in the south and west of the country) are truly exceptional, with family ownership going back generations. Of the stores that Musgrave itself owns, there are also some impressive examples of modern urban supermarket retailing – such as SuperValu Kilmainham in Dublin.

Following its takeover of the late Feargal Quinn’s famous Superquinn chain (a business that arguably set the template for modern supermarket retailing in Ireland) a decade ago, Musgrave has made a number of strategic acquisitions in recent years, such as its takeover of upmarket food store business Donnybrook Fair, in 2018. The group’s newly-opened Donnybrook Fair outlet at Dundrum Food Hall in South Dublin is a prime example of Musgrave’s ambitions for the retail brand: a sleek, modern outlet with marble countertops, minimalist design and immaculately-presented products.

Tesco, which needs no introduction, re-entered the Irish market in 1997, its initial foray across the Irish Sea in the 1980s proving underwhelming. Ireland has been a profitable enterprise for the retailer. According to its most recent third-quarter results, sales in its Republic of Ireland operation were 7.8% higher than in the corresponding period two years ago (i.e. before the pandemic), while Christmas sales were 13.0% higher.

Until recently, Tesco had been relatively quiet on the acquisition front – the majority of its stores are either new builds or were previously home to now-dissolved names such as Quinnsworth and H Williams – but that changed in November of last year, as Tesco announced the takeover of the independent Joyce’s Supermarkets business, a ten-store estate that will significantly bolster its presence in the west of Ireland. It also recently appointed a new CEO to its Irish business, Natasha Adams.

Like in many other markets, discounters Aldi and Lidl were for many years the ‘sleeping giants’ of the Irish grocery space, but the economic downturn of the late 2000s and early 2010s, coupled with a rapid store opening drive, commitment to ‘localising’ its product offering, and improvement in price-quality ratio has led to both gaining a strong foothold in the Irish market. As evidence, Aldi recently committed to a €320 million three-year (2022-2024) investment programme that will see it open a further 30 new stores across the country. Combined, Lidl’s 11.8% share of the market and Aldi’s 11.6% makes the discounter channel the ‘biggest retailer’ in Ireland.

From an aesthetic perspective, both Lidl and Aldi’s Irish store estate increasingly mirrors that of the mainstream (or even upmarket) grocers. Through the latter’s Project Fresh initiative, new outlets boast plenty of natural light, wider aisles, softer lighting and modern concepts. Aldi’s new store in Wexford (Trinity Street) is the first in Ireland to trial shelf-edge labelling, while Aldi Mitchelstown in Cork boasts a ‘reverse vending machine’.

Convenience Champions

The jewel in the crown of Irish retail – at least from a store format point of view – is the convenience channel, with competition particularly fierce among the two biggest players in that market, Spar and Centra.

BWG Foods, which operates Spar in Ireland, was taken over by Spar Group of South Africa in 2014, which has enabled the business to invest in its in-store offering, particularly in food-to-go, with many stores also operating as supermarket-cum-café/restaurant outlets. Its Spar Millennium Walkway outlet, in Dublin City Centre, is a prime example of this, as its Spar Gourmet outlet (also in Dublin), operated by independent retailer Thomas Ennis.

In February, Spar Group reported a 6.9% increase in sales at BWG Foods in the 18 weeks to 29 January, and an 11.5% gain on the corresponding period in 2020.

Rival Centra, operated by Musgrave, has also doubled down on its food-to-go offering in recent years – particularly after a 2016 brand repositioning – and has invested heavily in its in-store Frank and Honest coffee concept, which has been spun out into independent cafés and a private label range. The new-look Centra Millers Glen outlet in Swords, near Dublin Airport, showcases the ambition that Musgrave has for the Centra operation: incorporating an extensive deli, pizza kitchen, ice cream stall, freshly prepared meals, and other services.

Both Spar and Centra have raised the bar high, and rivals have had to invest significantly in their operations to meet this standard. Independent player Fresh The Good Food Market, which boasts several stores around Dublin, has developed an ‘experiential’ quality to its stores, particularly around freshly-prepared foods, that wouldn’t be out of place in the likes of New York, Paris or London. Fresh The Good Food Market’s longstanding Camden Street outlet in the heart of Dublin City is agem, as is its Grand Canal store, close to the European headquarters of Google, Facebook and others.

Irish convenience retail is also changing with the times, with the recent opening of an autonomous, checkout-free store, hinting at a digital-first future. Operated by catering firm Compass Group, in conjunction with AiFi (which has developed autonomous store concepts for Aldi, Carrefour, Żabka Polska and Morrisons in the past), the store is located at the headquarters of Flutter Entertainment in Clonskeagh, Co. Dublin, and claims to offer a ‘truly friction-free shopping experience’.

Forecourt to the Fore

Even Ireland’s forecourt channel seeks to inspire. Domestic player Applegreen has upped the ante when it comes to what the forecourt retail experience should be like, an approach that is serving it well in its other markets, the UK and US. Applegreen delisted from the Irish stock market last year to become a private company.

