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THE MORNING LEAD
Supervalu closes 'non-viable' supermarkets amid stiff competition for customers
The grocery chain has closed supermarkets in some busy areas this year.
SUPERVALU HAS CLOSED two stores in recent weeks, bringing to three the number closed this year, after the chain found it “impossible” to keep the outlets open amid slower trade.
Factors in the closures are understood to have included the location of the stores and local competition. Growth in consumer spending at Supervalu has slowed year on year relative to rival supermarket chains Tesco and Dunnes.
The closures come amid an ongoing cost-of-living crisis as retail’s competitive Christmas season nears.
Supervalu’s parent company, Musgrave, said “trading difficulties over a number of years” preceded the closure of the supermarkets in Ballymun in north Dublin and Kilkenny’s Market Cross in recent weeks.
It follows the closure of another store in Cork city’s Merchants Quay shopping centre earlier this year.
Damian O’Reilly, retail lecturer at Technical University Dublin, believes the closures are an example of how competitive the sector is at present, along with SuperValu still struggling to retain a number of stores it rebranded from Superquinn a decade ago.
These former Superquinns are run directly by Musgrave rather than on a franchised model.
A spokesperson for Musgrave told The Journal that it “has not been possible to identify” any way to keep its affected stores in Kilkenny and Ballymun open, leading to the potential loss of approximately 80 jobs combined, according to local media.
“The difficult decision to close these stores was store-specific and made after separate assessment processes at store level,” Musgrave said.
“The stores have experienced trading difficulties over a number of years, and unfortunately it has not been possible to identify a solution for either store that would make them viable over the long term.
“The store closures are no reflection on the hard work, commitment and support of SuperValu colleagues in both stores. A 30-day consultation period is taking place with all affected colleagues.”
Traditionally regarded as among the pricier of the so-called ‘Big Five’ supermarket chains in Ireland, the latest market analysis still shows that the company has managed to weather any cost-of-living storm for its overall business.
It recorded a six percent increase in consumer spending over the past year, but this was behind growth at rivals Dunnes (10.8 percent) and Tesco (11.3 percent).
SuperValu’s 21 percent market share was also lower than rivals Dunnes (23 percent) and Tesco (21 percent) in the latest data provided by market research firm Kantar.
Among the discount grocery companies, Lidl saw a significant increase of 10.7 percent in its consumer spending. Aldi recorded the lowest growth of the five at 2.6 percent.
O’Reilly said Kantar’s latest figures are an example of how the SuperValu chain is “fighting hard” for market share by maintaining lower prices.
Supermarkets across the board are seeing a decrease in overall net profit while recording an increase in sales.
O’Reilly pointed to a decision in June by Tesco to lower prices on more than 700 products, a move which Finance Minister Michael McGrath hailed at the time as “quite a significant turning point” for grocery price inflation.
“You can see that margins are down in the sector. So the Irish results are showing us it’s been an increase in sales but a decrease in overall net profit,” O’Reilly said.
“This would suggest that the supermarkets are fighting hard for market share by maintaining lower prices, so that’s also meaning lower prices are kicking back in.”
This week has seen latest data for the sector indicate that Irish grocery price inflation has hit single figures for first time this year – the sixth consecutive month that there has been a drop in inflation.
Despite the shopping centre locations of the Kilkenny and Cork branches, low footfall is believed to have helped to contribute to their demise.
The Kilkenny supermarket is one of the old Superquinn stores which were taken over in 2011.
Musgrave took over 24 supermarkets which were previously run by the Quinn family, eventually rebranding them as SuperValu in 2014.
But according to O’Reilly, the chain has often struggled with these outlets. Previously, in 2016, it closed ex-Superquinns in Clonmel and Carlow only two years after taking them over.
“They’ve had to close down a couple of those stores because they weren’t viable. They took these stores on but in the case of Kilkenny, there’s three other supermarkets nearby including a franchised SuperValu,” he said.
O’Reilly added that the competition between different supermarkets can often mean “a lot of pressure in a relatively small area”.
The demise of the Ballymun store, which was franchised, came for a different reason according to O’Reilly.
“They were taking out the fresh bakery and butchers, the fresh fruits, so that it had become more like a convenience store rather than a destination store. So it might have ended up being a store just in the wrong location.”
More broadly, he said that customers are shopping more for own label brands, with the latest data showing they account for half of spending.
“Between the big five retailers there is a lot of pressure to maintain market share, so SuperValu have done very well to kind of marginalise the discounters because they’re not getting market share as quickly as they were previously,” O’Reilly said.
Christmas
He added that “flux” can be expected coming up to the Christmas period, as shoppers may try to temper their spending in the coming weeks.
“The suggestion from the surveys that have been done is that people will spend more time at home, have more people around but for finer quality products coming up to Christmas, meaning they spend a little bit more but I think they are very conscious of waste for now, partially because of the cost of living.”
