Oireachtas Joint and Select Committees

Thursday, 9 May 2013

Joint Oireachtas Committee on Agriculture, Food and the Marine

Groceries Sector: Discussion with Lidl Ireland

9:30 am

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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The purpose of today's meeting is to discuss certain issues pertaining to the groceries sector. I welcome the delegates from Lidl Ireland: Mr. Kenneth McGrath, managing director; Mr. Ryan McDonnell, director of purchasing; and Ms Sara Jane Higgins, compliance manager. I thank them for giving of their valuable time to participate in this discussion. Apologies have been received from the Chairman, Deputy Andrew Doyle, and Vice Chairman, Deputy Pat Deering, both of whom are unable to attend.

Before we begin, I remind members to turn off their mobile telephones. Witnesses are advised that they are protected by absolute privilege in respect of the evidence they give to the committee. However, if they are directed by the committee to cease giving evidence in regard to a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. Witness are further directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I now invite Mr. McGrath to make his opening statement.

Mr. Kenneth McGrath:

I thank the Acting Chairman and members for inviting us to address the committee. In addition, we are grateful for the committee's understanding in rescheduling the appointment upon our request. We hope that our contribution today will add positively to the important work of the committee. I am joined today by my colleagues, Mr. Ryan McDonnell, purchasing director, and Ms Sara Jane Higgins, compliance manager.

Lidl is a privately held international discount supermarket retailer operating in 26 European countries. Having first entered the Irish market in July 2000, we now, 13 years on, trade from 135 stores spread throughout all 26 counties in the State. In the past three months alone we have opened three new stores, with a further five due to open throughout the remainder of 2013. Our capital investment programme for this year and next amounts to €100 million. This extensive network of stores is serviced by three regional distribution centres, located at Newbridge, County Kildare, Charleville, County Cork, and Mullingar, County Westmeath. Further support is provided from our head offices, which we intend to relocate to Tallaght, County Dublin from their current location in Newbridge and Naas upon the completion of a new facility. Lidl employs 3,059 employees across all 140 locations in Ireland, a team we consider to be the best in our sector and of which we are immensely proud.

Lidl has become renowned in Ireland for exceptional value for money, offering consumers top quality products at market-leading prices every day. This is achieved through a well organised business model which places great emphasis on efficiency and sustainability in everything we do. This includes the store itself, which is standard in both floor plan and fit-out. Each facility uses standard operating systems and follows a standard layout or merchandising plan. This standard layout allows, for example, for optimum space management, deliveries and pack-outs, with each store receiving products in the same flow as the store layout from its regional distribution centre. Point-of-sale signage is standardised and also received in flow, adding further efficiencies. An additional benefit of this for customers is that they can switch between Lidl stores and enjoy a consistent shopping experience. Such efficiencies exist across each element of our business, which in turn supports an extremely competitive cost base.

Our selected assortment strategy with regard to product range also fits with our efficient business model. We stock some 1,500 lines in total, which cover the typical consumer's everyday needs comprehensively. The lack of duplication within products or ranges results in a significant cost advantage to our business, one which we are pleased to pass on to the consumer in the form of low prices. Approximately 90% of our entire range consists of own brand products, which are as good as if not better than the equivalent brands and offer the consumer savings of up to 51% on food and 73% on household lines, as evidenced by our current brand challenge campaign.

I will now address the proposed statutory code of practice for the grocery goods sector. In the context of sustainability, which underpins our success at Lidl, respect for our business partners is fundamental. In 2007, Lidl introduced a code of conduct across Europe to govern our dealings with business partners. This covers principles of fairness, clarity with respect to expectations, trust, negotiation and partnership. The code of conduct is discussed with all new suppliers and is available on our website for public access. I have issued a copy for members' review.

The alleged practices in the industry are far removed from our daily business at Lidl. We shun the very notion of hello money and do not solicit moneys for new listings. We alone determine placement and layout. We determine and finance our own advertising and promotions strategy and do not "tap up" our suppliers retrospectively to reach financial targets. We do not seek compensation for wastage or shrinkage, nor do we seek merchandising support of any nature. We categorically do not demand money from suppliers. In fact, we aim to make doing business with Lidl as efficient and sustainable as possible. Our advanced logistics systems, based on our regional distribution model, fully support this objective whereby suppliers deliver to three locations throughout Ireland. We also manage the remainder of the supply chain. Based on our unequivocal code of conduct, we are naturally unconcerned by the principles set out in any balanced code or legislation governing the retailer-supplier relationship. Lidl has engaged fully in the consultative process to date and our opinions are therefore a matter of public record.

We do, however, have concerns regarding the current proposal to legislate for a code, in respect of which we remain unconvinced. Our primary concern emanates from the potential for additional costs for Lidl and the consumer in complying with additional legislation without the intended benefit of the code being realised. Such costs would include legal advice on compliance with the code, the appointment of a compliance officer, buyer training and operational costs, and the maintenance and supply of records as required under the code. This increase in costs is set against the background of current legislation. The Competition (Amendment) Act 2012 already prohibits or prevents some of the sharp practices reported to exist in the industry. Yet, to date, no cases have been brought before the courts under the Act. It is difficult, therefore, to see how a code of practice will address this problem.

I would like to be in a position to offer some perspective from the experience of our colleagues in the United Kingdom in respect of the new legislative framework there. However, given how recently that framework was introduced, we can attest only to the costs of implementation and not its efficacy at this juncture.

Notwithstanding our concerns, we are, however, respectful of the position in which the Oireachtas finds itself in legislating to deal with an alleged problem. We will fully comply with any and all measures.

Consistent with our objective of delivering value for money for our customers, we maintain strong relationships with all of our suppliers to which we offer fair prices for the products they supply in line with clear specifications. Our business is conducted by way of agreements which we always honour. We pay all invoices promptly and have invested in streamlining this process with the recent introduction of electronic data interchange, EDI. Contracts are awarded on foot of a competitive tender process and agreements typically range from six to 12 months, depending on the nature of the volatility of the primary commodity. We typically do not deal directly with primary producers. However, a small number of our suppliers produce at a primary level. This affords us the opportunity to gain direct insight into input costs. We negotiate competitively and make no apology for doing so. We are absolutely confident of our stance in this regard, particularly in the light of our overall approach to doing business with suppliers on the terms set out previously. Some of our 159 Irish suppliers have been working with us since 2000 and our relationships are built on mutual trust and respect. This has given suppliers such as the Meade Potato Company, Lobinstown, County Meath, or Liffey Meats, Ballyjamesduff, County Cavan, the confidence to invest alongside us and in doing so significantly grow their businesses.

