RGDATA Report

FAMILY ENTERPRISES • LOCAL JOBS • VIBRANT COMMUNITIES

LOCAL HEROES A study of the economic, financial and social significance of the independent retail grocery sector

by Jim Power. M.Econ.Sc. December 2011

Supported by Payzone

RGDATA, the voice of independent family grocers for 65 years, has commissioned this report to highlight the significant contribution that our members make to the fabric of Irish society.

This Report is significant and it proves beyond doubt that Irish owned and operated family grocery shops contribute more than foreign retailers and are better for Ireland. They create more jobs, keep money locally and are the best supporters of Irish suppliers. In short a euro spent with an Irish owned family grocery delivers more and goes further than a euro spent with a foreign shop. And there is a reason for this - our members are rooted in their communities – they have an interest and commitment to their localities that goes far beyond the indifference of an anonymous retailer headquartered in the UK or Germany.

RGDATA represent 4,000 family owned shops, convenience stores and supermarkets all over the country. The sheer resilience, tenacity and adaptability of the 2,000 plus local entrepreneurs that own and operate these shops is reflected in the fact that they continue to have well over a third of the €12 billion Irish grocery market.

That share is hard won. It means taking on and beating some of the biggest grocery operators in the world each and every day.

Independent family owned shops have created over 90,000 jobs all over Ireland. They are the biggest supporters of local Irish producers and suppliers. Over the past ten years they have collectively invested in excess of €1 billion to provide a standard of convenience shopping and access to local shops that is the envy of Europe. They contribute €3.6 billion to the national economy every year.

The shops that RGDATA represents come in many sizes and formats. Some trade under a symbol others under their family name. They share in common a constant focus on customer service, quality and value, supporting Irish suppliers, investing in their community sustaining local jobs, They open for business for 12, 16 or 24 hours seven days a week.

They are worth fighting for and RGDATA is leading the campaign to ensure their survival. This report highlights why it is vital for all those living in Ireland to support local family owned shops.

If you want easy access to quality local shops, a vibrant Irish food sector, local jobs in vibrant local communities, competition for the global giants and continued investment in Ireland then support your local family owned shops. You will make a difference.

Tara Buckley Director General RGDATA

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John Foy President RGDATA

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

Payzone is delighted to be in the position to sponsor this year’s report, Local Heros: The economic, financial and social significance of the independent retail grocery sector. We live in interesting and very challenging times and there has never been a more appropriate time to really emphasise the true value of local shops and to make a strong business case for the support of this particular sector.

As Ireland’s largest consumer payments network, we recognise the critically important economic and social role that Ireland’s unique network of local independent retailers plays in local communities all over the country. This report goes some way towards quantifying that contribution and will no doubt be used to promote policies that support the survival of local independent shops.

Ireland needs to maintain a vibrant, competitive and sustainable independent local retailing sector and Payzone is committed to playing its part to support our retailing partners around the issues and challenges they are facing on a day to day basis.

Jim Deignan Managing Director Payzone Ireland

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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EXECUTIVE SUMMARY

It is a simple and incontrovertible fact that Irish family owned and run retail grocery shops contribute more and are better for Ireland. Unlike foreign owned retailers operating in the market here, the research conducted as part of this study highlights that Irish shops:

• Create and sustain proportionally more jobs than foreign retailers • Contribute more to their communities in terms of investment, employment and service provision • Are the best supporters of Irish suppliers to the retail grocery sector • Give a better return to the Irish economy for every Euro that a consumer spends.

There is ample evidence from studies in other countries to support the proposition that the local economy multiplier effect is significantly greater for community based, owner operated local shops than for large retail multiples. The evidence from the Irish experience is consistent with this proposition.

An extra €100 euro spent in a locally owned shop would result in an injection of €250 into the local economy. The same €100 spent in a large multiple would result in an injection of just €140 into the local economy. Consequently, if 10 per cent of spending in the two largest multiples were to switch to locally owned retailers, it would result in an injection of an extra €670 million into the local economy creating jobs, supporting Irish producers and suppliers and keeping money in the local community.

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LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

DEVOTED TO QUALITY FOOD & ADDING VALUE Joe Doyle, Donnybrook Fair, Co Dublin

There is a growing body of international research showing the negative impact of the growth in retail multiples on local communities and local economies.

It is recognized by many commentators internationally that the growth of large retail multiples and the significant consolidation that is occurring in the retail sector, is ultimately bad for competition, consumer choice, local employment, local economic activity in general, and the social fabric.

The retail grocery market in Ireland is becoming increasingly concentrated. The two largest multiples, Tesco and Dunnes Stores now control almost 51 per cent of the market. The other multiples, the German discounters Aldi and Lidl, are also growing market share at a significant pace. In terms of growth in retail space and the number of outlets, the cap on the size of retail grocery outlets has not inhibited or restricted growth in the retail grocery market or net retail areas over recent years.

While there has been growth in the retail grocery sector, there has been a growing concentration of market power. Multiples are becoming very dominant in some parts of the country and are creating local monopolies across many parts of the country. From the perspective of consumer choice and competition, this is a source of concern and there is a real danger that loosening the cap on retail size will only exacerbate these trends, unless the dominant players in those areas are precluded from further expansion.

Joe Doyle recently opened his fourth Donnybrook Fair outlet in Stillorgan Shopping Centre, in South County Dublin adding a further 30 jobs on top of the 180 people employed by this dynamic independent retailer.

With a strong emphasis on gourmet food, the company ethos is “devoted to food”. Joe’s aim is to stay “committed to our core values through delivering the finest quality fresh food products, excellent service, to each and every one of our customers throughout all every aspect of the business”.

Among the 210 strong staff is a team of in-house chefs who produce high quality, fresh, homemade food. Their own label range of freshly made products guarantees that all foods are preservative free and additive free. Joe is proud to say that “most of the food is made and sold within one day”. There is also a dedicated butchery, fish counter and kitchen, and the Donnybrook Fair team work around the clock to produce breads, pastries, cakes and take-out hot and cold lunches and supper.

An excellent example of the entrepreneurial skills at the core of the independent retail grocery trade, Joe Doyle and Donnybrook Fair are always looking at ways to expand and grow the business without losing its key focus. Over the years the company has evolved to include a cookery school, restaurant and catering service.

“In the current climate, it is important that we bed down the business financially and enhance the product mix that we’re selling to customers. It is also vital for Ireland that locally owned companies like ours survive and thrive. When you support a local business like ours you support local jobs and investment in the local economy.” says Joe Stats: Name: Donnybrook Fair Locations: Morehampton Road; Baggot Street; Greystones and Stillorgan Owner: Joe Doyle Opened: 2001 Staff: 210

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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In an environment where the grocery sector is growing modestly in overall terms, the notion that retail multiple openings will generate net job gains is fanciful. The reality is that jobs created by the multiples largely result in job losses in other retail outlets that are forced to close or cut back on costs in a significant way. Policy makers need to recognize this reality.

The Independent Retail Grocery & Convenience Sector consists of around 5,000 shops, convenience stores, forecourt stores, specialist food stores and supermarkets.

It makes a very important contribution to the Irish economy through direct employment, local sponsorship, purchasing of local services and produce, advertising, investment, and it provides a very important local service to local communities.

It is estimated that the sector is responsible for 93,317 fulltime equivalent jobs in the economy and makes a total contribution of â‚Ź3.6 billion to the Irish economy.

The key issues facing the grocery retail sector are weak consumer demand, access to credit, wage rates, the behavior of multiples, commercial rates, local authority charges and other state imposed costs, parking and traffic management, the regulatory burden, planning and casual trading laws, rents and upward only rent reviews, the lack of any form of state supports, and the perception and reality about retail food prices.

Consumer spending remains under serious pressure and any recovery is unlikely for the foreseeable future, not least due to the fiscal outlook and the ongoing Euro Zone crisis. Between 2009 and October 2011, the retail sector experienced 560 insolvencies, accounting for 13.1 per cent of total business insolvencies over the period.

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LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

BUYING LOCAL, IRISH PRODUCE Peter and Mary Ward, Country Choice, Nenagh, Co Tipperary

Policy makers need to recognize the contribution that the Independent Retail Grocery Sector makes to the overall Irish economy and local economies in particular.

Specifically policy makers must address a number of issues: • Policy makers need to recognize the reality that the arrival of a multiple in an area will ultimately result in a reduction in employment as jobs are displaced in existing retailers; • The Retail Planning Guidelines must be maintained and strengthened in order to preserve and sustain community based, owner operated, local shops; • The issue of access to credit for small and medium sized businesses must be addressed • The burden of regulation should be reduced by 25 per cent across the board; • The burden of local authority charges and commercial rates should be reduced by 15%; • Certainty must be provided on upward only rent review legislation as quickly as possible; • The cost and logistical factors that result in higher food prices in Ireland must be recognized and addressed; • The unconstitutional and outdated Retail Grocery Joint Labour Committee wage setting mechanism should not be reintroduced; • Planning and casual trading laws must be enforced.

Country Choice delicatessen and café have been providing customers with top quality, locally produced food for the last 30 years.

Run by husband and wife team Peter and Mary Ward, the business operates out of the 200 year old premises on Kenyon Street and has recently extended to the Milk Market in Limerick.

Peter looks after the shop side of the business and says that sourcing committed suppliers is at the heart of their business “Country Choice has stuck to its core principles of local sourcing of foods and promoting the work of the best of Irish artisan producers both in the region and nationally.”.

Mary continues to personally hand make all the jams, preserves and dressings every day while the large kitchen is constantly churning out fresh soups, pies, meats and pates. Peter loves to greet customers and even holds special artisan food lunches accompanied by a talk on the history of Irish food. They also hold master classes on topics such as food, wine and gardening.

Stats: Name: Country Choice Location: 25 Kenyon St., Nenagh, Co. Tipperary Owner: Peter and Mary Ward Opened: 1982 Staff: 14 Size: 400 sq ft

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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INTRODUCTION The Irish economy is still struggling to emerge from the deepest and most difficult recession that the country has ever experienced. Business and consumer confidence is very weak across the economy; the public finances are in a totally unsustainable situation due to the sharp decline in the tax base and the unsustainably high cost of running the country; unemployment has increased sharply and significant job losses have occurred across the private sector; the property sector is still weakening; and the banking system is not functioning and credit availability is a major issue for many small businesses. The export performance is the key bright spot in the economy, but this growth is being driven by improvements in productivity rather than increased employment. Furthermore it is not generating the tax revenue buoyancy that growth in domestic demand would.

The environment has been particularly difficult for the retail sector during the recession. Consumer demand has weakened significantly and the costs of doing business for the sector increased sharply during the boom and while there has been some downward adjustment over the past couple of years, margins are still under considerable pressure.

The future for the economy is still very challenging, so it is imperative that the business environment is made as conducive as possible to entrepreneurial activity, job preservation and job creation. In this context, it is imperative that the cost of doing business in the economy is improved and that the regulatory burden is not excessive for small businesses in particular.

This report examines one very important sector of the economy, namely the independent retail grocer, specifically family owned independent shops, convenience stores and supermarkets. This segment of the retail sector is a major employer in the Irish economy and makes a particularly important contribution to local economies around the country. It is a sector that is currently experiencing very challenging market conditions and needs as much support as possible.

The sector is dominated by owner managers who are characterised by a commitment to customer service and quality. They have a very strong commitment to their local community and insofar as possible source product and services locally. They spend vast amounts of money on sponsorship of local events and are driven by a commitment to innovation and quality.

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LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

SECTION 1

The Irish Grocery Market

LEADING THE REVITALISATION OF THE LOCAL COMMUNITY Peter Dwan, Spar, Ranelagh

The Irish1 retail grocery market is broken down into four distinct SECTION segments – the Discounters, the non-aligned Independents, the aligned independents who belong to Symbol Groups, and the Multiples.

THE IRISH GROCERY MARKET Comprehensive data on the size and nature of the retail grocery sector in Ireland is not readily available. This reflects the very diverse nature Irishsector, retail grocery market down into four distinct segments – the corner Discounters, ofThethe given thatis broken it ranges from the single-person shop the non-aligned Independents, the aligned independents who belong to Symbol Groups, and to the giant multiple. the Multiples.

Comprehensive data on the sizeCSO and nature of the grocerythat sectorinin2009, Ireland isthere not readily Figures taken from the (Table 1)retail suggest were available.specialised This reflects theand very diverse nature of the sector, given predominantly that it ranges from theselling single6,763 non-specialised stores person corner shop to the multiple.

Food, Beverages & giant Tobacco in Ireland. They had a combined turnover ofFigures €17taken billion had(Table 100,578 persons engaged. fromand the CSO 1) suggest that in 2009, there were 6,763 specialised and non-specialised stores predominantly selling Food, Beverages & Tobacco in Ireland. They had a combined turnover of €17 billion and had 100,578 persons engaged.

TABLE TABLE 1 1 GROCERY SECTOR IN IRELAND 2009 GROCERY SECTOR IN IRELAND 2009

Peter Dwan opened the Shopping Basket in Ranelagh in 1991. Today Spar Ranelagh, a 2,500sq ft store, is the cornerstone of this Dublin 6 village. The Dwans and Spar Ranelagh became the hub of the village two years ago when Peter’s son, Peter junior, set about revitalising the village by initiating and developing a local campaign entitled ‘I Love Ranelagh.’

Concerned about the drop in footfall and an increase in vacant shops in this bustling southside Dublin village, Peter Junior visited every local business and rallied them behind a plan to revitalize Ranelagh. I Love Ranelagh was born. Peter collected €15,000 worth of prizes and created a promotional website and a brochure which was distributed to 20,000 houses in the area.

