Groceries Sector: Discussion with Lidl Ireland

Thursday, 9 May 2013

The witnesses are welcome. I am pleased to say I am a customer. I tend to buy specific items where I find the quality to be excellent. I am not sure if others follow the same pattern.

To be frank, abuses do occur in the industry. We would not be discussing the issue with the multiples unless something was wrong. It is very difficult to get suppliers to talk and to divulge the truth because their future contract and business with the multiple will be in trouble. I have spoken to suppliers of other multiples, not Lidl, in this country and the business relationship is shocking. Many issues arise but I will raise just two of them. One relates to marketing support, which in effect is another term for “hello money”. The second is potholing. In case the witnesses have never heard the term, it does exactly what it says on the tin. If one has a supplier and he or she is being paid €50,000 a month to supply certain goods, when the figures do not stack up in some months the supplier is paid half the amount. It is filling a pothole in the accounts of the multiple. One can work away on one’s cashflow but the supplier is ruined. Those practices are taking place. A supplier came to see me a few months ago who was almost falling apart because his business was being devastated. He could not come before the committee and say what he did because that would be the end of his business and the people who work for him. We will get to the bottom of the issue one way or another. People are being driven to a point where they must speak up or their businesses will be gone. The situation went further than that but I will be cautious as I do not wish to reveal the person involved.

In this difficult economic climate I must ask Lidl whether it is leaving enough margin for suppliers and, consequently, the primary producer? As the representative said, Lidl has direct insight into the input costs of suppliers. As a person who runs a small business, I find that scary. Let us look, for example, at the haulage industry in this country. Due to the closure of the sugar industry and other issues, there was an over-supply of hauliers and, consequently, the rates dropped because of the huge competition. Haulage companies are living on depreciation. One cannot have an industry doing that. Companies have to be able to renew their trucks, or in this case, facilities. One cannot constantly run and run because one will not have the standards if one cannot invest in one’s business. When one looks into a business one can see the direct profit it is making but one needs to allow enough for the business to invest in itself. Without that, we are going nowhere. People were shocked with the burger crisis. However, there is something wrong when one sees burgers on sale for 8 cent each when the price should be 80 cent. If one drives an industry down that far, corruption will follow. Someone will break.

I have an intense dislike for the label “Produced in Ireland”. It drives me scatty. I consider myself reasonably good at looking at labels. One can see “Produce of Ireland” and “Produced in Ireland” and both of the labels are lovely and shiny. They are both green but one product is not produced in this country and the other is. One of the labels should be in black, blue or some other colour because making it green gives one the impression that it is Irish.

Another multiple has a packet of sugar with a label stating that it is produced in Ireland. No sugar is produced in this country and as far as I am aware neither is the plastic wrapping. The colour of the packaging is also green. It seems that the action of pouring it into the packet gives it the blessing of being from Ireland. That is what the housewife will see. My concern is that when we get back to producing sugar in this country that the product will compete directly with Irish-produced sugar. That is not right. That is a simple example. There is nothing else in the packet than sugar. I urge Lidl to examine the issue.

I agree with Deputy Ó Cuív. We must go as far down the processing chain as we can. I appreciate that it can be difficult to show everything on a label. One solution would be to put a scan code on packets and if people are interested they could use their telephones to see the information. It is easy to update the information whereas it is difficult to print off everything.

It has been said that the customer is Lidl’s primary concern. That is commendable but the company’s supplier must also be a huge concern. We have a fodder crisis in this country. It is said that we can feed 35 million people and we have aspirations to feed 50 million but we cannot do it unless our supply base of primary producers have enough fodder. A company such as Lidl cannot succeed unless primary producers are stable and doing well. Having them at a break-even point, especially in these turbulent times is not a good business model.