While our investment in expansion and a supporting infrastructure demonstrates our commitment to Ireland, we also wish to state Lidl is fully committed to working with an Irish supply base. Since 2009 it has trebled its annual spend on Irish products and this growth is set to continue apace. Almost 40% of our grocery range is sourced from Irish suppliers. Lidl currently partners 159 Irish suppliers, producers and manufacturers covering categories such as fresh meat and poultry, cooked and breakfast meats, dairy, fresh fruit and vegetables, breads, cakes, eggs, spring water, juices, drinks, pet food and many more. In order to support this growth we have invested significantly in resourcing a purchasing division which now has over 60 staff, all dedicated to establishing and developing locally sourced products from an ever expanding network of Irish suppliers.

While we are equipped to deal with major Irish and international suppliers, we pay particular attention to supporting smaller indigenous suppliers which specialise in the production of niche products traditional to Ireland. Our distribution infrastructure is designed to give all producers an equal opportunity to place their products in our network with the minimum of investment on their part. Examples of such indigenous suppliers who currently have products in all 135 Lidl stores here are Mileeven Fine Foods in County Kilkenny which supplies honey and condiments, the Scullery in County Tipperary which supplies our award winning country relish, Spice O'Life Limited, Dunmanway, County Cork which supplies spices and sauces and Virginia Health Food Limited, Navan, County Meath which supplies cereal toppings and wholefoods.

We promote innovation across our existing supply base in order to meet the changing tastes and needs of the Irish consumer. This does not conflict in any way with our selected assortment strategy. We are always open to approaches from new suppliers to add to our supply base and welcome the opportunity to engage with suppliers in their environment to witness, at first hand, the excellent work they do. In this context, we acknowledge the work undertaken by Bord Bia to promote the diverse range of quality suppliers throughout Ireland. Lidl has certainly benefited from regular input from Bord Bia in respect of information on prospective suppliers.

As previously stated, establishing trust with our suppliers is key to our success. Despite difficult economic conditions, we are very encouraged by the commitment of our Irish suppliers to invest in the highest standards of production that continually raise the bar in terms of quality. We are extremely proud that Lidl suppliers won the largest number of awards of any group supplying to retail, including four gold awards for products supplied to Lidl, at Blas na hÉireann 2012. Significant success was also enjoyed by our Irish suppliers in the prestigious Great Taste Awards 2012, with a total of 19 awards won. It is not just the Irish consumer who is benefiting from this commitment to quality. We promote our Irish suppliers to all purchasing divisions within the Lidl Group and both permanent and seasonal listings have been successfully agreed by a number of them with many of our counterparts across Europe. Two examples in this regard are Terra Limited, Bailieborough, County Cavan, which exports its award winning cream liqueur to the United Kingdom, Romania, the Czech Republic, Slovakia, Austria, Spain and Italy, and P. Mulrine and Sons, Ballybofey, County Donegal, which exports drinks to the United Kingdom, Holland and Belgium.

The customer is our primary concern in the context of our approach to labelling. We aim to provide accurate and informative labelling on each product on the shelves at Lidl and are midway through a major programme of labelling changes to meet this objective. While this is of importance right across our ranges, it is particularly important in the case of locally sourced produce. In the absence of clear guidelines, we have developed our own system, to which reference is made in the brochure provided in support of this presentation. If a product is farmed, grown or reared in Ireland, it is brought to the shelf carrying the logo "Produce of Ireland". This is the case, for example, with our Carrick Glen water which is bottled at source by Glenpatrick in County Tipperary and with our Dairy Manor Irish creamery butter which has been supplied fro the past 13 years by Town of Monaghan Co-operative. A product which has undergone a full production process in Ireland but which may contain an imported ingredient will carry the logo "Produced in Ireland". An example of this is our Bridge Bakery range of cakes which are baked near our Newbridge base by Comerford Brothers. Where a product is sourced from Northern Ireland, we also indicate this clearly. The product will carry the equivalent logos set out above with "Northern Ireland" simply replacing "Ireland". In addition to country of origin, declarations on ingredients and nutritional information are also part of our extensive programme of labelling updates. In this context, we are mindful of EU guidelines - EU food information regulation.

The recent issue highlighted by the Food Safety Authority in respect of frozen burgers highlighted the need to address standards and declaration guidelines. We have always been clear on our obligations. As previously indicated, the vast majority of our product is own label. It is, therefore, of fundamental importance to Lidl that when we place our brand on a product, we can stand over it. It is not good enough to hold the producer responsible and to do so at arm's length. As a result, we agree detailed specifications with our suppliers and document same. We run an extensive internal audit programme which now includes DNA sampling and testing to verify specifications and standards of production for us and our customers. Our compliance standards are noted at industry level for their exacting nature and our suppliers consistently meet them. We owe this to the end consumer in order to ensure he or she can trust Lidl on each occasion that he or she makes a purchase.

I will conclude on that point. My colleagues and I will be happy to answer questions which members may wish to pose.

9:40 am

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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I thank Mr. McGrath for his presentation. We will now take contributions from spokespersons, beginning with Deputy Éamon Ó Cuív.

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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I welcome our guests. As they are probably aware, there has been much debate both here and elsewhere about the relationship between major retailers, processors and primary producers. They will appreciate that as a committee with responsibility for agriculture, we are extremely concerned about primary producers. We are of the view that in the context of such producers, it is extremely important to have sustainable agriculture which is profitable. If one is not in business to make profits, one is not in business at all. As the position changes at European level, it is very important that farmers obtain a fair price for what they produce.

I wish to pose a number of specific questions. Do I understand from the presentation that individual Lidl stores do not buy locally and that everything goes through the main distribution centre? In other words, if a supplier's products are in one store, they are in all of them. However, it is not possible for a supplier to get products into a single store. Some of the other supermarket chains have indicated that they allow local buying, which is extremely important for those who produce vegetables, fruit, niche artisan products, etc. Will Mr. McGrath clarify whether Lidl has an all-in-all-out system? Is it correct all products go through the central distribution system and that suppliers either get them into all of the stores or none?