SPECIALISED STORES – FOOD, BEVERAGES & TOBACCO

NON-SPECIALISED STORES FOOD, BEVERAGES & TOBACCO

TOTAL

Number of Enterprises

2,672

4,091

6,763

Turnover

€1.4 bln.

€15.6 bln.

€17.0 bln.

Number of Persons Engaged

11,819

88,759

100,578

Source: CSO Annual Services Inquiry 2009, Statbank.

Table 2 provides of expenditure by retailer acrossStatbank.

Food, Beverages, Alcohol, Source: CSOa breakdown Annual Services Inquiry 2009,

Household and Health & Beauty categories in September 2011. Tesco held 27.9 per cent of total market share in the Irish grocery market. The two Discounters, Aldi and Lidl, controlled 10.8 per cent of the market. Tesco and the Discounters are the only segments to have gained significant 7

Peter senior says that, as a family business, the Dwan’s success “goes back a long way” before the campaign. He describes the process of revamping the original shop and “bringing something new to the convenience store”.

The Dwan’s commitment to their local community and Peter’s focus on the personal touch make their store stand out from the many multiple operators in the vicinity. “I’ve always believed in the personal touch,” says Peter Senior.

Peter junior has since moved on to work for Spar Ireland but Spar Ranelagh remains a family business with Peter’s other son Stephen working there for the past 17 years.

Stats: Owner: Peter Dwan Location: Ranelagh, Dublin 6 Opened: 1991 Staff: 16 Size: 2,500sqft

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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Table 2 provides a breakdown of expenditure by retailer across Food, Beverages, Alcohol, Household and Health & Beauty categories in September 2011. Tesco held 27.9 per cent of total market share in the Irish grocery market.

The two Discounters, Aldi and Lidl, controlled 10.8 per cent of the market. Tesco and the Discounters are the only segments to have gained significant market share over the past year. This demonstrates clearly the increasingly dominant position of Tesco in the Irish grocery market, and the intense pressure that is being brought to bear by the Discounters in an environment where consumer spending power is becoming increasingly pressurized and where the lowest price possible is becoming a key driver of consumer behavior.

TABLE 2 MARKET SHARE - TOTAL GROCERY

OUTLET Total Multiples

12 WEEKS TO SEPTEMBER 5th 2010 56.3%

12 WEEKS TO SEPTEMBER 4th 2011 56.8%

Tesco

27.2%

27.9%

Dunnes

22.6%

22.9%

Superquinn

6.5%

6.0%

Total Discounters

9.5%

10.8%

-Aldi

3.5%

4.4%

-Lidl

5.9%

6.4%

Other Multiples

1.6%

1.4%

Total Symbols

25.4%

24.4%

Supervalu

19.8%

19.5%

Other Symbols

5.6%

4.9%

Asda & Sainsbury

2.0%

1.7%

Other Outlets

5.2%

4.9%

Source: Kantar Worldpanel Ireland, September 2011.

10 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

Table 3 provides detail on the growth in net retail space between 2000 and 2007. The discounters expanded very rapidly from a very low position over the period, but Tesco in particular consolidated its position as the strongest grocery retailer in the market over the period. It should be noted that the figures for Dunnes Stores and Marks & Spencer in particular would include a large element of non-grocery space.

FOLLOWING IN THE FAMILY FOOTSTEPS Pat Joyce, Joyce’s Supermarket, Athenry, Co Galway

TABLE 3 CHANGE IN NET RETAIL SALES AREA OF MAIN RETAILERS 2001-2011

RETAILER

RETAIL FLOOR AREA SQM 2001

RETAIL FLOOR AREA SQM 2007

% CHANGE

Aldi

5,976

74,667

+1149%

Lidl

13,442

140,600

+946%

M&S

5,876

18,740

+219%

Dunnes Stores

114,924

234,531

+104%

Superquinn

33,626

35,970

+7%

Supervalu

136,136

198,632

+46%

Tesco

127,617

294,521

+131%

Total

437,597

997,662

+128%

Source: McCabe, Durney, Barnes, August 2011 The figures in Tables 2 and 3 suggest that the cap on the size of retail grocery outlets has not inhibited or restricted growth in the retail market and net retail sales areas over recent years.

The Joyce family has been trading in Galway since 1951 when Pat Joyce senior opened his first shop with wife Maureen. From the beginning, the focus was on customer service and they expanded to a travelling shop to help local residents unable to get to the shop.

In 1988 Pat junior took over the shop but insisted on maintaining the core values “My father always put an emphasis on customer service, and I’ve continued that passion, that is what has been the driving force of the business.”

In 1999 the shop expanded into a supermarket and now offers a wide selection of fresh foods, deli, in store bakery and many deals. Pat describes his own personal way of motivating himself and his staff to be the best they can “I like to think of it as being like an all-Ireland every day, each day is only as good as the one that comes after it”.

Joyces Supermarket has put money back into the community through local GAA and soccer teams, the Knocknacarra amateur theatre society and the community meeting rooms above the supermarket have become the hub of the town.

The family continues to be involved with his children working there on weekends and on their holidays, “it’s in the blood, it’s what we do.”

Stats: Name: Joyce’s Supermarket, Location: Knocknacarra, Athenry Headford and Tuam, Co Galway Owner: Pat Joyce Opened: 1999 Staff: 120

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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The grocery sector has also been characterized by strong growth in the number of multiples operating across the country. Table 4 shows the change in the number of grocery outlets for the five multiples in the market between 2001 and August 2011. The discounters are expanding rapidly, but in overall terms, the two biggest multiples, Dunnes Stores and Tesco combined expanded rapidly over the period. This expansion is continuing.

TABLE 4 NUMBER OF RETAIL GROCERY OUTLETS

Retailer Aldi

2001 9

2011 86

% Change +855.5%

Lidl

28

127

+353.6%

Dunne’s 68 Store Superquinn 19

100

+47.1%

24

+26.3%

Tesco

76

131

+72.4%

Total

371

661

+78.2%

Source: The Competition Authority (March 2008), A Description of the Structure and Operation of Grocery Retailing and Wholesaling in Ireland: 2001 to 2006, Grocery Monitor: Report No. 1. and Company Websites.

In overall terms it is clear that the Irish retail grocery sector has experienced significant growth over the past decade. However, the market is clearly becoming more concentrated, with the multiples becoming more dominant in the market. This suggests a high level of competition and does not support the notion that the Retail Planning Guidelines are inhibiting growth or competition within the grocery market.

It is also clear, that while there has been growth in the retail grocery sector, there has been a growing concentration of market power. Multiples are becoming very dominant in some parts of the country and are creating local monopolies. For example in Waterford there is a ring of five Tesco stores around the city; in parts of Dublin it is estimated that Tesco has 60 per cent of the market; and in Naas Tesco has become very dominant. This trend is replicated across many parts of the country. From the perspective of consumer choice and competition, this is a source of concern and there is a real fear that loosening the cap on retail size will only exacerbate these trends, unless the dominant players in those areas are precluded from further expansion.

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SECTION 2

The Significance of the Local Shop

THE HUB OF THE COMMUNITY Kevin and Julie Reidy, Centra, Foynes, Co Limerick

The Role of the Local Shop Community based owner-operated local shops are correctly regarded as the economic and social mainstay of rural towns and villages and they also play an important role in larger urban areas. From the perspective of rural and regional economic development, and more importantly from a social perspective, policies to help sustain a local retail infrastructure and community service are regarded by many as being very important.

However, such policies have not always been applied in a rigorous fashion.

Due to changes in planning and other factors, there has been significant growth in out-of-town retail parks, shopping centres, and discount stores in recent years. Furthermore, the large foreign-owned multiples are becoming increasingly dominant in the market, reaching high levels of concentration in some areas. This is particularly true in the grocery market. These developments have combined to put a serious strain on many town centres in Ireland, the UK and elsewhere. Furthermore, many smaller communities and villages around Ireland have lost their local small grocer, which from an economic and social perspective is extremely regressive. Community based locally owned shops are a key part of the economic and social fabric and national policy should facilitate their continued existence insofar as possible.

Town centres are important from an economic and social perspective as they provide a range of commercial and community activities that are interdependent. Having a diversified retail offering is an essential pre-requisite for the vitality and vibrancy of towns. Unfortunately, many town centres in both the UK and Ireland have been undermined by the increasing penetration of large multiples, particularly those that locate in out of town locations.

The role of the local shop in the local community has long been recognized both in Ireland and in the UK, but policy makers have not always pursued policies that are consistent with such recognition.

In both the US and the UK, a significant body of research has been undertaken to examine the importance of vibrant town centres and the impact that the large retail multiples have had on town centres.

Kevin and Julie Reidy took over a small, run down 300 square foot shop with a forecourt in Foynes, Co Limerick in 1998. The couple ran the business by themselves at the start as they couldn’t afford staff.

Working from 7am to 11pm every day paid off and soon they rebuilt and expanded the shop to 1,700sqft and then again to 4,500 and 6,000. It was done “slowly but surely” and the overall process involved installing new pumps, car wash facilities, and a range of services such as a deli counter and off license which serve as cornerstones to their business.

Always thinking about what new offering he can bring to make life that bit easier for his customers, Kevin cites the fact they have a “bit of everything” for customers as the key to his business success.

Kevin’s Centra caters for the local shopper, as well as passing trade and offers a full range including convenience shopping and people doing a trolley shop.

Kevin is very involved in the local football club training youth soccer. “We arranged to bring all the soccer team up to an international match in Dublin. The bus arrived outside the shop and the kids were dropped off. We made up lunch bags for them and everyone was delighted. It was a brilliant trip for everyone,” says Kevin who believes it is very important for a local business owner to give something back to their local community.

The International Federation of Grocers’ Associations (IFGA) sums up the

‘Independent food retailers are important to society. They provide jobs and contribute to the growth of the economy and to welfare.

argument in a very succinct manner -

Stats: Owner: Kevin and Julie Reidy Location: Foynes, Co Limerick Opened: 1998 Staff: 23 Size: 6,000sq ft

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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They also play an important role in the quality of life of our society, not only as the last remaining amenities in smaller centres, but also in the districts and neighbourhoods of major cities. The nature of local shops is that they cater to the neighbourhood and meet the basic needs of consumers in their direct vicinity. The local supermarket owner plays both a commercial and a social role in the community. He is not only an employer and investor but often the social motor of the community. The independent retailer is pivotal in the community: his involvement is both civic and social.’ 1 2

Shub and Hird argue that the benefits gained from the prevalence of smaller independent food stores can include: • Promotion of local diversity and food culture; • Fresher produce; and • Boosting the local economy by supporting local businesses and therefore

jobs, and indirectly other businesses through the multiplier effect.

In the United Kingdom, the New Economics Foundation (NEF) has carried out several studies examining the damage that is being done to British towns by the forced closures of thousands of local shops due to the growth of the multiples.

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In 2002, NEF published a report called Ghost Town Britain , which showed that over the past couple of decades ‘the

construction of large out-of-town shopping centres and waves of high-street bank-branch closures have driven many people away from town-centre shopping resulting in the loss of thousands of independent traders’. At that stage they showed that general stores were closing at the rate of one per day, specialist stores like butchers, bakers and fishmongers shut at the rate of 50 per week between 1997 and 2002, and twenty traditional (non-chain) pubs were closing per month. Supermarket retailers, fast-food chains and global fashion outlets were coming in the place of these independent local shops.

The objective of this social and economic policy think tank (NEF) is driven by a belief that

‘reversing the spread of clone towns, and the associated impacts on local economies and cultures, is central to the long-term sustainability of Britain’s communities. In those communities where business is said to be thriving, this often means no more than a collection of faceless chains or fake local supermarkets that suck local money out of the community and send it to a remote group of shareholders. It certainly doesn’t circulate in the 4 local economy, providing jobs, local colour and diversity’.

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CHAMPIONS OF FRESH IRISH FOOD & LOCAL JOBS 5

In 2010, NEF again tracked the ongoing destruction of the high street in the UK due to the increased domination by the large chain stores. It argues that this creates a serious economic vulnerability for town centres as the large chain stores increasingly migrate to out-of town locations. NEF argues that with a little imagination ‘high streets could become places where we go to actively engage with other people in our communities: places where shopping is just one small part of a mix of activities including working, sharing, exchanging, playing and learning new skills’. Amongst a range of suggestions to arrest the trend towards clone towns, NEF calls on consumers to support local independent businesses and seek out locally produced products, and suggests that policy makers should pursue policies aimed at promoting town centres and creating more sustainable communities.

‘there is ample evidence that supermarkets have contributed to the decline of local communities in terms of loss of local retailers and jobs, as well as the creation of food deserts’.

Young 6 concludes

that

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In 2006, a cross-party group of British MPs warned that the big supermarket chains will start raising prices after achieving saturation point in the high street by wiping out small local shops. It went on to argue that the domination of the large supermarkets will have knock-on effects on local communities, with the most vulnerable groups such as the elderly, the less affluent and those without transport, most likely to be hit hardest. Specifically, the group recommended a moratorium on further mergers and takeovers, the creation of a retail regulator and comprehensive codes of practice across the retail sector.

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The Institute for Local Self Reliance has created a ‘Localism Index’ to monitor the growth and impact of local business in the United States. It calculated that the average portion of each $100 spent in a large multiple, only $16 stays in the local economy, whereas the average portion of $100 spent in an independent retailer that stays in the local economy is $32. In other words supporting local independent shops delivers twice the benefit for the local community than supporting a large multiple store will produce.

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Sustain is an alliance based in the UK that is seeking to promote better food and farming, encourage food and agricultural policies and practices that enhance the health and welfare of people and animals, improve the living environment , and promote greater equity. It believes that the food and agriculture system is damaging, rather than enhancing social development.