Rival Circle K, meanwhile, part of Canadian retail giant Alimentation Couche Tard, entered Ireland six years ago with the acquisition of the Topaz chain, and sees Ireland as an ideal testing ground for novel concepts for its international estate. Circle K also recently acquired a number of standalone Dublin City centre locations, to broaden its scope outside of its traditional fuel retail channel.

Another forecourt operator, Maxol, recently announced a €20 million investment programme for 2022, as it seeks to transition from ‘a fuel brand selling food and grocery to a convenience food service brand that also sells fuel’, according to the company.

Lockdown Response

Grocery retail’s status as an ‘essential service’ throughout the pandemic meant that all grocers reported a surge in sales throughout most of 2020 and into 2021. In addition, an immediate beneficiary of lockdown measures was the online channel: in September 2020, Kantar reported that the online channel had grown by more than 120% compared to the previous year, with new shoppers accounting for around a quarter of total spend during the category. As lockdowns persisted, so shoppers continued to turn to digital channels. As many as one in eight (12%) of Irish households purchased groceries online in the first four weeks of 2021.

While Ireland’s capital, Dublin, has not seen the arrival of quick commerce players such as Gorillas or Getir, rapid delivery options are on the increase – Aldi has teamed up with Deliveroo, while local player Buymie operates a grocery delivery service alongside Dunnes Stores and Lidl, where consumers can have groceries delivered to their door in as little as one hour.

An Irish consumer survey carried out by KPMG towards the end of 2021 suggests that the shift to online is set to persist, with 56% of respondents saying they were making more purchases online since the start of the pandemic, and 83% saying they were either ‘more likely’ or ‘as likely’ to buy products from websites that don’t have any physical stores. In addition, 90% of the respondents who had shopped online during the pandemic said they were likely to continue doing so.

Return to Normality?

While the past year has been dominated by the pandemic, a combination of tough measures and one of the world’s most successful vaccination programmes – with well over 90% of adults double vaccinated and a booster programme currently underway – the Irish government announced the lifting of almost all restrictions at the end of January 2022. Few would be confident enough to predict that we have seen the last of COVID-19, but the new-found vibrancy in towns and cities is an indication that most are welcoming a return to normality.

As Kantar noted in February, while consumers are eager to embrace freedom once again, a number of shopping habits that developed during the pandemic are unlikely to budge in the short term. Take-home grocery sales declined by 4.5% in the 12 weeks to 23 January 2022, however sales are still 11.2% higher than the period prior to the pandemic.

Household budgets are starting to come under pressure, however, with food price inflation reaching its highest level since October 2020 at the start of this year, and the number of products on promotion also starting to decrease. Price increases on some staple goods – milk, bread, rice, pasta – have risen by double digit percentages in some instances, a factor that has led to increased shopping around, and increased numbers of shoppers turning to private label items. Private label accounts for more than two fifths (43.3% as of November 2021) of Irish grocery spend, up from around 30% ten years ago.

In terms of the broader effects of inflation, last year, representative group Food Drink Ireland surveyed its members (food and beverage producers) in both July and November to assess the extent and impact of input cost increases – when it came to raw materials, 42% of companies (compared with 15% in July) had experienced a 20% or greater cost increase, while in terms of energy costs 69% (22% in July) had experienced a cost increase of 20% or more.

Consumer Sentiment

According to KBC Bank, Irish consumer sentiment increased to 81.9 in January 2022, reversing the sharp drop in confidence at the end of last year (to 74.9) as the Omicron variant took hold. While the current confidence level is marginally below the long-term average, current data suggests that the typical Irish consumer is ‘reasonably cautious’, the bank said, but also ‘one who is not insensitive to emerging positive news’.

Aside from the loosening of COVID restrictions, which has certainly provided a boost to consumer confidence, encouraging year-end exchequer returns and unemployment data indicates that the Irish economy and jobs market is proving resilient, two years on from the advent of the pandemic.

Spending plans, however, remain marginally weaker than at the end of last year, reflecting a ‘step-up’ in living costs, as well as ‘continuing caution in respect of a still unclear economic and financial future’, according to KBC Bank.

Elsewhere, KPMG’s recent ‘Next Generation Retail 2022’ study found that the vast majority (80%) of shoppers rate ‘price’ and ‘convenience’ as the main reasons why they choose one store over another, with price sensitivity ‘much more pronounced’ among a younger cohort of shoppers.

Also of note is the statistic that just 20% of respondents to the same survey rank ‘buying Irish’ or ‘supporting local retailers’ as a key consideration of where to shop – an indication that wrapping oneself in the flag may be a waning force when it comes to influencing shopper behaviour.

Ireland’s retailers, however, have shown over the years that they are adaptable and innovative enough to deal with whatever challenges or opportunities come their way.

The 2022 edition of CGF’s flagship event, the Global Summit, will take place in Dublin, 20th-23rd June. Join us and experience first-hand the Irish Retail Scene during the all-day exclusive Store Tour.