The committee is learning from the process in which it is engaged.

In the context of the code, in terms of suppliers and primary producers, it has come to the fore that there is a huge difference in the nature of Lidl's food suppliers and processors. Mr. McGrath might break that down into three headings. One is fresh foods such as meat, milk poultry, fish - if Lidl sells fish, eggs, vegetables and fruit which do not involve any significant processing. For example, a leg of lamb is a leg of lamb. How much of Lidl's products that can be grown in Ireland are sourced from here? In other words, oranges are not grown here and while Lidl might buy oranges from an Irish supplier they are not Irish oranges. How much of the milk, poultry, eggs and vegetables it sells are sourced within this State? Can Mr. McGrath give us an indication of the number of suppliers Lidl would have for those types of products?

The next tier down is processed foods such as cooked meats, breads and so on which are not greatly processed and which are produced by smaller suppliers. Presumably Lidl sources most of its bread, cooked meats such as ham and so on within the State. How much of those products are sourced in Ireland? There are the very processed foods which would be divided between the small producers Mr. McGrath mentioned and the big operators. If it is in order to mention brands such as Kelloggs, Proctor and Gamble and all of those who can look after themselves, I am sure the relationship between Lidl and those is equal and balanced and we do not need to fight their battles for them. It is important that we get a sense of how that breaks down because there is a certain element of chalk and cheese in terms of those relationships. I would refer to value and volume as opposed to the number of suppliers in the context of the third category and presumably the vast majority of those types of products come from the major multinationals.

Many of the supermarkets chains that have come into this country has said that they have no problem with the European Union code but they would have a problem with the Travers code, as proposed, or the British code. Could Mr. McGrath outline whether it is the mandatory nature of one of those codes that is the problem and compliance cost or is there something in the British code and Travers code that causes major difficulties for Lidl? Do those difficulties relate to, for example, the compliance cost in terms of the major multinationals with which Lidl deals?

Does Lidl source its milk in the Republic or is it imported from Northern Ireland, if it is cheaper there, or has it a policy on milk purchases other than buying the cheapest on offer? I have received many complaints from milk producers, and these are genuine complaints, that if the current pricing policy continues with some of the supermarket chains - I will not name here and I am not necessarily saying that there is a problem in the case of Lidl - we will run short of milk. We will have to talk to the National Milk Agency about this. That agency was established to ensure that we would have a supply of milk 52 weeks of the year. I am told that is a concern in this respect arising from the current policies being followed by the multiples. Does Mr. McGrath accept that the misbehaviour, as I would call it, or the pressure being exerted by some groups of multiples could cause difficulties for the remainder in that to stop abuses, as I would term them, we might have to bring in codes of practice that would impinge on the cost bases of the remainder, the ones that have a high standard and a fair code of practice?

We have moved largely towards labelling displaying the contents of products but we can go further than that with labelling. There are four elements to labelling. Lidl can have its own brand and that is fair enough. If it wants to put the name of the supermarket on a product I do not see a problem in it doing that. The second element is that all ingredients over a certain volume would be displayed on a label and displayed in an understandable way. The third element that seems to be omitted, and it is one that fascinates me, is that there is no requirement to show the processor's name on a label. We talk about tracing food back to the to the farm gate but in many cases we cannot even trace the product back to the processor. If one buys 2 litres of milk, one does not know its producer except that it is has come from Lidl. What would Mr. McGrath's view be on the introduction of legislation requiring the display on a product of the processor's name as a first step? It would be even better if the farmer's name was displayed on it, in order that the customer would know the processor of the product. The final element displayed on labels is the energy values, calorific values and so on. In the case of milk, the ingredient would be displayed which is simple in that it is milk, and the label would contain the calorific and energy value and so on, the name of the processor and if a supermarket wants to put its own name on it, that is fair enough. What would the view of the trade be on that?

9:50 am

Photo of Andrew DoyleAndrew Doyle (Wicklow, Fine Gael)
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I will take a few questions together from the members before reverting to Mr. McGrath. I call Deputy Pringle.

Photo of Thomas PringleThomas Pringle (Donegal South West, Independent)
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I apologise for being late for the start of the meeting. I thank the representatives of Lidl for their presentation. On the issue of labelling and support for local produce, it is welcome that Lidl labels produce as produce of Ireland if the products have been produced in Ireland. Mr. McGrath might comment on how much of that is in response to consumer demands and concerns about whether products sold in Lidl have been sourced in Ireland? Is it because Irish consumers are demanding Irish products? Is that the reason for the change in labelling policy within the company?

Regarding the code of conduct, the representatives are at a disadvantage because they were the last to appear before the committee but it has amazed me how remarkably similar all the responses by the multiples were to the code of conduct. The paragraph detailing their response could almost be copied from everybody else's presentation. It also sets off alarm bells in my head when I hear all the companies making the same comments about a code of practice. If everybody is so concerned about it, it is probably something that should be done because it signals that there is something wrong and that it needs to be addressed.

Specifically on the code of conduct, Mr. McGrath mentioned that Lidl has 3,059 employees across 140 locations in Ireland. He said they were a team which he believed to be the best in his sector and of which he was very proud, yet Lidl refuses to talk to its employees' union about concerns that its members have. I am aware the workers appear to have some serious concerns about the way they are dealt with as a company. That may signal deeper problems across the company. Mr. McGrath referred to people being business partners but surely employees are business partners also. Employees being motivated, willing to work and happy in their job reflects well on the company and could deliver increased sales and so on. As a company Lidl does not deal with the workers' union and does not respond to it when it corresponds with the company. How does that tie in with the way it deals with its suppliers?

As a culture within the company that could be worrying.

On the UK code of practice, it was said that Lidl could only attest to the cost of implementation and not its efficacy at this juncture because the code is so new. That is fair enough. Is it possible to outline what the costs of its implementation have been in terms of a percentage cost of the overall turnover of the company?

All the multiples that have appeared before us have said they have very good procedures and practices in place, that they deal very well with all their suppliers and that compliance checking goes on already, yet they say that it will be a huge extra cost to comply with the code of practice. That does not ring true because if one is already doing something, then one could ask where the costs arise. I accept there might be initial costs in terms of checking the legislation and making sure that systems are in place, but if the systems are so good already there should not be a big problem in that regard. I would welcome some elaboration on the point. I had one other issue to raise but I have temporarily forgotten it.