To address this, it is argued that the planning system should be used to protect an increase both the number and the diversity of types of food retail outlets – such as small shops and markets – locally, and within easy walking distance of communities, or by public transport. It also argues that every £10 spent on a local food initiative is worth €25 to the local economy, compared with just £14 when the same amount is spent in a multiple supermarket. Its value increases locally by being reinvested many times over in the local economy.

Eugene and Catriona Scally, Scally’s Supervalu, Clonakilty, Co Cork

Visit Scally’s Supervalu in Clonakilty, West Cork to experience a focus on local food that is second to none.

This family owned supermarket has a huge impact on its local community.

Driven by the enthusiasm and dedication of owner, Eugene Scally, this supermarket spends almost €2 million annually buying from 55 West Cork food producers who employ 800 people. Eugene will often be found down on the Quay in Union Hall buying fresh fish from the local fishermen for the store’s outstanding and unique fresh fish offer. He is also deservedly proud of the 300 different Irish cheeses on sale in this award winning store.

“Our talented team here in Scally’s dedicates much of its time and effort in developing an exciting selection of seafood products and other fresh Irish products that are exclusive to our store,” says Eugene.

A strong believer in local enterprise and promoting local entrepreneurship, Eugene says that Scally’s is deeply committed to “ensuring the sustainability of the rural community in which we live.”

“A company’s role in the local community can be construed in many different ways,” he adds. “We are fully aware of our dependence on the local community in which we operate our business and for this reason we have always been compelled to give back to the community in return for the support we have received throughout the years.”

The store is a significant supporter of the local community and promotes the vibrancy and vitality of Clonakilty at every opportunity. They supported a “local hero” competition where 19 schools raised money and nominated a “hero” in an effort to support local suppliers including the fishing crew pictured. Through the competition they were able to donate €10,000 to local national schools.

Scally’s Supervalu remains committed to local schools and another initiative is an instore promotion called Kids in Action where Munster Rugby star, Denis Leamy made an appearance and went on to visit the local school to encourage young people to eat fresh food. “I believe that Scally’s commitment to our local producers and suppliers and our strong involvement in our local community is the key reason why this business is surviving and I expect to grow our business by 5% next year,” says a buoyant Eugene who admits that supporting and selling the very best of fresh local and Irish produce and encouraging local start up food businesses “goes to the very marrow of my bones”.

Stats: Name: Scally’s Supervalu Location: Clondakilty, Co Cork Owner: Eugene and Catriona Scally Opened: 1984

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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10

Goetz and Fleming, two economists affiliated with Pennsylvania State University, conducted research which suggested that the key to reversing the long-term trend of stagnating incomes in the US lies in the nurturing of small, locally owned businesses and limiting further expansion and market consolidation by large corporations. Their research suggested that in both rural and urban areas, those with a larger density of small, locally owned businesses experienced greater per capita income growth between 2000 and 2007, than those areas with a high density of large, non-local businesses.

In September 2009, a study of 15 locally owned businesses in New Orleans compared their impact on the local economy to that of a supermarket chain-store. It found that 32 per cent of the money spent in the local shops stayed in the local economy compared to 16 per cent of the money spent in the chain.11 The study concludes that even modest shifts in spending can make a big difference to the local economy. If residents and visitors were to shift 10 per cent of their spending from chains to local businesses, it would generate an additional $235 million a year for the local economy. The study also found that local businesses require much less land to produce an equivalent amount of economic activity. The study found that a four block area in the town-centre, a traditional business centre, provided 179,000 sq ft of retail space, hosts about 100 individual businesses and generates $105 million in sales with $34 million remaining in the local economy. In contrast the 479,000 sq ft supermarket chain and car park generates $50 million in annual sales with just $8 remaining in the local economy.

A 2008 study in Western Michigan found that if local residents redirected 10 per cent of their spending to local businesses it would generate $140 million in new economic activity, 12 1,600 new jobs and $53 million in additional payroll.

A 2003 study showed that three times as much money stays in the local economy when you buy from local businesses as opposed to multiple chains.13 If the UK multiplier effect were to be applied to the Irish situation, an extra €100 euro spent in a locally owned shop would result in an injection of €250 into the local economy. The same €100 spent in a large multiple would result in an injection of just €140 into the local economy. Consequently, if 10 per cent of spending in the two largest multiples were to switch to locally owned retailers, it would result in an injection of an extra €670 million into the local economy.

RETAIL EMPLOYMENT The growth of the power of the multiples is welcomed by some due to the increased employment that the new multiple will allegedly generate in a local area.

The reality is that the growth of employment in the multiples almost always comes at the expense of the closure of independent retailers and associated employment. This results in the decimation of a sector that makes a significantly greater economic and social contribution to a local area than a large multiple ever would.

16 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

INVESTING IN THE LOCAL ECONOMY Tom Liddy, Liddy’s Costcutter, Roslevan, Co Clare

TABLE 5 SELECTED STORE OPENINGS AND LIVE REGISTER TRENDS

LOCATION

DATE STORE OPENED

JOBS PROMISED

Dunnes Stores- October 2007 Bridgewater Centre, Arklow

200

CHANGE IN LIVE REGISTER OVER FOLLOWING YEAR IN TOWN +896

Tesco-Claremorris

2007

150

+385

Tesco-Westport 2007

150

+606

Tesco-Tullow

2008

94

+651

Tesco-Birr

2008

90

+865

TescoDrogheda

2008

220

+2,685

Table 5 outlines six examples of store opening announcements by Tesco and Dunnes Stores, with the number of jobs promised, and the trend in the number of people signing on the live register over the following 12-month period in that location. In all cases the number of people signing on the live register increased sharply over the subsequent twelve-month period.

Opening in 2005, Tom Liddy’s Coscutter store was well placed in the Roslevan Neighbourhood Centre. Three years later, Liddy purchased the entire 11,000sq ft unit, demonstrating his commitment to the local community.

Tom believes this was the key to his success and he says it “shows the local area that I am committed to the long term viability of the store and the community”.

Tom believes passionately in providing his community with a top class fresh food offering and excellent value. He has won many awards and puts it down to: “a mixture of having a good store manager, staff, value and of course, a really food fresh offering”.

Employing a chef to manage the deli was the first step on the road to success. This ensured fresh food, a good reputation and quality. The store now caters for functions in the community such as christenings and communions.

Stats: Owner: Tom Liddy Location: Roslevan Opened: 2005 Staff: 30 Size: 9,000sq ft

It has to be recognized that this is not totally scientific as many other factors influence a local labour market and it is also not possible to identify where those extra people signing on the live register actually worked. However, the point is that in an environment where the grocery sector is growing modestly in overall terms, the notion that retail multiple openings will generate net job gains is fanciful. The reality is that jobs created by the multiples largely result in job displacement in other retail outlets.

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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The large Multiple aims for a one stop shopping experience sucking business and footfall from the traditional retail centre and forcing the existing shops to close or cut back on costs (ie staff numbers and hours) in a significant way.

In overall terms, the real economic impact of the arrival of a large multiple to an area is very significant than direct employment numbers alone suggest because locally-owned grocery outlets have a greater connection to the local area than a large foreignowned multiple.

14

In a major study published in the UK, ’Planning for Retail Development’, it is argued that gains from employment in new superstores occur at the same time as employment losses when small stores are closed down. The author argues that in relation to retail planning, free market forces need to be carefully controlled in order to prevent the construction of an excessive quantity of shops and to achieve an optimum mix of shop types at the various levels of the retail hierarchy.

15

A 2007 study in the US found that the opening of a Walmart store reduces county level retail employment in the USA by 150 jobs and reduces the county retail contribution by about $1.2 million. It found that for every new retail job created by Walmart, 1.4 jobs are lost as existing businesses close or downsize. The reality is that large multiples employ fewer people per square metre of retail space than a smaller grocery store.

It is being increasingly recognized by many commentators internationally that the growth of large retail multiples and the significant consolidation that is occurring in the retail sector, is ultimately bad for competition, consumer choice, local employment, local economic activity in general, and the social fabric. The bottom line is that there is ample evidence to support the proposition that the local economy multiplier effect is significantly greater for local community based owner operated local shops than for large retail multiples. The evidence from the Irish experience is consistent with this proposition. Just read the profiles of some of Ireland’s independent retailers in this report to see the unique and significant contribution they make to enterprise and employment, not just in their shops but throughout their community.

1 ‘Local Shops’, The International Federation of Grocers’ Associations (IFGA), 2007.

2 Vicki Hird & Merav Shub, ‘Race to the Top’ Communities Module Briefing Paper, July 30th 2003 3 ‘Ghost Town Britain’, NEF, 2002 4 ‘Clone Town Britain’, NEF, September 2004 5 ‘Re-imagining the high street – Escape from Clone Town Britain’, The 2010 Clone Town Report, NEF. 6 ‘Sold Out’, William Young, Vision Paperbacks,2004 7 Parliamentary Small Shops Group Report, February 2006.

8 http://www.newrules.org 9 ‘Good Planning for Good Food’, Sustain, January 2011.

10 Goetz . Stephen, & Fleming.David,. ‘Does Local Firm Ownership Matter?’, Economic Development Quarterly, August 2011.

11 Thinking Outside the Box: A Report on Independent Merchants and the Local Economy by Civic Economics, September 2009.

Impact of Local Business on Western Michigan Economy. Civic Economics. 2008.

13 The Economic Impact of Locally Owned Businesses vs. Chains by the Institute for Local Self 14 ‘Planning for Retail Development’, Clifford Guy, 2006.

15 ‘The Effects of WalMart on Local Labour Markets’, Neumark, Zhang & Ciccarella, 2007

12 Local Works: Examining the

Reliance and Friends of Midcoast Maine, 2003.

18 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

SECTION 3 The Economic and Financial Contribution of the Independent Retail Grocer in Ireland

GENUINE FAMILY BUSINESS Ray and Margaret McCaughey, McCaughey’s 24 hour Service Station, Broomfield, Co Monaghan

RGDATA represents around 3,900 family owned shops in Ireland ranging from the smaller community based owner operated shop to the larger aligned independent supermarket. This sector currently accounts for over a third of the retail grocery market in Ireland.

Research conducted by the author of this report based on material submitted

by RGDATA members in a confidential survey carried out in the final quarter of 2009 and updated in 2011, provides evidence of the social and economic impact of local shops in their local community. It is estimated that there are around 5,000 independent retail grocery shops in the country and the following analysis is based on this larger number.

The Irish Experience The reality is that local shops provide substantive local employment, use local services, they tend to source product locally insofar as they can, they provide sponsorship to local communities, and make a significant contribution to the local economy through wages, commercial rates and local authority charges.

This multiplier effect then percolates through the local economy.

Research from Guaranteed Irish shows that a modest increase in spend by households on Guaranteed Irish goods and services of €4 per week could generate 6,200 new jobs in Ireland. As a sector that has a heavy focus on Irish goods, the IRG sector clearly can make a much greater contribution to the real economy due to its high multiplier effect.

The findings from research carried out by RGDATA specifically for this report and analysed by Jim Power Economics certainly do bear out this reality. The research on local shops carried out sought to focus on ownership structures, hours of opening, turnover, employment, investment in premises, the number of different lines carried, the use of ancillary services, commercial rates and local authority charges, expenditure on advertising, expenditure on sponsorship, and where services are sourced.

The key findings in relation to local shops are as follows: • They are major employers in local economies and give many people

their first job; • There is a strong family ownership structure; • They are major supporters of local and Irish suppliers; • They carry a wide range of products and provide a range of ancillary services; • They provide convenience to the consumer through location and

opening hours; • They make a major contribution to the National Exchequer and the

local authorities;

Ray McCaughey had already been in the forecourt retail business for over 20 years when, in 1997, an opportunity to expand was presented to him on the developing N2 Dublin to Derry route.

Raylene, one of Ray’s four daughters says that it was, and still is, the “little things” that have contributed to the growth of this award winning family business.

The emphasis at McCaughey’s restaurant and deli is on good quality food and delivering customer satisfaction every day. “We try to drive home the idea of home cooked food,” Raylene says. The deli and restaurant is very popular providing 30% of the store turnover.

The McCaughey’s philosophy is to deliver above and beyond their customers’ needs. On one particular occasion when a local band was travelling to America the McCaughey’s opened the restaurant at 1am to serve the band members food on the way to the airport. “It wasn’t for the profit,” says Raylene. “It was about the fact that they are going to go home and tell everyone about it.”

Indeed, this family run business is all about the “little things”, such as the complimentary food and drink to busy drivers. Raylene thinks that it is this type of service that keeps customers coming back.

Recently, they discovered that a customer who was from Derry appeared on Winning Streak after buying a scratch card in the shop.

They also get involved in the Vintage Parade that happens every Easter Monday to raise money for various charities.

Stats: Name: McCaughey’s 24 hour service station Location: Broomfield Co Monaghan Owner: Ray and Margaret McCaughey Opened: 1997 Staff: 30 Size: 1,700 sq ft

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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• • • •

They invest significant monies in maintaining and improving their premises; They have a significant advertising spend; They have a significant sponsorship spend on local causes; and They have a significant multiplier effect in the local and national economy.

THE RESEARCH CONDUCTED BY RGDATA AND INTERPRETED BY JIM POWER ECONOMICS SHOWS THE FOLLOWING ATTRIBUTES OF THE INDEPENDENT RETAIL GROCERY SECTOR: OWNERSHIP STRUCTURE The research shows that the ownership structure of local shops is very strong in the sense that there is a high level of family ownership and continuity.

• 100 per cent of local shops are family owned, with over 60 per cent of the smaller

shops, 50 per cent of the medium-sized shops and 30 per cent of the larger

shops first generation.

