Helpline: RTE 1 Drivetime
TRANSCRIPT
Station: RTE Radio One
Programme: Drivetime
Date: 19.07.11
Time: 14 minutes
Ref: RGDATA
Presenter (Mary Wilson):
After an emotional roller coaster for two thousand eight hundred Superquinn workers and suppliers the grocery chain went from receivership to being sold to the Musgrave retail group over night. The story of the receivership being appointed broke at eight o’clock last night, by seven o’clock this morning the news of the Musgrave deal was announced. So how has this changed the retail landscape here and what will it mean for the workers and for the suppliers? And of course reports today that suppliers are out of pocket to the tune of one hundred million. Damien McLoughlin is Professor of Marketing at the UCD Smurfit Business School he joins me now. We’re also joined by Tara Buckley who’s the Director General of RG Data, the representative body for over four thousand grocers in the independent retail grocery sector in Ireland. Damien McLoughlin to you first and a little bit of history, Superquinn and its place in the Irish retail sector over the past number of decades, where would you place it?
Damien McLoughlin:
I think in fairness Mary you’d have to, you’d have to give Superquinn and Fergal Quinn a bigger place than just in retail. I mean it’s in terms of great Irish businesses with great brand names which are, you know resonate with Irish culture and history over the last sort of fifty years. And I think Fergal Quinn in fairness to him effectively put marketing onto the landscape and on the, on the horizon of a lot of business leaders in this country and he introduced people to idea of customer service along with you know other visionaries like PV. Doyle I guess in the hotel business. I think he deserves to be right up there at the top of, at the top of that, at the top of that list. But I think you know, one of the things that we teach at the school here on our MBA programme in particular is that it’s possible to be too customer oriented and people might not like to hear that but I think in the last, sort of five years before Fergal sold the business I think that Superquinn was clearly too customer oriented and they got caught out by their competition. One of the things that firms need to do is to be customer oriented absolutely but also to be very focused on what their competition are doing and I think that’s what, what’s ultimately did for Superquinn in the end.
Presenter:
Well Fergal Quinn sold on his business. What happened after that because it would appear to a lot of people that it was following on the sale?
Damien McLoughlin:
Yeah…
Presenter:
…That Superquinn started to go into a nosedive and that accelerated with the recession?
Damien McLoughlin:
I think there was two things Mary I might say about that. What Fergal and his family did very very cleverly was they owned all of their property in Superquinn. So everywhere you go there was Superquinn they owned the shopping centre and they owned the store itself. That had huge value for them when the time came for them as a family to move on with their business, so what they were able to do at the height of the property market madness here was to sell this great property play for people. There was all sorts of speculation that you know apartments would be built on top of supermarkets and so on. I think the people who bought, who bought Superquinn was I think an organisation called Retail Select Holdings. There was a very prominent retail guy in that who used to work for Hamley’s in the UK, very well known retail organisation. But the company wasn’t owned by retailers and I think you know the retail industry doesn’t get any credit in this country and my family are involved in it Mary so I have a great affinity to it myself. Your local shopkeeper needs to go his store every morning at seven o’clock and he opens the door and brings the milk and he brings the bread and he takes his deliveries and he’s still there at ten o’clock at night. And they do the same thing every single day for thirty, forty or fifty years and that’s where this term retail is detail comes from. Guys like Fergal Quinn and Margaret Heffernan and people like that, they understand that you need to manage these really really small details in order to make good money and a good living in retail. I think if your business wasn’t retail, if your business was property speculation you don’t understand that retail is detail thing, you don’t understand the role that staff play, you don’t understand the role that suppliers play and I think that’s what happened.
Presenter:
So do mean they didn’t know what they were about?
Damien McLoughlin:
Ah it’s hard to go as far as that Mary but I think they weren’t traders, they weren’t retailers, they were property guys. I think the intension was to get in allow the market to rise, redevelop these properties, sell Superquinn as a trading entity, keep ownership of the properties which is a nice tax play also, redevelop it apartments and so on. That’s what the game was and I think they were…
Presenter:
They got caught out.
Damien McLoughlin:
They got caught out by the property market and sure we know that’s a, that’s a tale a hundred times over in the current environment.
Presenter:
All right, there is a, there is a financial tale to the appointment of the receiver and the decision by Musgraves now to move in. Do you suspect they have got a very good deal on the purchase of Superquinn?
Damien McLoughlin:
Well they’re not saying how much they’ve paid for it Mary…
Presenter:
No
Damien McLoughlin:
But I’d suspect that they do. You know I don’t know whether people are familiar with Musgraves, they might know Musgraves cash and carry, that’s how the name is best known. But this is a very very well established Irish Cork based family, very very respectable people, lifetimes and generations of commitment to Ireland.
Presenter:
And they’ve been sniffing around Superquinn for some time but I think as they said it themselves with four hundred million in liabilities it wasn’t, it wasn’t for them to move in financially.
Damien McLoughlin:
Yeah and I think they had to, I think the ambition was to buy it from a receiver rather than directly from, from the previous guys and I’m sure there is some issue in terms of liabilities which wouldn’t be my competency Mary, Mary to be honest with you but I’d have been a lot happier if I was a Superquinn employee, I’d have been a lot happier, I’d be a lot happier today than I would have been this time last year because nobody knew what was going to happen. Everybody knew Superquinn has been in play for a long time. It’s been up for sale for some time, people have been trying to get rid of it for some time and I think people who work for Superquinn and suppliers for Superquinn can today be very relieved they’re working for a great Irish firm like Musgraves.