10:00 am

Photo of Tom BarryTom Barry (Cork East, Fine Gael)
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The witnesses are welcome. I am pleased to say I am a customer. I tend to buy specific items where I find the quality to be excellent. I am not sure if others follow the same pattern.

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

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

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

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

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

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

Photo of Colm KeaveneyColm Keaveney (Galway East, Independent)
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I do not wish to repeat what has been said. I thank the witnesses for their positive presentation. Like previous speakers, I am also a customer. The model presented from the perspective of the consumer is a low-cost model. One can only assume that has an implication at the other end from the supplier-producer point of view. As Deputy Barry said, there is a sense that there is a race to the bottom for suppliers. It is not just a question of floor space, presentation or Lidl’s out-of-town locations which facilitate the margins on which the company delivers a profit. There must be some connectivity with a similar type of philosophy with suppliers. That is a general assumption. Needless to say, the quality of the product from a consumer point of view is high.

Lidl is concerned about the proposed code and legislation. Does it have difficulty with a whistleblower's charter being attached to the legislation? Deputy Barry referred to alleged instances and we have all heard on the corridors and from people we meet in our constituencies of primary producers being squeezed but who are afraid to speak out because their livelihoods are at risk. Would Lidl object to the protection of whistleblowers and that they would have immunity? We could develop best practice on them divulging information about retailers who adopt unethical practices.

Deputy Pringle referred to the consistency of approach by multiples. If they were to adopt the same practice as competitors that would be in the interests of consumers and suppliers and the cost base would be equalised across all competitors. Lidl has its own code and says it maintains its own standards. Surely it would have a vested interest in achieving competition with its competitors in terms of raising the threshold given that we suspect there is a difficulty with some of the operators in the market. Surely Lidl would have an interest in ensuring there is a level playing field in that respect.

10:10 am

Acting Chairman (Deputy Martin Heydon):

Four more members are indicating. Would Mr. McGrath prefer to take questions from those members also or answer the ones put to him already?

Mr. Kenneth McGrath:

We might start by answering the questions already asked. I am concerned we will lose the opportunity to respond to each of the important questions raised.

I will take up the matter of the code and, as an aside, deal with the matter raised by Deputy Pringle, which was not raised by any other member, in respect of our relationship with our staff. The situation at Lidl is not any different from many other employers in Ireland. We engage directly with our staff. We believe it is fundamental to our success that we listen to our staff and take time to talk to them directly. We put measures and structures in place to ensure that we get feedback from the grassroots, namely, the most important person in our business, who is facing the customer day in, day out. We have been operating in Ireland for 13 years, and many of our staff have been with us from the first day we entered the market. We develop from the ground up within our business and invest significantly in our staff. Many who started on the shop floor or the warehouse floor are in very senior positions today, also at director level within the business. That would not happen if we did not have a culture of engagement directly with those staff members. Our fluctuation rates are extremely low.

We were recently acknowledged in Ireland, on the first time of entry, by the Irish Institute of Training and Development, IITD. This year we won the award for best graduate placement, best large employer in retail and best overall employer in Ireland for our training and development. That is an accolade and an acknowledgement of which we are extremely proud, and the accolade extends to every member of our staff involved in training and development and the promotion and furthering of their colleagues' training across our business. In terms of our staff, therefore, we have a system that works for us and works for our staff.

In respect of the issues raised with regard to the code of practice, I understand the member's concerns in that he has possibly received the same feedback time and again. I can go back to my own files from 2009. We wrote our first correspondence to the then Minister on 30 September 2009. Lidl's position has not changed since then. We had our own code of conduct in place at the time of writing that letter. I fully appreciate the advantage it would give us as a competitor in the market to have all players operating on the same principle in terms of negotiation with and treatment of suppliers. Our concern is that these are alleged practices. They are not practices that we conduct or in which we become involved. The notion of potholing is alien to us as a business. With regard to the notion of "hello money" in any form, regardless of the way it is dressed up, it is not something we engage in as a business.

It is a concern from our perspective that we will have bureaucracy or additional compliance imposed on us as a business, and the net result will be that suppliers that have difficulties will not come forward. They will not use the legislation or the approach currently set out in the code to raise their concerns. As an industry, and an operator in that industry, we are in a situation in which we have additional compliance or additional cost without the intended result because we agree that the supplier must be protected. That is the reason we have our own code in place and the reason we conduct our business in the manner in which we conduct it day in, day out. The Competition (Amendment) Act 2006 laid down specific sharp practices that should be punished. There has not been any activity in that regard. That is where our concern lies. We have no issue with any Deputy or any member of the committee dealing directly with our suppliers. We stand over what we said in the committee today in respect of our day-to-day dealings. From a code perspective, that addresses some of the comments made.

Deputy Pringle raised the issue of cost, and said that we already have costs. That is correct. We carry compliance costs at this point in time. A new code will necessitate our reviewing everything from a legal perspective, looking at the wording in existing contracts and changing that where necessary to reflect the exact detail of the code. It will require specific filing obligations and audit compliance over and above what we engage in currently. There will be operating costs. I am sure specific training needs will arise as a result of the implementation of such a code. Those are real costs which will result in extra red tape or perhaps a significant shift in the way we currently engage in compliance. There will be set-up costs over time. These may be less significant in terms of their effect on our operating overheads as a business but we are cognisant that there would be a cost, perhaps without the intended benefit.

From our perspective as a player in the trade, we look to what is coming from the European Union also. We note that the principles put forward by the EU are very much directed at tackling head-on the issues that have been raised by this discussion. We have been in this consultation for three and a half years. From our perspective we would propose that perhaps the implementation take cognisance of the effect of those EU principles on the basis of harmonisation in ensuring that Ireland retains its competitive advantage, because cost is very much an issue for us in operating in the Irish marketplace. We have a higher cost base than any of our counterparts across the EU.

Mr. Ryan McDonnell:

I will start by addressing Deputy Ó Cuív's questions regarding our supply base nationwide. We said in our opening statement that we have a flexible distribution system in the Republic of Ireland, with three regional distribution centres based in Mullingar, Charleville and Newbridge. Where volume or capacity can be split provincially, we will engage with multiple suppliers across a specific product. For instance, we will split a volume of milk or a meat and poultry product where it makes commercial sense to do that or where we need to split our volumes.