• 32 per cent of smaller shops, 36 per cent of medium-sized shops and 50 per cent

of larger shops are second generation.

• 2 per cent of small shops, 7 per cent of medium sized shops and 20 per cent of

larger shops are third generation.

This ownership structure is important, because it suggests continuity and is indicative of the shop being part of the local community, rather than being owned by a multi-national or major national company with no sense of commitment to the local economy or the local community.

OPENING HOURS From a consumer’s perspective, having a shop that is geographically convenient and that opens long hours is extremely important. Local shops certainly fulfill both of these important consumer criteria. They generally tend to have long opening hours and as such provide extreme retail convenience for local communities. Our research shows that: • For smaller shops, 40 per cent remain open from 9am to 7pm, 50 per cent remain

open from 7 am to 10 pm and 10 per cent remain open from 5.30 am to 11pm or

on a 24 hour basis.

• For medium-sized shops, 30 per cent remain open from 9am to 7pm, 50 per cent

remain open from 7am to 10 pm and 20 per cent remain open from 5.30 am to

11pm or on a 24 hour basis.

• For larger shops, 40 per cent stay open from 9am to 7pm, 50 per cent remain

open from 7am to 10 pm and 10 per cent remain open from 5.30 am to 11pm or

on a 24 hour basis.

20 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

WORLD CLASS CITY CENTRE CONVENIENCE RETAILING Thomas Ennis, SPAR, Merrion Row, Dublin City Centre

TURNOVER For smaller shops who employ an average of 7 workers, it is estimated that weekly turnover ranges from €4,500 up to €35,000. For the medium-sized shops who employ an average of 30 workers, turnover ranges from €35,000 to €90,000. For the larger stores, turnover ranges from €40,000 to €500,000.

The net margin ranges from 0.5 to 1 per cent for the smaller shops; 1 to 2 per cent for the medium-sized shops and 2 per cent for the larger shops.

EMPLOYMENT Local shops make a major contribution to local labour market conditions. They provide steady employment, they typically source their staff locally, they tend to provide longevity of employment and also provide variety and choice in terms of working hours and in terms of part-time and full-time working arrangements.

Our research shows: • For the smaller shops, 30 per cent of workers are full time and 70

per cent part time. Since 2009, part-time workers are becoming a

more significant component of this workforce. On this basis, the

smaller shops, who employ an average of 7 workers, account for

approximately 4,256 full-time equivalent jobs; • For the medium-sized shops that employ an average of 30 workers,

the split between part-time and full-time workers is 50/50. On this

basis the medium-sized shops account for approximately 60,093 full-

time equivalent jobs; • For the large shops that employ an average of 90 workers, the

split between part-time and full-time workers is also 50/50. On this

basis, the large shops account for approximately 28,968 full-time

equivalent jobs; • In total the local shops account for 93,317 full-time equivalent jobs in

the economy. This includes newsagents and garage forecourts and

may not be directly comparable to CSO data quoted earlier in this

report. However, it is clear that the Independent Retail

Grocery sector accounts for a very substantial portion of

total employment in the retail grocery sector; and • The research shows that average pay in the grocery retail sector is

around €24,960 per annum. Around 15 per cent of these earnings

are paid in Income Tax, PRSI and USC, the net contribution to

the national wage pool is €2.98 billion and the contribution to

the Exchequer is €349 million per annum.

For all size categories, continuity of employment is very strong. 60 per cent of employees have been employed for more than a year. The average length of employment for employees in all sized shops is 5 years. This continuity and stability of employment is very important, particularly given that all employees come from the local area, based on the research. It is also the case that the local shop very often provides the first job for many young people.

Spar Merrion Row is instantly recognizable for it’s gold shop front, it is also renowned as a place where you can expect great prices, best promotional offers, fresh food and many other great products.

That’s why, SPAR Merrion Row is visited by many international groups as an example of international best practice in city centre convenience retailing.

It has also been recognised in numerous industry awards for its dynamic and innovative fresh food offering, stylish layout and excellent focus on delivering what customers want.

Competing with a range of nearby restaurants and delis, Spar Merrion Row definitely holds its own.

“We pride ourselves on being the best in fresh food retailing. It’s our unique fresh food offering means that our customers come back for more,” says owner, Thomas Ennis. “Our aim is to bring and achieve excellence in service, provide a really excellent fresh food offer and bring new meaning to the convenience retail shopping experience.”

Understanding the customer is something Thomas has perfected. In the prime city centre location, busy shoppers can find all they need at their fingertips, really delivering genuine convenience.

Other services include a hot wok, extensive deli and an Insomnia coffee bar and a seating area with free web access.

However, being in the city centre doesn’t stop Thomas from getting involved in local promotional activities and giving back to his customers. The ladies who compete in the annual Women’s Mini Marathon get some welcome relief as they pass the store which provides food and drink to all the competitors.

Name: Spar, Merrion Row Location: Merrion Row, Dublin Owner: Thomas Ennis Size: 3,000sq ft Opened: 2006

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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INVESTMENT IN SECTOR Local shop owners tend to invest heavily in their businesses. Such investment includes IT equipment, security systems, painting & decorating, physical construction work, shelf layout. Over the past three years this investment spending has slowed significantly for the smaller shops. Medium-sized shop owners on average have invested between €20,000 and €50,000 in their shops over the past five years and for larger shops this figure ranges from €50,000 to €1 million. This suggests that local shops are continually maintaining and upgrading their premises and this investment acts as an important stimulant to the local economy. However, future investment will be heavily dependent on consumer conditions and credit availability.

PRODUCT RANGE The number and range of lines carried by retailers is very important from the perspective of consumer choice, and suppliers. Our research indicates that these retailers tend to carry a wide variety of different lines and offer considerable choice to consumers both in terms of price and quality.

• Smaller independent shops carry up to 8,000 different lines, medium-sized shops

carry up to 13,000 different lines and large shops carry up to 30,000 different lines.

• For smaller shops 24 per cent of lines stocked are manufactured in Ireland. For

medium-sized and large shops 55 per cent of goods stocked are manufactured

in Ireland. This means that small shops stock an average of up to 1,920

lines that are manufactured in Ireland, medium-sized shops stock

up to 7,150 Irish manufactured lines and large shops stock up to 16,500 lines

manufactured in Ireland.

• For smaller shops 10 per cent of goods stocked are sourced from local suppliers

within close geographical proximity, 20 per cent for medium-sized shops and 21

per cent for large shops. This means that small shops stock around 800

locally produced lines, medium-sized shops stock up to 2,600 locally produced

lines and large stocks stock up to 6,300 locally produced lines.

• 10 per cent of smaller shops run special promotions for local suppliers and

producers, 50 per cent of medium-sized shops and 95 per cent of larger

shops run special promotions.

It is clear that local shops are major supporters of national and local suppliers and so make a significant contribution to the national and local economies. This support for local and national suppliers is very important for the economically significant Food & Drink sector.

22 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

OTHER SERVICES PROVIDED The sector does tend to provide a broad range of services apart from the provision of basic groceries.

• For small shops, 50 per cent have an off-license, 17 per cent sell petrol,

fuel and diesel, 1 per cent provides a post office service, 100 per cent

sell National Lottery products, and 50 per cent provide a home delivery

service.

• For medium-sized shops, 50 per cent have an off-license, 45 per cent

sell petrol, fuel and diesel, 1 per cent provides a post office service, 90

per cent sell National Lottery products, and 70 per cent provide a home

delivery service.

• For large shops, 95 per cent have an off-license, 2 per cent sell petrol,

fuel and diesel, 3 per cent provide a post office service, 99 per cent sell

National Lottery products, and 64 per cent provide a home delivery

service.

COMMERCIAL RATES Local shops make a significant financial contribution to local authorities. In an environment where local authorities are facing serious budgetary constraints, this is extremely important. It is estimated that the small-sized retailers pay commercial rates of €9 million per annum, the medium-sized shops pay €32million per annum

The total amount of commercial rates paid by the sector is estimated at €55 million.

and the larger stores pay €14 million per annum.

LOCAL AUTHORITY CHARGES Local grocery retailers also make a significant contribution to local authority finances through local authority charges such as water and refuse. It is estimated that: • The small-sized retailers pay local authority charges of €1.6 million per

annum.

• The medium-sized shops pay €19 million per annum, and • The larger stores pay €3.6 million per annum.

• The total amount of local authority charges paid by the sector is

estimated at €24 million per annum.

ADVERTISING SPEND Grocery retailers expend considerable amounts of money in advertising in local and national media, direct marketing, TV & Radio, and online and outdoor advertising in what is an increasingly competitive retail grocery sector. This provides a major source of revenue for local media. It is estimated that: • Small sized retailers spend an average of €1,000 per annum on

advertising, giving a total spend of €1.28 million per annum.

• Medium sized retailers spend an average of €13,000 per annum on

advertising, giving a total spend of €41.7 million per annum.

• Large sized retailers spend an average of €90,000 per annum on

advertising, giving a total spend of €46.4 million per annum.

• The total advertising spend by the sector is estimated at €89 million per

annum.

QUALITY, VALUE & THE LOCAL TOUCH - THE ESSENTIAL COMMUNITY SUPERMARKET Vincent and Annie Timothy, Timothy’s Londis PLUS, Abbeytown, Co Roscommon

Timothy’s Londis Plus in Abbeytown, Co Roscommon is a community focused, family run business, headed up by a great husband and wife team Vincent and Annie Timotyh.

Being involved in the local community comes naturally to them with Annie coaching the local girls GAA team and the store very involved in sponsorship of the nearby golf club.

Timothy’s create a great hub in the local community by getting involved in innovative local projects like a recent recent “Come Dine With Me” competition in aid of the charity Western Alzheimer’s. “We really enjoy being part of the community and giving something back. We really value and appreciate our customers so we are thrilled to sponsor local events like this,” says Annie.

On top of this, Timothy’s Londis Plus continues to excel in their business and won a gold award at the Londis Retailing Excellence Award in 2009.

“We believe that a combination of hard work, adapting to customers’ needs and ensuring overall brilliant customer service is the winning combination,” Annie explains.

Stats: Name: Timothy’s Londis Plus Owner: Annie and Vincent Timothy Location: Abbeytown, Co Roscommon Opened: 1999 Staff: 37 Size: 9,000 sq ft

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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SPONSORSHIP Local shops provide major support to local communities and local organizations through

Our research indicates that 100 per cent of shops in the sector get involved in sponsorship of some sort. This generally involves

sponsorship.

activities such as local sporting events and teams, fund raising ventures, charitable donations and school events.

• For small sized shops the average sponsorship spend is estimated at €2,500 per

annum, giving a total sponsorship spend of €3.2 million.

• For medium sized shops the average sponsorship spend is estimated at €15,000 per

annum, giving a total sponsorship spend of €48 million.

• For large sized shops the average sponsorship spend is estimated at €30,000 per

annum, giving a total sponsorship spend of €15.4 million.

• The total sponsorship spend by the sector is estimated at €66.6 million per annum.

SOURCING OF SERVICES Local shops support many local businesses through their sourcing of local services. Our research shows that: • 90 per cent of small sized shops source services such as banking, cleaning, repairs and

decoration locally.

• 96 per cent of medium sized shops source services such as banking, cleaning, repairs

and decoration locally.

• 90 per cent of large sized shops source services such as banking, cleaning, repairs and

decoration locally.

Table 6 summarises the financial contribution made by the independent retail grocery sector per annum: TABLE 6 FINANCIAL CONTRIBUTION OF THE LOCAL SHOP

Source

Net Effect (€ m)

Net Wages Tax/PRSI/Levies Commercial Rates Local Authority Charges Advertising Sponsorship TOTAL IMPACT

1,979 349 55 24

Multiplier Effect (€ m) 2,968 349 55 24

89 66 2,562

133 99 3628

If an average income multiplier effect of 1.5 times is applied to the total spending on net wages, advertising, and sponsorship, the total contribution made by the local shop to the economy is estimated at €3.62 billion in a year, which is equivalent to 2.8 per cent of GNP.

24 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

SECTION 4 Issues for the Retail Sector The independent retail grocery sector is making an extremely important contribution to the Irish economy in general, but to local economies in particular.

Given the extremely challenging environment in which the Irish economy now finds itself, the health of this sector, which is dominated by sole traders and SME retailers, it is vital that the environment for these enterprises is as positive and conducive to effort and entrepreneurial endeavor as possible.

This is not to contend that they should be sheltered from competition, but that policy and legislation should not operate to raise the bar for these businesses unnecessarily, particularly through the imposition of unnecessary regulatory burdens.

The sector is experiencing very challenging trading conditions as evidenced by the job losses and shop closures that are occurring. It is currently operating in an environment where input costs are very high, where there are deflationary pressures on selling prices, and where competition is intensifying. For this sector to survive and to continue to make the very significant economic and social contribution to the national economy and local communities, a number of issues will have to be addressed.

The key issues facing the sector are as follows: WEAK CONSUMER DEMAND Overall consumer spending has weakened significantly over the past three years and the general environment for retailers has become very challenging.

Consumers remain very uncertain about future employment prospects, future taxation changes and further cutbacks in government expenditure. Against that background, consumer confidence has weakened and precautionary saving has become a key feature of personal sector behavior. Policy makers need to create an environment where the personal sector gets more certainty about the issues that are currently undermining confidence. From the perspective of tax revenues and employment, a recovery in consumer spending is very necessary. These issues are addressed in Section 5.

