Home > Joint Committee on Agriculture, Food and the Marine debate. Groceries sector: discussion (resumed) (continued) [alcohol pricing].

[Oireachtas] Joint Committee on Agriculture, Food and the Marine debate. Groceries sector: discussion (resumed) (continued) [alcohol pricing]. (18 Apr 2013)

External website: https://www.oireachtas.ie/en/debates/debate/joint_...

Senator Pat O'Neill: …It has been said that annual tendering does not influence Aldi as to who is the producer for the primary supplier to the company. However, it must have a big effect in the case of fresh produce, especially fruit and vegetables or meat. If I negotiate with Aldi and put in a tender that is accepted, renegotiation can work both ways, as was mentioned. For example, a supplier could say the price must increase because his or her costs have gone up or Aldi could say to a supplier after one month that its costs have risen and that it must reduce the price paid to the supplier. That could have an effect on the primary producer, namely, the farmer. In the tender process a price is agreed for a product to be supplied. Does part of the annual tender relate to different credit agreements with suppliers? Are there different credit agreements with each supplier on the length of time for which Aldi is given credit? Could the credit agreement be renegotiated when the annual tender takes place or at any stage during the term of supply?

I have asked all the multiples about the proposal on minimum pricing for the sale of alcohol in supermarkets and off-licences. What is the company policy on below-cost selling of alcohol and its use as a loss leader to attract people into stores? Perhaps Aldi could not give a figure, but what percentage of sales in its stores are represented by alcohol products?

Mr. Niall O'Connor: Perhaps I could start with the question of alcohol. I am a little reluctant to give information on the percentage of alcohol sales as part of our overall business, as that is commercially sensitive for us. I am happy to say that we do not willingly engage in below-cost selling of alcohol. We react to competitive issues in the market and we clearly match the lowest price in the market because we need to do so. Again, we have only one product. We cannot be seen to be more expensive for the equivalent quality.

If one takes the period between December 2011 and November 2012, 96% of all the alcohol we sold was above cost. The 4% of the alcohol we sold below cost related to five products, four of which were beers. All four of those were branded products which we would call a special - in other words, it is not a listing and it is not included in the list of 1,350 products we have day in and day out. They are listed in our business for a short period, usually at Christmas time. We set our retails on those prices in order to be profitable. We followed the market to a price which ended up being below cost. It is not our view that we should use alcohol as a way to drive volume through our business. We have no interest in doing that. We are active members of Responsible Retailers of Alcohol in Ireland, RRAI, and we adhere to its code very closely. We are measured on the code on an annual basis and we have an exemplary record. We have no intention of selling alcohol below cost.

Senator Pat O'Neill: Would Mr. O’Connor welcome legislation to set a minimum price for alcohol sales?

Mr. Niall O'Connor: It would make no difference to us whether there is legislation.

Mr. Donald Mackay: We would be interested to see the detail of the legislation before passing comment on its suitability. We would not necessarily be opposed to it because it is not inconsistent with how we operate the business.

There is one other scenario in which we would perhaps sell alcohol below cost. It does not happen very often but if we ever find ourselves with so-called life issues on alcohol then we will reduce the price in order to clear a product. It does not happen very often with alcohol, but for beers, surprisingly, it happens sometimes. We will reduce the price if we are over-stocked and a product is coming towards the end of its life.

[For full debate, click on this link to the Oireachtas website]

Repository Staff Only: item control page