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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At a regional level but not at a shop level.

Mr. Ryan McDonnell:

Not at a shop level. Our model is based on simplicity and cost efficiency. Breaking it down to store level would not suit our model but we would not rule out having regional supply.

On the buying strategy for milk, we have 100% National Dairy Council milk across our 1 litre product. We receive milk from a supplier in Northern Ireland across our 2 litre product but it is from farms north and south of the Border.

Lidl is actually mid-tender at present and with the sensitivity around that, I reiterate and restate that we are 100% committed to buying Irish where possible. On the volatility regarding input costs and concerns of the IFA in respect of winter milk and the sustainability of supply, Lidl is very mindful of this and engages regularly with its suppliers and with the IFA, where possible, to understand the broader crisis, if that is the case, within a sector and we are responsible in that respect. The opening statement in our code of conduct is "Our approach towards business partners is competitive and fair" and this is how we approach all our buying negotiations and contractual negotiations. Deputy Ó Cuív asked for quite a lot of detail concerning the number of suppliers broken into categories. I will not reel that off as I do not have it to hand but we will be happy to furnish the Deputy with that information afterwards. The Deputy also asked a specific question regarding fresh or unprocessed produce, that is meat, poultry, fish, fruit, vegetables etc. I reiterate that 100% of our Inisvale Irish beef is Bord Bia approved and certified, as with our lamb, pork and fresh chicken. Our fresh fish, where possible, will be sourced in Ireland but we have a broad range of fresh fish products which, naturally, we must import, depending on source. On the further detail regarding how many suppliers there are in each category, we can furnish the Deputy with that information.

I wish to revert to Deputy Barry's question on our knowledge of input costs or how close we are to input costs and whether we are mindful of the margin received by producers. As stated in the opening statement, Lidl does not primarily deal directly with producers and growers but we do have some suppliers who are involved in primary production. As a purchasing division, we would not be doing our job if we did not understand the components that make up the buying price on which we agree contractually. Consequently, to be well-informed and educated on what makes up our buying pricing is part of our job. As for fairness, in a turbulent commodity market we are extremely mindful that it has been a very difficult trading environment in the past 12 to 18 months across the board, whether it is feed related or potato growing, and we will interrupt contracts where there is verifiable reason for so doing and will entertain renegotiation on price. Again, fairness and being in touch with the commodity markets are vital within our purchasing division.

10:20 am

Mr. Kenneth McGrath:

On the subject of labelling, we will take on board Deputy Barry's suggestion, certainly in terms of "produced in Ireland" or "produce of Ireland". I believe Deputy Pringle asked the question as to from where this is coming and this is consumer-driven. It is absolutely that the customer wants to know from where the product is coming and from where it is being sourced. We have no issue in putting the producer on our labelling and in fact part of our review at present is to include the producer on the labelling. In the context of our current logos, we have avoided putting the Irish flag on our product. Yes, we have green logos and sitting behind both logos is significant investment in the Irish economy. In the case of something that is reared or grown on the island and put through the entire process, obviously its contribution to the economy is much more significant. We absolutely respect the provenance in that regard and do not wish to dupe the customer by having a similar logo that intends to communicate a similar meaning. Through our advertising, we have communicated exactly the difference between both logos on a number of occasions in terms of what they mean. In addition, specific producers also are highlighted regularly in our weekly leaflets or our regular communication to the consumer. This also is to help educate the consumer as to from where we are sourcing our product. However, in the case of a product that has been taken into Ireland, perhaps cured and having gone through an extensive production process involving being sliced or packed, there is a big industry behind that somewhere in a local town in Ireland. Obviously, that also is playing a big part in the Irish economy from a food perspective. Many of these suppliers also are exporting product from Ireland, having gone through the production process in Ireland. We are mindful of this and believe the term "produced in Ireland" does reflect the message we wish to communicate to the customer. We certainly do not believe that a case in which a product has been imported and has come off one pallet only to go onto another with a label, would warrant or justify the logo.

Photo of Mary Ann O'BrienMary Ann O'Brien (Independent)
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I welcome the executives from Lidl and congratulate them on the announcement the week before last of Lidl's recent increase in market share, which is an amazing achievement. I will be brief because I will simply echo the labelling conversation. Given Lidl's size, the amazing resources it has available to it in Europe and how powerful and successful it is, it is really good to hear its representatives speak about the labelling. I refer to labels such as smoked in Ireland, caught in Ireland or produced in Ireland in the case of salmon and we really must get this right once and for all for the benefit of the consumer. Consequently, on foot of Mr. McGrath's response to Deputy Barry's question in particular, I believe that Lidl is on this path. Were we able to move to using QR codes in order that one could scan one's telephone over the product and could then see what it was, it would be an amazing new world. However, we are on a journey and I welcome that.

I happened to visit Bord Bia last week and again, I believe Lidl has done a great job. I know one or two of its suppliers and they tell me how good Lidl is to deal with. However, one must be cognisant of the fact that in the main, Lidl is a private label store. While I recognise that its private label sometimes is better than branded products, its suppliers are helping to build its brand. While it is wonderful that Lidl does not seek promotional moneys, one must acknowledge the suppliers are helping to build the Lidl brand and that the company has done a magnificent job in Ireland. I have just two questions on suppliers. First, must they engage in long-term agreements, LTAs, with Lidl? For example, were I to enter into a contract would I be obliged, once I hit €1 million in turnover, to pay over a cheque? In other countries and other retailers - none of which is in Ireland as one must be careful of what one says - such practices exist, even in respect of private labels. Second, if someone is producing for Lidl's label, must that supplier pick up the costs of design, packaging and origination early on in the process?

In Bord Bia's offices last week, one of Lidl's international competitors was running for the second year an excellent programme in educating what I call young suppliers. These are smaller suppliers that perhaps can become bigger suppliers and can become exporters. It involves educating them in relationships and supply chain matters, really welcoming them into one's family, getting to know them and giving them confidence. I acknowledge so doing involves a bit of one's time and investment but I wonder whether Lidl would consider entering such a programme? There are some very good potential suppliers but to be honest, they have not got a clue and need a bit of education. Consequently, would Lidl consider entering into such activity?