WAGE RATES For retailers, wage costs represent one of the most significant operating costs, given the customer-focused nature of the business. Wage costs deteriorated very significantly up to 2008, but the relative situation has improved during

According to the National Competitiveness Council, labour cost growth rates in Ireland slowed significantly after 2008. Total labour costs for a single person in Ireland, with no children earning the average wage – including taxes on income, and employer & employee social security contributions – were the 10th highest in the OECD and are broadly comparable with a number of western European countries. However, the statutory monthly minimum wage in Ireland in 2010 was the second highest in the EU-15. the recession.

16

GENERATIONS OF HARD WORK, PASSION & DEDICATION TO CUSTOMERS Joe Stafford, Stafford Fine Foods, Drogheda and The Lourdes Hospital

Joe Stafford, managing director and owner of Stafford Fine Foods has always been part of the family business. The business was opened by his Father in 1978 and Joe is proud to say that they still have staff members working there since the original store opened 33 years ago.

Joe has carried on his Father’s hard work and enterprise and has grown the family enterprise to include another award winning store and now employs over 60 people. “It has evolved throughout the years and Stafford’s is purely a family creation.

It has been through hard work, determination and fervor that we got this far” says Joe. The hard work has paid off, and the store can only be described as exceptional. With personally created recipes exclusive to the Stafford’s brand, Joe wanted to bring this successful formula to the next level and it is now a landmark in the centre of Drogheda on Laurence Street. “Being an independent convenience store is extremely challenging, “says Joe. “But I think our customer base like what we do and we get to know them personally and they really appreciate that”.

Stats: Name: Stafford Fine Food Owner: Joe Stafford Location: Dublin Road Drogheda and the Lourdes Hospital Opened: 1978 Staff: 60+

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

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When measured as a percentage of the average wage, the minimum wage in Ireland was the fourth highest in the EU-15. Given the cross-border competition for Irish retailers, wage rates in the United Kingdom are particularly important. When adjusted for exchange rates, the monthly minimum wage in the United Kingdom is more than 22 per cent lower than in the Republic of Ireland. However, the reality has been that the minimum wage does not tell the full story. Under terms set down by the Joint Labour Committee (JLC) in relation to workers in the retail grocery and allied trades, a wage higher than the national minimum wage is legally imposed on retailers. Changes to this legislation are welcomed by the sector.

This wage structure has been a serious issue for many independent retailers who are struggling to survive in the face of intense competition and margin pressures. It reduced their flexibility to agree lower rates to the level of the minimum wage with employees if required to retain employment.

BEHAVIOUR OF MULTIPLES AND THE IMPORTANCE OF THE RETAIL PLANNING GUIDELINES The purchasing power and sourcing policies of the large national and multi-national retailers and the responses of the larger suppliers and international brand holders are imposing huge competitive pressures on smaller Irish retailers. The large multiples have very significant purchasing power with suppliers and can insist on extremely generous terms. Smaller retailers do not have such purchasing power and are as a consequence placed in an extremely uncompetitive position relative to the multiples. There is a strong feeling within the retail grocery trade that the larger suppliers fund their promotions and discounts with the multiples, through the imposition of less attractive terms of trade with the smaller retailers.

If the power of the large multiples is allowed expand without constraint, smaller retailers will be steadily pushed out of business and the retail grocery market will come to be dominated by one or two big players. This would not be in the best interests of consumers or the national economy in terms of choice, price or the local economic contribution of independent retailers.

The abolition of the Groceries Order strengthened the position of the large multiples, and this would be exacerbated by a further relaxation of the Retail Planning Guidelines (RPG).

The RPG is an essential component in seeking to maintain a balanced retail grocery sector, where independent grocers can continue to make a strong contribution to local economic activity. They are designed to support the achievement of a range of social, cultural and economic goals.

26 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

GENUINE GREEN GROCERS Sean Quish, Quish’s Supervalu, Ballincollig, Co Cork

17

Forfas acknowledged the risk that retailers will extend their scale advantage to create local monopolies .It viewed this as a particular issue in the grocery market where most consumers are generally unwilling to travel long distances to do their weekly grocery shop.

TABLE 7 CONCENTRATION IN THE IRISH AND UK RETAIL GROCERY MARKETS

Top Retailer UK 30.2%

Ireland 27.3%

Top 3 Retailers UK 60.5%

Ireland 70.8%

Top 5 Retailers UK 79.4%

One of Co Cork’s longest established supermarkets, Quish’s SuperValu in Ballincollig, has transformed the local community since opening 32 years ago.

Ireland 82.7%

Source: Kantar World Panel, 2011 Table 7 shows the level of concentration in the Irish and UK retail grocery markets. The top retailers has a higher market share in the UK than in Ireland.

However, the top 3 retailers and the top 5 retailers have a higher market share in Ireland than in the UK. This suggests that the level of market concentration is Ireland is higher than in the UK, and any relaxation of the RPG would be likely to exacerbate this trend. From the perspective of competition, consumer choice and consumer prices, this would not be a positive development.

The RPG is an essential element of the control of the Irish retail landscape.

The guidelines should be maintained and strengthened in order to maintain a balanced retail mix and to preserve town centres. From a socio-economic perspective this is also important in order to provide access to retailing for elderly and disadvantaged shoppers, for whom out of town developments do not provide an option in many instances. There is no evidence that the relaxation of the guideline would benefit the consumer, not to mention the overall economy.

PARKING AND TRAFFIC MANAGEMENT Many independent retail grocery shops are located in town centres, whereas the larger multiples tend to be located in out of town centres. There is a need for a consistent and coherent approach to parking and traffic management so that town centres are not penalized to the advantage of out of town centres.

Policy needs to ensure that smaller retailers are not placed at a competitive disadvantage as a result of the town centre location. In this context, it is essential that the same parking charges should apply to shoppers in out of town centres as in town centres.

Employing 130 local people and sponsoring the local rugby and football teams is only a fraction of what Quish’s give back to their local community.

They are also one of Ireland’s truly greenest grocers committed to reducing, reusing and recycling waste. Quish’s invested significantly in making the store environmentally friendly and now recycle over 90% of waste.

“As a community focused, family business we are determined to play our part in improving awareness of our environment and to promote green initiatives in both our supermarkets in Ballincollig and Tramore,” says owner Sean Quish.

Indeed, Sean and his family are committed to the local community in many ways and encourages young people to take part in sport by donating €22,000 worth of sports equipment to the local primary schools. He says the key to his family businesses’ success is that “Our team are our most important asset. At Quish’s we are committed to living the values of what we do”.

Stats: 20,000sq ft Name: Quish’s Supervalu Location: Ballincollig Co Cork and Tramore, Co Wexford Owner: Sean Quish Staff: 130 Size: 20,000

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THE REGULATORY BURDEN The burden of regulation on retailers is very high and is regarded as a key impediment to business and job creation. In calculating the cost of regulation, the two key considerations that must be taken into account are the costs of the various licenses and permits and the time involved in compliance. Based on the research conducted by RGDATA in 2009, for an average retailer: • The cost of permits and licenses totals around €5,436 per annum; • The time involved in ensuring compliance and completing surveys averages

around 50 hours; Management time in the retail sector averages around €24 per

hour; • The cost of this compliance time is estimated at €1,200 per retailer; • The cost of compliance for the average retailer is €6,636 per annum; • The total cost of compliance for the 4,000 members of RGDATA is estimated at

€26.54 million.

This burden of regulation is very costly and needs to be streamlined, without undermining standards. There needs to be a centrally driven push to reduce regulatory and compliance costs, and rationalize the number of licenses and agencies in the regulatory system.

The cost of regulation needs to be reduced by a minimum of 25 per cent across the board.

LOCAL AUTHORITY CHARGES AND COMMERCIAL RATES Local authority charges, commercial rates, and planning levies are imposing considerable costs on the grocery sector. Significant progress has been made during the recession to reduce business costs to ensure survival. Wages are adjusting in a downward direction; many companies have shed labour to reduce labour costs; professional fees are in the main adjusting in a downward direction; and in some cases commercial rents are reacting to the harsh economic realities.

The one segment of the overall cost structure that has not adjusted to the economic challenges are the charges imposed by the local authority system – particularly commercial rates.

Between 2000 and 2011, Annual Rateable Valuations (ARVs) have increased significantly in all local authority areas, with the increase averaging 57 per cent across the country. The Consumer Price Index increased by 32.8 per cent over the same period. Local Authority Commercial rates also vary significantly throughout the country.

28 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

CREATING LOCAL JOBS David and Maura O’Reilly, N4 Mace, Ballinack, Co West Meath

In 2010, Central Government Funding (Total General Purposes Grant + NonNational Roads Grant) accounted for 24.5% of total council expenditure. This contribution is down from 31.8 per cent in 2006. Over the same period the business contribution from Water and Commercial Rates increased from 27.2 per cent to 30.2 per cent. The reduction in Central Government Funding is being largely compensated for through an increased burden on the business sector.

Commercial rates must adjust to the changed economic realities, or many more retailers will be forced to close, with the loss of many more jobs. The following options should be considered: 1. Business must be given the right to appeal a rates valuation based on economic conditions and an inability to pay; 2. The funding of local authorities in Ireland needs to be more broadly based and needs to reflect changing economic and business conditions. Having a system that is not based on ability to pay makes no sense from an overall economic and business perspective. In Ireland there is no flexibility based on ability to pay and there is a statutory obligation on local authorities to pursue commercial rates. This is not in the best interests of business and is certainly not in the best interests of the overall economy. The UK system is a model that would be worth studying carefully to improve the system in Ireland. The proposed broadening of the rates base through the introduction of a household charge must be matched with some alleviation for small businesses that have carried the burden of rates over the years; 3. Local authorities should work more closely with business organisations and local businesses to find solutions to the issues facing business and to find solutions to the funding of local authorities; 4. There will have to be significant rationalisation of local authorities. One local authority per 250,000 of population would appear to be a realistic scale for a more efficient and affordable structure. Ireland currently has 34 County and City Councils, which is equivalent to one per 134,743 people. One council per 250,000 people would result in 18 Councils. This could generate savings of more than €1 billion. The proposals for Limerick provide a template for what is possible. All around Ireland there are examples of local authorities who have small populations under their control and who compete with neighbouring local authorities for development. This has resulted in poor planning decisions; unacceptable expense and widespread duplication. Business in the main is forced to carry the burden;

It has taken David and Maura O’Neill 11 years to transform their small shop and petrol station into a thriving enterprise employing 40 people.

A complete revamp in 2008 transformed the N4 Service Station at Ballinack into a modern forecourt.

Manager Pat O’Neill describes the business as “a new born baby that had to be nourished in order to grow”. He feels that it has greatly evolved and now has a “pedigree” while retaining “a bit of heart”.

The O’ Neill’s currently have 40 staff who all receive comprehensive training to ensure that they are multi skilled. But what made this particular service station stand out from the rest. Pat is always keen to highlight the dedication, effort and good spirit of the staff, “through the good times, and more importantly the tough times over the past few years”.

Stats: Owner: David and Maura O’Reilly Location: N4, Ballinack, West Meath Opened: 2000 Staff: 40 Size: 2,000sq ft

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5. The Local Government Efficiency Review Group identified savings of €511 million to be achieved through efficiencies across the local authority system. It recommended that efficiency gains could be made from ‘greater integration of administrative structures across county/city areas, both through a regional approach to shared services, and the pairing of neighbouring county/city authorities as joint administrative areas, and greater integration of administrative structures between town and county’. These recommendations must be considered by government as a matter of immediate priority. While some progress has been made, further progress is needed. Given the pressure on the public finances and the necessity to cut public expenditure, it has to be recognised that not all savings made in the cost of running local authorities can be passed back to the business sector. However, even if half of the €511 million in savings suggested by the Local Government Efficiency Review Group were passed back to business, the total commercial rates bill could fall by almost 19 per cent. This would deliver some assistance in helping business survival and job preservation in the economy. Greater reductions would provide a stimulus to job creation; 6. Since 1977 the funding of local authorities has not been on a sound footing. This must be remedied. The introduction of user charges for domestic water and a domestic property tax are necessary to create a fairer and broader funding regime for local authorities. Central Government should pick up the bill for those who cannot pay and who are granted waivers; 7. No further cuts in central government funding of local authorities should be implemented for the foreseeable future either through further cuts in the non-national road maintenance budgets or the local government fund. Clearly, the correction of the public finances will have to continue; but this should focus primarily on reducing the size and cost of the overall public administration. If local authority funding is cut further without rationalising the local authority structure, the result will be that business will have to carry an even bigger burden of unsustainable local authority commercial rates. Any further reduction in the local government fund will have to be accompanied by an equivalent reduction in the commercial rates bill; and 8. A semi-state water company should be established with the power to levy user charges, thereby allowing the company to raise finance on global capital markets, and thus creating scope for reduced commercial water charges.

THE NON-WAGE COST ENVIRONMENT The general cost environment for business operating in Ireland spiraled between 2000 and 2007. However, following the onset of recession in 2008, many business costs have adjusted in a downward direction and Ireland has become more competitive. However, further progress is required to facilitate business survival in what is still a very harsh economic climate.

30 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

SERVING A LOCAL STUDENT COMMUNITY WITH STYLE 18

The National Competitiveness Council summarises a range of costs metrics, which clearly show that the situation is improving, but there is room for further improvement.

For example: • Ireland is the fourth most expensive country (sample of 14) surveyed

for electricity costs for SMEs and remains more expensive than

the euro area average; • Ireland is the eighth most expensive location (sample of 13) for a

basket of business calls and is almost 5 per cent lower than the euro

area average; The current recession must be used to reduce the cost base of the Irish economy and regain some lost competitiveness. This will require a co-operative and co-ordinated approach from employers, trade unions, government and the public. Cost competitiveness is not just an important issue for the retail grocery sector, but is an issue of immense national importance.

PLANNING AND CASUAL TRADING LAWS There needs to be a stronger enforcement of the planning and trading laws.

The ability of rogue traders to set up a stall or to trade in adapted premises without any of the compliance objectives that apply to retailers seriously undermines retailers in established premises. A dedicated programme is essential to address this issue.

RENTS AND UPWARD ONLY RENT REVIEWS Upward only rent reviews in property leases have been long highlighted as a big issue for small business in Ireland. In February 2010, the then government introduced legislation banning upward only rent reviews for new leases. In March 2011, the incoming government included in its Programme for Government, a commitment to legislate to end upward only rent reviews for existing leases. Legislation in relation to existing leases is now awaited to clarify the issue.

The reality is that many commercial property tenants have been able to get flexibility from landlords, reflecting the changed economic circumstances. However, the evidence suggests that retailers have generally found it very difficult to negotiate rents downwards, particularly with large institutional landlords. Consequently, many retailers are being forced out of business. The law must be changed to address this situation and provide a

Louis Byrne & Colette O’Sullivan, Spar Oak Park & Monavalley, Tralee, Co Kerry

Louis Byrne and his wife, Colette O’Sullivan are the proud and hardworking owners of two Spar shops located within less than a mile of each other in Tralee, Co Kerry. Every day, the two can be found going between Oak Park, and Monavalley ensuring that things are running smoothly in both shops.

The couple, who previously ran a forecourt business, decided to expand in 2001 when the opportunity to purchase a nearby Spar arose. They decided to craft their fresh food and convenience offer to meet the needs of the students attending nearby Tralee Institute of Technology. This has certainly delivered to hungry students who are regular customers of this busy convenience store.

Louis, who has been involved in retail for 15 years, is very focused on the business and despite much nearby competition he believes they have the “upper hand”. He puts this down to the significant investment the couple have made in ensuring their shops stand out from the rest.

Louis & Colette have upgraded the shops three times in the past five years. A focus on ensuring convenient parking and offerings such as a juice bar, innovative deli and regular special offers, ensure a heavy footfall of busy students. Louis also believes that the couple’s support for local events and clubs is also paramount.

“We are constantly looking at ways to adapt the shops to suit our customers. This is a very dynamic sector and you have to constantly keep ahead of the competition if you want to survive,” he says.

Spar Oak Park Listowel Rd & Spar Monavalley, Monavalley Owners: Louis Byrne and Colette O’ Sullivan Staff: 26 Opened: 2001:Oak Park; 2007: Monavalley Size: Oak Park ,2,000 sq ft; Monavalley, 1,900 sq ft.

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31

greater level of flexibility for retail clients.

BANK CREDIT Those independent retail grocers who have entered the market in recent years have invested heavily in developing their businesses. Many are now heavily borrowed and are struggling to cope with the changed business environment. Lack of access to credit and widening margins on existing credit lines are now imposing serious financial pressures on retailers and many are concerned about getting their credit lines extended. This issue has to be addressed by the authorities as a matter of urgency. If credit flow to small business does not resume quickly, many entrepreneurs will be forced out of business and many more jobs will be lost all round the country.

STATE SUPPORTS Independent retailers do not receive any state supports or assistance. Given the challenges that are currently facing the Irish economy and the difficulty in identifying the sectors that might contribute to future employment creation, the Government needs to disavow itself of the notion that some jobs have less worth than others. The Independent Retail Grocery sector (IRG) should be given access to the full level of State supports available for the growth and retention of employment in other sectors. Agencies such as Leader Partnerships and County Enterprise Boards should be allowed focus on the IRG sector on the basis that it does provide major employment and does contribute significantly to economic activity around the country.

Training in the IRG sector should also be assisted by state agencies in areas such as financial management, HR management and sales. Many business owners in the IRG sector are currently in serious financial difficulty and do not have the skills necessary to extricate themselves from the difficulties. As important economic and employment contributors all around the country, these owner mangers need to be given as much training assistance as possible from state agencies.

19

FOOD PRICE INFLATION When adjusted for Purchasing Power Parities (PPP), the price level indices for the EU-27 show that food prices in Ireland were 28 per cent higher than the EU-27 average in 2009.

Irish food prices were 33.3 per cent higher than the UK, 15.3 per cent higher than Germany and 4.5 per cent lower than Germany.

Table 8 shows the trend in food prices and overall inflation between 2005 and March 2011 in a selection of regions. Food prices increased by a significantly larger magnitude than overall average prices over the period. Irish food prices showed a lower rate of increase than the EU-27, and the UK, Germany and France. The food supply chain price index compiled by Eurostat seeks to bring together the available data on price developments through the supply chain, from primary agricultural products, through to the food industry and ultimately to the consumer.

32 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

TAKING ON & BEATING THE BIG BOYS Sean Mulrooney, Mulrooney’s Gala Shops, Roscrea, Co Tipperary

TABLE 8

Region EU-27 Ireland Germany France UK Italy Spain

HICP +14.8% +6.6% +10.8% +10.9% +18.1% +13.0% +16.3%

Food supply chain prices +29.6% +21.9% +28.7% +32.1% +63.2% +20.8% +3.1%

FOOD PRICE TRENDS 2005-MARCH 2011 The consumer food price index compiled by the CSO in Ireland shows that consumer food prices increased by just 3.1 per cent between January 2005 and October 2011.

This is significantly lower than food commodity prices over that period. This reflects the fact that at the consumer level, food prices are determined more by movements in nonfood costs rather than food raw material costs. The reality is that food raw material costs account for a low share of what consumers pay for food.

Consequently in understanding why food prices in Ireland are higher than the EU average, it is important to understand the non-food material factors that influence the price paid by the consumer.

The Irish domestic market is small in size. Hence it is more difficult for food producers to achieve sufficient scale to exploit economies of scale.

The costs of doing business in Ireland are still higher than many of the EU competitors.

Such business costs include the minimum wage; wage costs in general; insurance costs; professional fees; IT costs; commercial rates and rents; the cost of logistics; and energy.

The general cost environment for business operating in Ireland deteriorated significantly up until 2008. The latest report on the costs of doing business from the National Competitiveness Council concludes that there have been significant improvements in cost competitiveness over the last two years, but that further progress is required. On a broad range of business costs Ireland fared as follows: 20 • Between 2000 and 2006 total compensation per employee rose by 6.3 per

cent in Ireland, compared to 2.3 per cent in the euro area. In 2010, average

employee compensation grew by 1.6 per cent in the euro area, but it fell by

1.9 per cent in Ireland; • Unit labour costs in Ireland fell by 4.4 per cent in 2010, compared to an

increase of 0.85 per cent in the euro area; • Total labour costs for a single person in Ireland, with no children earning the

average wage – including taxes on income, and employer & employee

social security contributions – were the 10th highest in the OECD and is

broadly comparable with a number of western European countries;

Earlier this year, Mulrooney’s Gala store beat off stiff competition to win the national award for ‘Best Bakery’ at Checkout magazine’s Best in Fresh awards. Owner of the store, Sean describes how it was an “unexpected surprise and a very big achievement”.

With six full time bakers, they start baking at 10pm and deliver fresh tarts, breads and scones to Mulrooney’s three other Galas located in Portuma, Neenagh and Ballywilliam.

“Everything is mad fresh from start to finish” Sean says “we even peel the apples ourselves”.

According to Sean, it’s the winning combination of good quality food; legacy and the human touch that keeps customers coming back. “It’s the legacy and the history that allows us to keep trading. Customers who come into our store will experience the human touch which is missing in the larger retailers. That’s what will keep us going”.

Stats: Name: Mulrooney’s Gala Location: Roscrea, Co Tipperary Owner: Sean Mulrooney Opened 2003 Staff: 20 Size: 1,200sq ft

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33

• •

•

•

•

•

•

•

•

•

•

In 2009, Ireland had the fifth highest net wage level in the OECD-28; The statutory monthly minimum wage in Ireland in 2010 was the second highest in the EU-15. When measured as a percentage of the average wage, the minimum wage in Ireland was the fourth highest in the EU-15; Of 13 countries considered, Ireland was the third most expensive for construction of a prime industrial unit in 2009; Of 14 countries considered, Ireland was the sixth most expensive for renting a prime industrial site in 2010. Rents have fallen by almost 37 per cent since their peak in 2007; The cost of renting a prime office unit in Ireland declined by 25 per cent in 2008, 18 per cent in 2009 and 12 per cent in 2010. Ireland is now a cheaper location than Germany and Spain; The cost of industrial electricity for large energy users in Ireland fell by 27 per cent in 2010 and of 14 countries benchmarked, Ireland was the fifth cheapest and is now lower than the euro area average; Despite significant declines in 2009 and 2010, electricity costs for SMEs in Ireland were still higher than the euro area average in 2010, but the gap between Ireland and the euro average has dropped from 30 per cent in 2008 to under 4 per cent in 2010; The cost of industrial gas fell significantly between 2009 and 2010. Of 14 countries benchmarked Ireland had the third lowest industrial gas price in 2010 and was 12 per cent below the euro area average; There was a significant increase of 18.8 per cent in the average cost of waste water services in Ireland in 2009. There was an increase of 100 per cent in Waterford City and 69.5 per cent in Limerick City; Ireland was the third most expensive benchmarked location for the land filling of non-hazardous waste in 2009, since early 2010, Irish gate fees have continued to fall sharply; Ireland was the eighth most expensive of 13 countries benchmarked in 2010, but is now 5 per cent cheaper than the euro zone average for a business basket of landline calls.

These competitiveness comparisons relate to 2009 and 2010. It is clear that most costs of doing business have fallen sharply during the recession. However, the costs of doing business in Ireland are still too high and must be taken down further.

As an island economy, Ireland suffers from the additional cost of importing most goods by air or sea. It is estimated that on average, 15 per cent of the value of imports is the cost of transporting the goods from door to door; and Approximately 85 per cent of goods in Ireland are moved by road, compared with only 45 per cent in Germany and 60 per cent in France. As road transport is more labour intensive than other modes of transport, high labour costs affect the transport costs of most goods. The quality of the transport infrastructure also impacts on the effectiveness of the distribution system.

In any discussion on food prices in Ireland, proper account must be taken of the high level of wage and non-wage costs in Ireland. This must be factored in to the equation. The reality is that there is now intense competition at the retail grocery level. There is no transparency around the margins being earned by the large retail multiples, but it is clear that the margins earned by the independent retail grocery sector are under constant downward pressure.

16 17 18 19 20

‘Costs of Doing Business in Ireland 2011’, National Competitiveness Council, Forfas, June 2011 ‘Review of the Economic Impact of the Retail Cap’, Forfas, April 2011.

‘Costs of Doing Business in Ireland 2011’, National Competitiveness Council, Forfas, June 2011.

Source: Eurostat ‘Costs of Doing Business in Ireland 2011’, National Competitiveness Council, Forfas, June 2011.

34 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

SECTION 5 Overview of consumer spending

RECENT TRENDS IN CONSUMER SPENDING The Irish economy has experienced a dramatic decline in economic activity over the past four years. GDP contracted by 3 per cent in 2008, 7 per cent in 2009 and 0.4 per cent in 2010. Consumer spending has been particularly badly affected since 2008 and has made a very significant contribution to the overall decline in the economy.

Personal consumer spending measures the expenditure by individuals and households on goods and services. It is released quarterly by the CSO in the Quarterly National Accounts release. Consumer spending is determined by many factors, of which the most important are trends in wages, employment, job security, credit availability, the personal taxation burden, government current expenditure, personal wealth and asset price changes.

Figure 1

THE PERSONAL TOUCH Kevin Lowe and John O’Gara, Garlow’s Londis, Grange, Co Sligo

Set up by Kevin Lowe and John O’Gara, Garlow’s Londis became a fusion of the two business partners, not only in name but in expertise. This year the c-store celebrated its ten year trading anniversary and decided to involve the whole community in the festivities. “There were bouncy castles and freebies for all. It was all about customer appreciation and thanking everyone for the last 10 years” says Kevin.

The store, located on the N5 Grange Road is run by a dedicated team of 17 staff members, many of whom have been working there for ten years.

Kevin believes passionately that the “most important aspect to any business is the absolute personal touch. That is something the big stores try and achieve but never do,” he says. Kevin is present on the shop floor seven days a week and loves to greet and chat with his customers who come in and meet each other, making it a hub of activity.

Source: CSO, National Accounts & Department of Finance, Nov 2011.

Between 1996 and 2007 growth in consumer spending on goods and services averaged 6.5 per cent per annum in real terms. The annual growth rate peaked at 10.3 per cent in 2000. In 2008, consumer spending declined by 1.1 per cent, by 6.9 per cent in 2009 and by 0.8 per cent in 2010. Spending is projected to decline by 2.5 per cent in 2011 and 1 per cent in 2012 (Figure 1).

The decline in consumer spending from 2008 onwards reflects significant job losses, downward pressure on wages in the public and private sectors, very tight credit conditions, falling house prices and domestic equity prices, cutbacks in government expenditure and higher personal taxes.

These factors combined to undermine personal disposable incomes.

In order to maintain the personal touch Kevin is moving with the times and has taken to the social networking site of Facebook. The store has recently starting running the Facebook fan page but has starting advertising special offers for customers. “This is the way to go and is another form of the ‘personal touch’,” says Kevin.