For the information of other members, I visited Hamburg three weeks ago with a very high-end supplier in the airline industry and it has just entered into a huge supplier relationship with Lidl. While it would never have dreamt of entering such a relationship, it is from where Lidl has come. Lidl is big and is here to stay.

I am making statements as well as asking questions. I am merely trying to get a robust discussion going.

On the horsemeat issue, I am aware that better value is what the customer wants, which is why we all are shopping at Lidl. I hate the word "cheap", but, as one of the Deputies stated, those famous burgers were probably sold by the supplier to Tesco for 8 cent, 9 cent or 10 cent. Consumers cannot push the supermarkets any further. Lidl should make a stand and get together with the other retailers to set a decent price for milk in order that even smaller farmers can survive. They should agree a price among themselves. It cannot be reduced further because retailers cannot squeeze suppliers any more. I am not criticising Lidl in this regard and this is not about the quality of food. We have come to a stage where we must hold the price of food because we cannot have horsemeat put in something that is supposed to be beef. I understand it was not all a matter of money and that there was fraudulent practice, but it all comes down to the exertion of pressure at the end of the day. I would be interested to hear what Lidl has to state about this. We all want to see footfall. The retailer wants to have the cheapest milk in order that he or she can entice in the consumer, but it must stop somewhere in order that we can achieve a balance. Returning to the big word of the day, "sustainability" is for everybody. It is for the consumer, the supplier and the retailer because everybody must make a little.

10:30 am

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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I thank the representatives of Lidl for coming and acknowledge their support of locally produced product, especially in my part of County Kilkenny.

I wish to return to some of the points made because I am not satisfied with some of the answers given. I support Deputy Barry on the following point. The consumer needs to know from where a product comes and where a product was produced. In this regard, Lidl's two labels are alike. How aware are its customers of the position, that "produced in Ireland" means that a product is produced in Ireland but that all of the ingredients may not be Irish, whereas "produce of Ireland" means it is 100% Irish? I suggest Lidl make a slight change in its labelling by using colour. Lidl's brochure is well produced - at least, the print business is doing well.

The first issue I will take up is where Donegal Dairies supplies milk. It is just as well Mr. McDonnell has clarified that this refers to the 1 litre product. I remember seeing a 2 litre Morning Fresh carton at home with the words "produce of the UK" on it. Is this not misleading?

Senator Mary Ann O'Brien and others hit on the following issue. All retailers use a fresh product such as milk which is used in 99.9% of houses in Ireland as a market leader, where their own brand is at a far lower price than that of named brands such as Avonmore or Dairygold. Up until recently, suppliers were getting 33 cent a litre. However, the price of liquid milk increased to 35 cent a litre, although it costs 43 cent a litre to produce it. Lidl has a duty to ensure its suppliers are kept in business. If not, all of its products will have to be imported, from the United Kingdom, including Northern Ireland, or elsewhere because suppliers in Ireland will not be able to produce liquid milk at these prices.

I would be interested to hear Lidl's views - I have asked all of its competitors here - on the proposal made by the Government on the below-cost selling of alcohol and perhaps introducing minimum pricing in Ireland. For what percentage does alcohol account of Lidl's sales and does it use alcohol as a loss leader to attract customers?

On contracts, Lidl's presentation states it awards six to 12 month contracts and refers to "volatility" in terms of the primary commodity. The use of the word "volatility" scares suppliers. Does it give Lidl a right at any stage during the period of the contract to state it must reduce the price or where a supplier signs a six month contract with it - for instance, it was hard to harvest potatoes last year, which meant they were scarce and the price had to increase - is he or she entitled under this volatility clause to say to Lidl that he or she cannot supply it at the contract price?

EUROSTAT has produced statistics showing that the cost of food in Ireland is 17% to 18% higher than the European average. Lidl operates in 26 countries. Does this make Lidl Ireland one of its most profitable sections worldwide?

Lidl states 40% of its products are Irish sourced. Of the 40%, what percentage is fresh produce? Is it 90%, 80% or 70%?

Photo of Brian Ó DomhnaillBrian Ó Domhnaill (Fianna Fail)
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I welcome the representatives of Lidl. It is important to have this conversation, as Lidl is emerging as a dominant player in the Irish retail grocery trade, a fact many consumers welcome, as it is bringing competition into the sector, which can only be good. I have looked through the voluntary code of conduct it has established and it appears to be extremely vague. There is no detail. I am sure, however, that there is more documentation available than what is stated on this single sheet. It seems to include a number of points, but it is extremely vague. There is nothing in it on below-cost selling, for example. I am sure that Lidl would not engage in below-cost selling, but there is nothing to state it is not taking place within the company. The code contains nothing on payment details and when suppliers will be paid. Will they be paid after 30 days or 60 days? What is the commitment given to suppliers?

The code of conduct contains nothing on listing fees for inclusion in the brochures Lidl produces. If one is providing a product for Lidl Ireland and it appears in the brochure, I assume there is no additional cost to the supplier, for example, Donegal Creameries. How are these products selected? There is no such detail in the code. Obviously, if a product is listed in the brochure that is issued every week, it will prove beneficial to sales of that product through Lidl outlets.

There is nothing in the code of conduct about the process of de-listing products, both in the brochure and stores. There is nothing about slotting fees. I am not saying such practices are followed in Lidl Ireland, but one would expect such items to be listed in a code of conduct for dealing with suppliers. At first glance, the code appears to be extremely vague. I suppose, however, that it is a step in the right direction and other retailers should be following Lidl. The ideal scenario would be to have a voluntary code of conduct agreed with all grocery multiples and to have it implemented. Of course, that was not possible and the Government has no option but to go down the road of a regulatory code and bringing forward primary legislation to enforce it.

Senator Pat O'Neill touched on the issue of cost. Across the EU 27 there is an additional cost of 18% on grocery items purchased by consumers in this country. I would be interested in Mr. McGrath's views on why this is the case and whether Lidl Ireland publishes the profits it makes here. Instead of publishing global profit figures, does Lidl publish Lidl Ireland profit figures and, if so, how do they compare with those in Germany, France, Portugal, Spain and other countries? What is the profit margin in the various countries?

The beef controversy was referred to. To be fair to Lidl Ireland, it promotes Irish beef; there is no question about that.