Stats: Name: Garlow’s Londis Location: Grange, Co Sligo Owner: Kevin Lowe and John O’Gara Opened: 2001 Staff: 17 Size 2,500sq ft

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Personal Disposable Income (PDI) is the difference between gross personal income in the economy and direct personal taxes. In other words it is the income that is available for spending once direct tax liabilities have been discharged. Growth in personal disposable incomes averaged 6.7 per cent per annum between 2004 and 2008. This growth reflected strong growth in employment, strong growth in earnings, an easing of the personal tax burden and strong growth in government social expenditure. There was a major change

Personal disposable incomes are estimated to have declined by around 3.2 per cent in 2009 and 2.4 per cent in 2010 (Figure 2).The decline in disposable incomes came after more than a decade of in 2009.

strong growth and has come as a major shock to Irish consumers. Consumer nervousness and caution has been exacerbated in 2011 by the economic and financial turmoil in the Euro Zone.

Figure 2

Source: ESRI, CSO National Accounts & Own Estimates Table 9 examines the composition of total consumer spending on goods and services in the economy between 2005 and 2010 and the growth rate in the various categories of spending over that period.

36 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

FOCUSING ON STAFF TRAINING TO PROVIDE EXCELLENT CUSTOMER SERVICE

Table 9 examines the composition of total consumer spending on goods and services in the economy between 2005 and 2010 and the growth rate in the various categories of spending over that period.

TABLE 9

COMPOSITION OF IRISH CONSUMER SPENDING 2005-2010 (CONSTANT TABLE 9 MARKET PRICES)

Casey’s Quickstop, Ballina, Co Mayo

COMPOSITION OF IRISH CONSUMER SPENDING 2005-2010 (CONSTANT MARKET PRICES) Commodity Group

2005 €m

% TOTAL

2010

Food, Beverages & Tobacco

17,445

21.4%

16,640 19.7%

-4.6%

Of which: Food (exc.meals out)

7,202

8.8%

7,432

8.8%

+3.2%

0.7%

611

0.7%

+13.4%

Non-Alcoholic Beverages 539

% TOTAL €m

% CHANGE

Alcoholic Beverages

7,041

8.7%

6,435

7.6%

-8.6%

Tobacco

2,725

3.3%

2,161

2.6%

-20.7%

Clothing & Footwear

2,783

3.4%

3,281

3.9%

+17.9%

Housing

11,969

14.7%

13,933 16.5%

+16.4%

Fuel & Power

2,768

3.4%

2,990

3.5%

+8.0%

Household Equipment & Operation

4,874

6.0%

4,225

5.0%

-13.3%

Transport & Communication

12,895

15.8%

11,235 13.3%

-12.9%

Recreation, Entertainment & Education

8,868

10.9%

9,961

+12.3%

Miscellaneous Goods & Services

19,617

24.1%

20,169 23.8%

+2.8%

Expenditure Outside the State

4,826

5.9%

5,241

6.2%

+8.6%

Less Expenditure by Non residents

-4,187

-5.1%

-3,105

-3.7%

-25.8%

100.0%

84,571 100.0%

(total)

PERSONAL CONSUMPTION OF 81,380 GOODS & SERVICES

11.8%

Opened in 2006, Casey’s Quickstop in Ballina, Co Mayo has grown to be an impressive 4,000sq ft store employing 38 staff. The dedicated team all come from the local community and the majority has been working for Casey’s many years.

One of the core values in Casey’s is the training and upskilling of their staff. As part of their training process every member of staff is given responsibility for a different area within the store.

Store manager Chris McVeigh explains “every part of the store and every operation within the store has an owner, and no team members are left out.

+3.9% 40

Source: ‘National Income & Expenditure 2010’, Table 14, CSO, June 2011 There was an increase of just 3.9 per cent in consumer spending between 2005 and 2010. Between 2005 and 2010: • There was a decline of 4.6 per cent in expenditure on food,

beverages & tobacco; • Food, beverages and tobacco as a percentage of total expenditure

declined from 21.4 per cent in 2005 to 19.7 per cent in 2010. In

1995, food, beverages & tobacco accounted for 29.7 per cent of

total consumer expenditure; • There was an increase of 3.2 per cent in expenditure on food

between 2005 and 2010; and • Food as a percentage of total consumer expenditure was constant

over the period at 8.8 per cent. In 1995, food accounted for 14 per

cent of total consumer expenditure.

“We encourage all staff to have pride in themselves and their work, to understand and thoroughly appreciate what excellent practice means to our business. We reward staff when a job is done well, when standards are excelled,” says Chris Casey’s have also developed their own in house training for employees and provide certificates for those who have successfully completed it.

With a forecourt, deli, Supermac’s, off license and convenience store there is a need for cross training, allowing for more flexibility. In turn, Casey’s are able to provide excellent customer care while maintaining a high level of staff morale.

Stats: Name: Casey’s Quickstop Location: Ballina Co Mayo Owner: Gerry Casey Opened: 2006 Staff: 38 Size: 4,000sq ft

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

37

It is important to note that the expenditure figure for housing includes imputed rent, which is assumed rental expenditure for owner-occupied dwellings, but is in reality spending that never actually occurs. In 2005 imputed rent totaled â‚Ź8.9 billion, equivalent to 74.7 per cent of total expenditure on housing. In 2010, the total for imputed rent was â‚Ź10.7 billion, equivalent to 76.6 per cent of total expenditure on housing. When adjusted for this expenditure on imputed rent that never actually takes place, the share of total personal consumer spending (excluding imputed rent) accounted for by food beverages and tobacco was 24.1 per cent in 2005 and 22.5 per cent in 2010. Food accounted for 9.9per cent of total expenditure in 2005 and 10.1 per cent in 2010.

RECENT TRENDS IN RETAIL SALES

The retail sector has been particularly badly hit as a result of the sharp contraction in consumer spending after more than a decade of expansion. This is having a significant impact on the overall economy, but particularly on employment in local communities around the country as thousands of jobs have been lost in the wholesale and retail sector.

Retail sales data capture expenditure on goods only, and account for approximately 44 per cent of total consumer expenditure on goods & services. Retail Sales data are released monthly by the CSO. Having grown strongly for a decade, retail sales fell very heavily from 2008 onwards (Figure 3).

In volume terms, retail sales fell by 6.1 per cent in 2008 and by 14 per cent in 2009 and sales expanded by 1 per cent in 2010.

In value terms, retail sales fell by 4.5 per cent in 2008, 18 per cent in 2009 and 2 per cent in 2010.

The marked divergence in growth in volume and value terms from 2009 onwards is indicative of the fact that retailers are being forced to cut prices to shift stock. This highlights the pressure on retail margins and the consequent necessity for retailers and producers to control costs to the greatest extent possible.

38 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

WORKING TOGETHER TO GET THINGS DONE Kevin Victory, Centra, Mainstreet, Kingscourt

Figure 3 Source: CSO, Retail Sales Index

Kevin Victory opened his convenience store on the mainstreet of Kingscourt in County Cavan in 2000 after working in the industry for many years.

With all the necessary amenities such as deli, off license and ATM, Victory’s Centra offers everything a customer could need in one place.

Kevin represents a typical independent retailer with a strong focus on ensuring the vibrancy and vitality of his town. And he is not afraid to do the hard graft to make sure things happen in Kingscourt.

Table 10 outlines the growth in retail sales in both volume and value terms between January 2007 and September 2011; • Total sales fell by 21.4 per cent in volume terms and by 25.5 per

cent in value terms • Excluding the motor trade, retail sales fell by 11.2 per cent in volume

terms and by 15.7 per cent in volume terms; • Total Food sales declined by 0.2 per cent in volume terms and by

0.1 per cent in value terms; • Sales of Food, Beverages & Tobacco in non-specialized stores

increased by 1.4 per cent in volume terms and by 1.6 per cent in

value terms. The non-specialized stores are dominated by

the large multiples. These relatively strong retail sales data

show that the large multiples are still recording solid growth

in the Irish market, despite the difficult economic conditions. Detailed

evidence of the profits and sales for the multiples are not available,

but retail sales data and the business strategies pursued all point

towards a solid performance by this component of the retail grocery

market.

• Sales of Food, Beverages & Tobacco in specialized stores fell by

16.3 per cent in volume terms and by 16.8 per cent in value terms.

• Sales of Books, Newspapers & Stationery declined by 38.4 per cent

in volume terms and by 35.7 per cent in value terms. The weakness

in sales of Books, Newspapers & Stationery was particularly

concentrated in smaller shops and newsagents.

Kevin and his staff make a huge difference to the local community. At Christmas Kevin, together with other local independent businesses, organise the lights for the town. Kevin rallies around all the local businesses and in December Santa always visits the town to turn on the Christmas Lights and up to 500 children from the community will get a little goody bag from Santa.

Kevin is Chairman of the Kingscourt Chamber of Commerce and also gets involved in Shop local campaigns , local town vouchers scheme and the annual Festival which takes place in Kingscourt every August Bank Holiday weekend.

Kevin attributes the town’s success to all the local businesses working together, “we all work off each other to get things done”.

Stats: Name: Victory’s Centra Location: Mainstreet, Kings Court, Co Cavan Owner: Kevin Victory Opened: 2000 Staff: 15

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

39

available, but retail sales data and the business strategies pursued all point towards a solid performance by this component of the retail grocery market. 

Sales of Food, Beverages & Tobacco in specialized stores fell by 16.3 per cent in volume terms and by 16.8 per cent in value terms.



Sales of Books, Newspapers & Stationery declined by 38.4 per cent in volume terms and by 35.7 per cent in value terms. The weakness in sales of Books, Newspapers & Stationery was particularly concentrated in smaller shops and newsagents.

TABLE10 10 TABLE RETAIL SALES TRENDS JAN 2007-SEPTEMBER 2011 (SEASONALLY ADJUSTED RETAIL SALES TRENDS JAN 2007-SEPTEMBER 2011 (SEASONALLY ADJUSTED)

SECTOR

VOLUME

VALUE

% CHANGE % CHANGE All Retail Businesses

-21.4%

-25.5%

All Retail Businesses ex-Motor Trades

-11.2%

-15.7%

Food, Beverages & Tobacco in Non-Specialised Stores +1.4%

+1.6%

Bars

-30.2%

-27.1%

Food

-0.2%

-0.1%

Food, Beverages & Tobacco in Specialised Stores

-16.3%

-16.8%

Books, Newspapers & Stationery

-38.4%

-35.7%

Source: Central Statistics Office StatBank.

Source: Central Statistics Office StatBank.

The weakness in retail spending has continued in 2011. In the first nine months of the year, the

The weakness in retail hascent continued 2011. the first nineinmonths of the the year, volume of retail salesspending was 1.3 per lower in than theInsame period 2010, while value of the volume of retail sales was 1.3 per cent lower than the same period in 2010, while the sales was down by 1.1 per cent. When the motor trade is excluded, the underlying picture was value of sales was down by 1.1 per cent. When the motor trade is excluded, the underlying even weaker – the volume of volume sales declined bydeclined 3.3 per by cent, value of sales declined by picture was lack even weaker – the of sales 3.3and perthe cent, andConsumer the value of consumers the confidence to spend and are engaging in pre-cautionary saving. sales declined 2.4 per cent. by 2.4 per cent. confidence is being further undermined by the escalating euro zone crisis.

Consumer Figure Figure4 4 confidence remains fragile. Consumers remain very concerned about future

employment prospects, downward pressure on earnings, mortgage and other personal debt difficulties, and the ongoing fiscal adjustment (Figure 4). Personal savings levels are high, but 43

Source: ESRI/KBC Bank, November 2011 Source: ESRI/KBC Bank, November 2011

40 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

THE BEATING HEART OF THE COMMUNITY Walsh’s Service Station, Costello, Connemara, Galway

Consumer confidence remains fragile. Consumers remain very concerned about future employment prospects, downward pressure on earnings, mortgage and other personal debt difficulties, and the ongoing fiscal adjustment (Figure 4). Personal savings levels are high, but consumers lack the confidence to spend and are engaging in pre-cautionary saving.

Consumer confidence is being further undermined by the escalating euro zone crisis.

EMPLOYMENT IN THE RETAIL SECTOR Table 11 provides a breakdown of recent employment trends by sector across the economy. The most up to date data refer to the second quarter of 2011. Between the top of the labour market in the third quarter of 2007 to the second quarter of 2011, total employment in the economy has declined by 328,500.

The second column in Table 11 shows the decline in employment from the sectoral peak to the second quarter of 2011. Employment in the wholesale and retail trade declined by 48,600 between the peak of employment in the sector and the second quarter of 2011.

In the first quarter of 2011, 261,700 workers were employed in the Wholesale & Retail trade, accounting for 14.5 per cent of total employment in the economy. The retail trade accounted for 179,800 workers, equivalent to 10 per cent of total employment in the economy. From the peak of employment in the retail trade in the first quarter of 2008 to the first quarter of 2011, 29,500 jobs were lost in the sector.

After a prolonged period of sustained employment growth in this sector of the economy, the decline in employment is indicative of the changed environment for consumer spending and the retail sector.

Situated in the Gaeltacht region of Galway, 25 miles away from any cities, Gearoid and Antoinette Walsh have been running their business for 20 years. In that time the couple have acquired a dedicated team of 22 staff, all locals from the surrounding community.

This is a shop where, Antoinette describes, “All members of staff are on first name basis with the customers”. Despite competition from larger multiples in neighbouring cities, she feels that customers are going back to basics and appreciate this type of personal attention and interaction from staff.

The hub of the local community, Walsh’s Centra is always seeking innovative ways to engage their local customers while supporting important local charities.

They recently held a large fundraising drive for Breast Cancer Awareness which included a ‘Guess the Baby’ competition. Staff members were asked to bring in baby photographs of themselves and customers could guess who was who. “All of our staff are locals and the customers will either know them or know their families, so it was great fun getting them to guess the names”. Shoppers paid €2 towards the charity and in turn were entered into a draw for a hamper. They also held a ‘Pink Night’ in the local pub where a band played and spot prizes were given throughout the night. In total they raised €2,000 and had a great time too!