I am not sure how many products Lidl actually stocks in Ireland. What percentage of these are Irish? What percentage are imported? Secondary processing takes place here and that is referred to in the two labels the delegates have produced. The delegates may not have the figures to hand. If they have them, I would be interested in hearing them.

Some 70% of the Irish groceries trade is attributable to the three top stores, which include Tesco and Dunnes Stores. I am not sure what the third is, and I believe Lidl comes fourth. Lidl is doing very well and its standing is increasing, which is only to be welcomed. What are the delegates' views on the fact that three multiples are responsible for 70% of the trade? Is that healthy? I am sure the answer will be "No". With regard to the profit margin in Ireland versus other countries and the percentage of Irish manufactured produce sold in Lidl stores, has Lidl any policy on supporting Irish jobs through the products it buys? What percentage of the branded products sourced by Lidl are imported? We know 45% is the figure for all branded products coming into the State that are sold in our retail stores.

Through what loopholes must Irish suppliers go to supply Lidl Ireland? Is there a policy of actively sourcing new suppliers? Is it difficult for a supplier to supply Lidl? Obviously, food safety and product safety issues arise. Is there an aggressive policy to engage actively to seek new suppliers within the Irish food and drinks chain?

Lidl’s marketing literature is excellent. Every household in the country that receives it examines it. Lidl's active promotion of Irish products is to be encouraged and welcomed. However, the only reason it is doing so is that the majority of Irish consumers want to buy Irish products. They cannot afford to buy them at all times but Irish mothers, fathers and families want to buy them if they can afford them. The delegates have picked up on that. Non-Irish stores, such as Lidl and its cousin, Aldi, are certainly trying to ensure they are promoting Irish produce and, in so far as it is possible, buying Irish products.

It always strikes me that in towns to which Lidl or Aldi comes, the other follows. Is this a strategy or a case of following the big brother? I do not know what is occurring. I am always intrigued that when one comes, the other follows. Perhaps there is a reason; I do not know.

10:40 am

Mr. Kenneth McGrath:

I will answer Senator O'Brien’s comment on own-brand produce, its development and how it affects a supplier. I will also address some of the questions raised on corporate matters, financial performance, etc.

On the last question, Lidl and Aldi are two separate companies without any relation of any sort. We adopt separate strategies. That is as far as I can take that discussion because there is not really anything more to discuss in that context.

On the matter of own-brand produce and development, the Senator is correct that a supplier, particularly a smaller supplier, initially produces an own-brand product for us. One might ask how this develops a presence for the supplier and adds to its long-term sustainability and ability to promote itself? Obviously, our literature and communication serve as one such support. More important, one must examine the opportunity that exists for a small producer to achieve a listing in 135 stores without significant barriers to entry. There is no red tape in terms of the small producers supplying us. The supplier's obligation is to work with us, develop a specification and develop a product that is suitable for our shelf and which will be shelf-ready for us. We assist the supplier through that process and then we manage the supply chain beyond our three distribution centres for it. Ultimately, the growth the supplier experiences with us allows it the flexibility to do a lot in its own business. Suppliers avail of this opportunity quite successfully. None of our small suppliers has failed in terms of business. They are all extremely entrepreneurial and vibrant, and they get good financial support. We honour our agreements with them and pay on time. In that respect, we support them 100%. Their businesses grow beyond own-brand production with ourselves. We are very cognisant of that and of the fact that we would be uncomfortable with a supplier being solely dependent on business from us on an ongoing basis. It would not be sustainable. I hope that answers the question satisfactorily.

Mr. Ryan McDonnell:

It was mentioned that smaller suppliers develop an own-brand product for us. Anyone who has been in our stores will see that we do entertain promoting the suppliers' trade brands. Where a supplier is small and is building its own brand, we put its products on promotion and advertise them in our leaflets and press material from time to time. Many companies we deal with produce our private label but also develop their own brand in the background.

Reference was made to Bord Bia's initiative to drive innovation and develop small businesses. In line with the Harvest 2020 strategy, entrepreneurship, innovation and up-skilling within businesses are very important. This is related to a question by Senator Brian Ó Domhnaill. With regard to moving forward with an Irish supply base, we spoke in our opening statement about developing our purchasing division in the order of up to 60 people. We have developed this in the past few years. We are putting a massive, conscious effort into gaining more customers and getting them to buy into our product range. We started as a cold discounter back in 1999 and 2000. As the very competitive marketplace evolved, we have had to evolve our product range. We will be only delighted to work with the smaller suppliers and Irish businesses. There are some phenomenal ones with serious production talent.

Mr. Kenneth McGrath:

In respect of financial performance, Lidl is a privately held company. It does not publish figures on turnover and profit. This is in line with many other participants in the Irish market. We have not considered publishing figures given the private nature of our business. With regard to the basket and the price differential across Europe, we are certainly cognisant of the statistics.

It is difficult to compare prices across borders because we have different cost bases and input costs across Europe. My colleague, Mr. McDonnell, will deal with the issue of milk pricing and our strategy regarding milk. As regards quota in Ireland and looking at the local situation, however, there are differences in respect of legislation and input costs.

10:50 am

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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Of the 26 countries that Lidl is involved in - obviously Mr. McGrath is not going to give us his profit margin - where would Ireland rate concerning the cost base, labour costs, insurance and things like that? Would it be in the top ten? Is it dearer to operate in Ireland than in other countries? Is Ireland in the top five?

Mr. Kenneth McGrath:

We operate a successful business but our performance is reasonable, in line with expectations.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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That is one way of putting it.

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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Please allow the witness to respond.

Mr. Kenneth McGrath:

In the context of my earlier comments, as a privately held business, I am not going to give-----

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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Some of Lidl's competitors have said that labour costs are dearer in Ireland and that is why they were doing this. Can Mr. McGrath say the same?

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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Please allow the witnesses to make their responses.

Mr. Kenneth McGrath:

As a privately held company, the financial performance of our business is not something that we have disclosed in Ireland to date. In respect of how we perform across Europe, Ireland is not exceptional in that context. As regards a ranking list, that is not something that I sit down and look at. I am very much focused on our business here and am very clear as to the input costs we have in Ireland. I had not made the point concerning rents, rates, labour costs and the costs of doing business specifically, but they certainly have a big bearing on the financial overheads that a business in Ireland carries. I cannot give the Senator a direct answer because it is not something that is an issue for us in running our business. We are very much focused on our local performance and that is not something we publish here locally.

Mr. Ryan McDonnell:

Senator O'Brien's final comment concerned the horsemeat scandal and the issues of quality and compromising versus price and sustainability. For me, as head of our purchasing division, quality is to the fore of everything we do. The first things we address are the product's specification, taste and the quality of its ingredients. The cheapest price in the tendering process will not always be the most attractive one because we have to pay for quality. I know the Senator is in production herself.

We would not entertain the idea of quality becoming an afterthought when we have hammered out the cheapest price. Senator O'Neill referred to minimum pricing and below-cost selling of alcohol. In principle, our offer to the customer, week in and week out, is based and built primarily on a fresh offering, promoting fresh fruit and vegetables, meat and poultry, chilled products and household essentials. In our experience, these are the primary drivers of footfall and turnover, and what make us attractive. We have a broad and healthy promotional mix as evidenced in our weekly leaflets, on television and in the press. However, we are very aware of how competitive the alcohol category is across the retail landscape. As part of our efforts to make the entire basket as competitive as possible, we engage in alcohol promotions which occasionally can fall below cost. I would reiterate, however, that we do not see alcohol as a main driver for our business. We would deem such a strategy as unhealthy and it would be unsustainable to focus too much on that category.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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Does Mr. McDonnell agree with minimum pricing?

Mr. Ryan McDonnell:

The issue of minimum pricing is part of a separate, although extensive, debate on the misuse of alcohol. However, we are aware that it is a sensitive matter and we would be willing to engage in any debates or a wider discussion on that.

Volatility was mentioned regarding contracts and I spoke earlier about such cases. Where there has been a significant and verifiable inflationary pressure on input costs or on commodity pricing, we will act fairly. We will sit down with our suppliers and renegotiate within a six-month or annual term. It ties in with Senator Ó Domhnaill's question on credit terms. It is a negotiable term within our agreements. If there is inflationary pressure on raw materials, ingredients or commodities, or if a business finds itself in such a difficult trading environment and is struggling, we will sit down within contract and renegotiate.

Mr. Kenneth McGrath:

That is not to say that we will retrospectively rip up agreements. Where we have an agreement, we will stand over it.

Mr. Ryan McDonnell:


Mr. Kenneth McGrath:

We adhere to our agreements very much. Senator Ó Domhnaill commented on our code being perhaps general. It is certainly a set of principles as opposed to a specific code of practice setting out all the rules of engagement. It is a set of principles, that is for sure, but one that we honour. In that context, agreements are fundamental. We could not sustain our business in Ireland if we abused suppliers, contracts or relationships.

We have 1,500 products listed and there is very little duplication in our range. If one or more of those products were to go off sale, there would be a hole on our shelves for a considerable period of time. That would make us unattractive for the consumers. If they are used to buying a certain product on a weekly basis as part of their grocery spend and they cannot purchase it with us, they will go somewhere else. We are aware that there is a requirement to build a strong, mutual relationship that is ultimately sustainable and healthy. That requires fairness. In the case of nothing changing, however, the contract is honoured. That is our modus operandi.

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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We are under time pressure because another meeting is scheduled for this room.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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Mr. McGrath said 40% of Lidl's groceries are sourced in Ireland. How much of that 40% is fresh produce? Can he give a figure on that?

Mr. Kenneth McGrath:

It is quite a lengthy process to go through that by category. We can do that directly in terms of the-----

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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No, but perhaps we can have a written note on it.

Mr. Kenneth McGrath:

We can revert to the committee, but if we start by category, there is 100% fresh Irish beef, which is an extremely important part of our business.

Photo of Pat O'NeillPat O'Neill (Fine Gael)
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Yes, but perhaps we can get a breakdown as regards the products.

Mr. Ryan McDonnell:

The majority of our buying is based around the agri-industry, so we are talking about fresh meat and poultry, fish, fruit and vegetables, water and chilled bacon products, such as breakfast meats. The higher proportion of what we source will be fresh produce. There have been a few questions on the proportion of Irish products. There is no problem in submitting that information, with the proportion of Irish products in specific categories.

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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Mr. McDonnell might furnish those details to the committee.

Photo of Éamon Ó CuívÉamon Ó Cuív (Galway West, Fianna Fail)
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I am interested in the issue of codes. The information the Lidl representatives have given us indicates clear divisions. I have mentioned the brands of two very large companies that are household names and, as I said, they can look after themselves. While it is an important issue for us, we do not need a sledge-hammer to crack the nut.

Any information on how this breaks down, particularly with regard to volume, would be useful. Lidl might have 150 suppliers but two of the really big ones might account for 30% or 40% of its purchases. These might be multinationals that are even bigger than the multinational multiples. So far as I am concerned, that is an equal fight to be fought among themselves.

The concern of this agriculture committee is to protect the producers who are producing from the land and seas of Ireland. If we do not have our indigenous suppliers we will have no economy and then the stores will have no consumers. We should never forget that this country depends hugely on the land and the seas of Ireland to survive as a country. The consumer, in many cases, is also directly or indirectly linked to the supplier and to the ability of this country to produce. If this is not possible, there is no economic future in this country.

I thank the Lidl representatives for their attendance. It has been interesting to listen to all the different multiple chains but from our point of view as a committee it is the absent member who is the spectre at the feast. One particular chain has refused to attend a meeting. To those who have attended and have put their point of view, I say fair play to them; they made their point. We might not have agreed with everything they said and we might have more questions, but at least they had the guts to come in and answer the questions.

It seems to be uniformly the case that Irish meat - Irish beef in particular - is very well marketed by supermarket chains. All the major multiples who attended said they sourced all their beef in Ireland. This is welcome. We need to talk to the national milk agency, but that is for another day.

11:00 am

Photo of Martin HeydonMartin Heydon (Kildare South, Fine Gael)
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I thank the witnesses for their attendance and for their presentation to the committee. This is part of a wider range of work undertaken by the committee. It has been very helpful to hear the views of the delegates and to engage with them by way of questions from members.

The joint committee adjourned at 11.15 a.m. until 2 p.m. on Tuesday, 14 May 2013.