“This is not just about raising funds for a local charity, it’s about getting people involved in the local community, bringing them together and having a good time too” says Antoinette.

Stats: Name: Walsh’s Service Station Location: Costelloe, Connemara, Co Galway Owner: Gearoid and Antoinette Walsh Opened: 1991 Size: 2,500 sq ft

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

41

TABLE 11 EMPLOYMENT TRENDS Sector

CHANGE FROM PEAK22

CHANGE OVER 12 MONTHS

NUMBERS EMPLOYED Q2 2011

Agriculture, F&F

-30,400

+900

85,800

Industry

-71,900

-6,400

233,700

Construction

-162,900

-19,600

105,700

Wholesale & Retail Trade

-48,600

-3,500

265,600

Transportation & Storage

-2,600

+5,000

94,700

Accommodation & Food

-30,600

-12,600

107,200

Information & Com.

-

+800

74,900

Financial, Insurance & Real -5,700 Estate

+700

103,900

Professional, Scientific & Technical

-14,800

+900

101,800

Administrative & Support Services

-16,600

+4,800

66,100

Public Admin. & Defence

-7,500

-7,600

100,200

Education

-7,400

-3,300

146,500

-

+3,000

237,900

Human Health & Soc.Work Other

-13,500

-900

97,200

Total

-328,500

-37,800

1,821,300

Source: CSO, Quarterly National Household Survey, September 2011 & STATBANK. 22 The peak of employment in various sectors may have occurred in different quarters from the peak in overall employment. Hence the figures in the column do not add up to total decline in employment. Total employment peaked in Q3 2007.

RECENT TRENDS IN CONSUMER PRICES Consumer price inflation in Ireland averaged 4 per cent between 2000 and 2008, which was double the 2 per cent inflation target that is pursued by the European Central Bank.

The high level of inflation primarily reflected very strong demand in the economy, the sharp increase in the general cost of doing business across the economy, strong growth in house prices, and weak consumer resistance to higher prices against a background of buoyant economic and income growth in a very strong labour market.

42 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

for 179,800 workers, equivalent to 10 per cent of total employment in the economy. From the peak of employment in the retail trade in the first quarter of 2008 to the first quarter of 2011, 29,500 jobs were lost in the sector.

After a prolonged period of sustained employment growth in this sector of the economy, the decline in employment is indicative of the changed environment for consumer spending and the retail sector.

RECENT TRENDS IN CONSUMER PRICES

SERVING CUSTOMERS – SAVING LIVES

Consumer price inflation in Ireland averaged 4 per cent between 2000 and 2008, which was double the 2 per cent inflation target that is pursued by the European Central Bank. The high level of inflation primarily reflected very strong demand in the economy, the sharp increase in Kieran & Brigid Cotter, Cotter’s Gala, Baltimore, West Cork the general cost of doing business across the economy, strong growth in house prices, and FIGURE weak 5 consumer resistance to higher prices against a background of buoyant economic and income growth in a very strong labour market.

Source: CSO, Consumer Price Index, November 2011

Photo: Te

am Team

Phaedo

FIGURE 5

Community shopkeeper Kieran Cotter, who runs a Gala convenience store in Baltimore West Cork with his wife Brigid is a prime example of how local independent retailers play a pivotal role in their local communities.

Source: CSO, Consumer Price Index, November 2011

Average consumer prices in Ireland fell by 4.5 per cent in 2009 and by 1 per cent in 2010. However, the annual rate of decline bottomed out in July 2010. Between August 2010 and October 2011 the annual rate of inflation has increased from 0.2 per cent to 2.8 per cent. The consumer price index peaked in September 2008 and reached its nadir in January 2010. Between September 2008 and January 2010, average consumer prices fell by 7.7 per cent. Between January 2010 and October 2011 prices have increased by 4.7 per cent.

Table 12 shows the trend in prices for a number of commodity groups in the year to October 2011 and in the period from January 2000 to October 2011.

During the periods of very high inflation in the Irish economy over the past decade, those sectors exposed to high levels of competition both from domestic and external sources have experienced significantly lower rates of price increase.

In the twelve months to October 2011, the retail price for Food & NonAlcoholic Beverages increased by 1.4, compared to an average consumer price increase of 2.8 per cent. Food prices increased by 1.1 per cent and nonalcoholic beverage prices increased by 3.8 per cent. In the period between January 2000 and October 2011, the retail price of Food increased by 17.6 per cent and the retail price of Non-Alcoholic Beverages increased by 18.6 per cent. Over the same period, overall average consumer prices increased by 36.7 per cent, with the cost of Education increasing by 106.2 per cent and the cost of Health by 83.3 per cent.

Cotter’s is at the very heart of this bustling sailing and boating community and Kieran is also the 46 volunteer coxswain of the busy Baltimore Lifeboat.

It takes six minutes for Kieran to get from behind the counter of his store to man the wheel on the Baltimore Lifeboat and lead the dedicated local crew on lifesaving emergencies.

Kieran followed his father’s footsteps and joined the Baltimore Lifeboat crew in January 1975. He became a 2nd coxswain in 1982 and coxswain in 1989.

Over the years Kieran has taken part in many dramatic sea rescues and has saved many lives.

The most recent rescue catapulted Kieran onto the international media when he led the lifeboat rescue of the stricken Rambler 100 yacht which overturned when its keel fell off during the 2011 Fastnet Race.

After that dramatic evening time rescue Kieran was back in his shop at 7am the next morning preparing the newspapers and getting ready to open the store which serves over 3,000 visitors during the busy Summer months and 300 local customers throughout the year.

Kieran Cotter and members of the Baltimore Lifeboat have received many deserved awards and citations for playing their part in dangerous and difficult rescue missions including the rescuing crews and towing two yachts back to Baltimore during the 1979 storm in which the 15 Fastnet race competitors perished. Most recently, Kieran and Jerry Smith of Baltimore were named the Afloat.ie/Irish Independent “Sailors of the Month” for August 2011 in recognition of the key roles they played in the superb rescue of all 21 of he crew of the Rambler 100.

LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

43

TABLE 12 CONSUMER PRICE INFLATION

COMMODITY GROUP ANNUAL PRICE CHANGE (OCT ’11) Food & Non-Alcoholic +1.1% Bevs -Food +1.1% -Non-Alcoholic +3.8% Beverages Alcoholic Beverages & -0.5% Tob. Clothing & Footwear -0.3% Housing, Water, +10.2% Electricity, Gas Furnishings, Household -2.2% Equip Health +2.3% Transport +3.6% Communications +1.0% Recreation & Culture -0.8% -Newspapers, Books & -0.6% Stationery Education 6.5% Restaurants & Hotels -0.9% All Items 2.8%

CHANGE JAN ‘00OCT ‘11 +17.8% +17.6% +18.6% +45.5% -35.2% +92.2% -9.3% +83.3% +30.8% +0.5% +21.3% +40.5% +106.2% +43.7% +36.7%

Source: ‘Consumer Price Index Detailed Sub-Indices Release, CSO October 2011.

The increase in the price of Food and Non-Alcoholic beverages has been considerably lower than most other categories within the Consumer Price Index. This primarily reflects the intense level of competition in the retail grocery sector. Such competition is also apparent in the clothing and footwear retail sector, but few other sectors of the economy are exposed to such vibrant levels of competition.

44 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

SHOP CLOSURES Against a background of downward pressure on personal disposable incomes, fragile consumer confidence, significant retrenchment in consumer spending and intense competition both from the established multiples and the foreign-owned discounters, the environment for the retail sector has been and continues to be extremely difficult. The number of shop closures has increased significantly, smaller shops the country. the end of particularly October 2011, there werearound 4,261 business insolvencies recorded 23. The retail sector

5601,525 of these, equivalent to 13.1inper cent of the total.

Inaccounted 2010 therefor were business insolvencies Ireland, which represents an increase of 8.4 per cent on 2009. Of the 1,525 insolvencies in 2010, the retail sector accounted for 177 or 11.6 These not third breakonly down theconstruction retail insolvencies type, but figures from per cent data of thedototal, to the sector by andbusiness the non-retail services sector.

RGDATA suggest that over the past two years, 112 non-aligned shops who are members of

InRGDATA the first ten months of and 2011, insolvencies were reported.

The retail sector accounted for have closed, 401,330 new shops have opened.

These figures from RGDATA may not 182 of these, equivalent to 13.7 per cent of the total. Between the beginning of 2009 and the end the overall situation, because anecdotally it does appear.that shops accounted most likely to ofreflect October 2011, there were 4,261 business insolvencies recorded The those retail sector are probably in a trade association at all, or the Tobacco/Newspaper/Sweets forclose 560 first, of these, equivalentnot to 13.1 per cent of the total.

(TSN) type smaller shops that may not be in RGDATA. However, the situation for smaller shops in particular is still extremely difficult.

FIGURE 6

FIGURE 6

Source: Source:Insolvencyjournal.ie Insolvencyjournal.ie

In summary, after a period of very strong growth in consumer spending, there has been a significant slow down since 2008. Consumer confidence is now very fragile as a result of rising unemployment, wage cuts, tax increases, cuts in Government expenditure, falling asset values, the ongoing turmoil in the Euro Zone, and general downward pressure on personal disposable 23

Source: Insolvencyjournal.ie

49 retail grocery sector LOCAL HEROES: A study of the economic, financial and social significance of the independent

45

These data do not break down the retail insolvencies by business type, but figures from RGDATA suggest that over the past two years, 112 non-aligned shops who are members of RGDATA have closed, and 40 new shops have opened. These figures from RGDATA may not reflect the overall situation, because anecdotally it does appear that those shops most likely to close first, are probably not in a trade association at all, or the Tobacco/Newspaper/ Sweets (TSN) type smaller shops that may not be in RGDATA. However, the situation for smaller shops in particular is still extremely difficult.

In summary, after a period of very strong growth in consumer spending, there has been a significant slow down since 2008. Consumer confidence is now very fragile as a result of rising unemployment, wage cuts, tax increases, cuts in Government expenditure, falling asset values, the ongoing turmoil in the Euro Zone, and general downward pressure on personal disposable incomes. While expenditure on Food, Beverages & Tobacco has been declining as a percentage of overall spending for some time, the sector is not experiencing the magnitude of decline that most other sectors have over the past couple of years. This reflects the fact that Food is a necessity and will still be bought despite tough economic times. However, reflecting the pressure on disposable incomes and intense competition in the retail market place, the retail price of Food and Non-Alcoholic Beverages is under considerable downward pressure and smaller retailers in particular are operating in an increasingly challenging environment. It is clear that the level of competition in the retail grocery sector is intense.

46 LOCAL HEROES: A study of the economic, financial and social significance of the independent retail grocery sector

CONCLUSIONS The independent retail grocery sector makes a very significant contribution to the overall Irish economy and to local communities. The sector is a major supporter of local and national suppliers, it is a major source of employment all around the country, it provides consumers with convenience and choice, it makes a major contribution directly and indirectly to local authorities and the

More than anything else, the IRG sector is local and is deeply integrated into local communities around the country and is characterized by an amazing level of dynamism and entrepreneurship. This is extremely important for the fabric of national exchequer, and it sources many of its services locally.

local communities throughout the country.

The sector is now under serious pressure due to the very difficult economic environment, the high cost base and the often unfair competitive conditions from large multi-national and national grocery retailers, as well as large suppliers.

It is incumbent on Government, if it desires to maintain this very important part of Irish life to address the cost base of the economy, encourage consumer confidence through sensible policy making, and ensure that proper legislation is put in place to control the growth and predatory powers of the large multiples. If this is not ensured, local communities will be further eroded, consumer choice will be reduced, many more local producers and suppliers will be forced out of business, many smaller towns and villages will be further decimated, and the overall economy will suffer.

The following proposals should be considered: • Policy makers need to recognize the reality that the arrival of a

multiple in an area will ultimately result in a reduction in employment

as jobs are displaced in smaller retailers; • The Retail Planning Guidelines must be maintained and

strengthened in order to preserve and sustain local community

based owner operated local shops; • The burden of regulation should be reduced by 25 per cent across

the board; • The burden of local authority charges and commercial rates must be

reduced by 15%; • Certainty must be provided on upward only rent review legislation as

quickly as possible; and • The cost and logistical factors that result in higher food prices in

Ireland must be recognized and addressed; • planning and casual trading laws must be enforced.

Local Value Standing up money SUSTAINABLE

FAMILY

to the large retailers

ENTERPRISES LOCAL LOCAL JOBS NURTURING ENTERPRISE Family

run LOCAL FOOD CHAMPIONS businesses

VIBRANT COMMUNITIES THE TRULY GREEN Economic Significance GROCERS

Quality

90,000 jobs

SUSTAINABLE

SUPPORTING LOCAL CLUBS

90,000 jobs

FUNDRAISERS LOCAL JOBS SERVING COMMUNITIES LOCAL FOOD Value CONVENIENCE SUSTAINABLE CHAMPIONS QUALITY VALUE ANNUAL CONTRIBUTION TO NATIONAL ECONOMYCHALLENGING Quality GENERATIONS OF FAMILY THE MULTIPLES NURTURING LOCAL EVERY DAY BUSINESSES ENTERPRISE Truly Green GENERATIONSSUSTAINABLE Grocers OF FAMILY competition COMMUNITY HUBS SHOPS PEOPLE CAN WALK TO

€3.6 BILLION jobs

BIGGEST SUPPORTES OF IRISH PRODUCERS, FARMERS, SUPPLIERS BUSTLING TOWN Centres

CENTRES

RGDATA, Rock House, Main Street, Blackrock Co Dublin • T: 01 2887584 • E: rgdata@rgdata.ie • www.rgdata.ie