Presenter:
Stay with us Damien, I want to bring in Tara Buckley Director General of RG Data and you heard Damien there saying you know this is, this is a good news story. We’ll deal with the debts to suppliers in a minute. Musgraves, you would know Musgraves you represent the independent grocery sector and they would buy I suppose a substantial amount through Musgraves?
Tara Buckley:
Oh absolutely, I mean I think what Damien has been saying is absolutely true. I mean the retail grocery sector in this country has been incredibly competitive over the last number of years and it has been very tough for people and you know, to see an iconic brand like Superquinn have to go into receivership reflects how tough it has been for players here. Musgrave has obviously been a fantastic supporter of the independent retail trade in this country. About, I’m sure about half of my members would have a relationship with Musgraves. Many are operating under symbol groups that are part of the Musgrave Groups, so you’ve Centras and Supervalus and Daybreaks and other members would buy from the cash and carry operation. So and I mean do you know in a positive way isn’t great to see a very positive Irish family business that’s been around for a long time, that’s playing in a very tough market place and has established itself very well in Ireland, in the UK and in Spain.
Damien McLoughlin:
Yeah.
Tara Buckley:
And you know is up there taking on the biggest players in the world.
Presenter:
What impact might it have on your members, that Musgraves is now moving in as a player and into the Dublin market as well as around the country, there would be I think it’s sixteen stores in Dublin, the remainder of the twenty four are around the country. That could impact your own members.
Tara Buckley:
Well the interesting thing is that in fact the Dublin had not been very stronghold for the independent sector. The multiples have a much bigger stronghold in Dublin. So you can see from a competitive point of view why Musgrave would be interested in Superquinn because of the sixteen stores in Dublin and I mean at the moment the market share in Dublin, Tesco probably have about thirty percent market share, Dunnes have about twenty eight percent, Superquinn had twelve percent and of the Supervalu in Dublin, those operators would have about ten percent. So this gives Musgrave a buying power and a strength in the market to take on the Tescos and the Dunnes.
Presenter:
Damien to come back to you they said today as I listened to the interview with Chris Martin, the head of Musgraves that they’re going to keep the brand, they’re going to continue to employ the full compliment of two thousand eight hundred and keep all twenty four stores going. Will that prove very difficult for them?
Damien McLoughlin:
I don’t think it would for Supervalu, I think Superquinn have made a number of errors in terms of you know, Superquinn is a higher end chain Mary and I think some of the locations that they had chosen in later days were poor choices. I think that the Retail Select Holdings had cleared out a lot of people from Superquinn I understand already so I think it’s a fairly lean organisation. Chris Martin is a guy I admire hugely and he’s a very well respected person in the international retail business, but if I was advising him my advise would be I wouldn’t scare any Superquinn’s, any of Superquinn’s loyal customers away today by changing the name to Supervalu but if that’s, if Superquinn is still over the door in eighteen months time I’ll be shocked. There’s nothing in it for Supervalu to keep the name. Supervalu is a fantastic brand name; they’ve got a superb value proposition Mary for their customers, very loyal customers all over the country. What they need to do is they need to reassure Superquinn customers that you can come to Supervalu, you can have good service, great fresh produce, great fresh meats, the locals, the store manager who will be a local person will be there to welcome you, they’ve got home deliveries. All of that great stuff, great bakery, all the things we associate with Superquinn, Supervalu have been doing for a very long time, also with keen pricing and Irish products but I’d change the name to Supervalu sooner rather that later.
Presenter:
All right I want to talk about the suppliers because small and large suppliers are out of pocket to the tune of one hundred million and right now it doesn’t look that there’s any place they can go to try and get this money back. Let’s hear what Paul Kelly of Retail Ireland had to say.
Paul Kelly:
The big issue basically is the, is the outstanding invoices which are goods which were supplied and generally would have been sold at this stage and our estimates is that there’s up to a hundred million at risk there and that’s a hit that the food industry simply is unable to take operating on the low margins that it does. Big international brands, right down to small artisan producers, anybody who supplies food or any other products, you’d be including alcohol and other products that you’d find in Superquinn as well. So it’s consumer food, it’s dairy, it’s meat, it’s beverages, it’s small companies and what they’re saying to us is that this is absolutely disastrous. It’s going to have a huge impact on the viability of many companies and a lot of jobs are going to be at risk as a result if this thing can’t be resolved.
Presenter:
That’s Paul Kelly there, so Tara Buckley a good day for the Superquinn employees but this could be a very bad day for suppliers out of pocket, particularly small suppliers who depend on getting paid, they need that money to keep that going from month to month.
Tara Buckley:
Absolutely, I mean I just on the headlines on my way in here I heard that the KPMG were saying that the amount that they put on it was somewhere in the early twenties, not one hundred million.
Damien McLoughlin:
Yeah
Tara Buckley:
But I mean obviously that is, you know this is very important for all of the suppliers in Ireland and the independent sector would be very good supporters of the Irish suppliers and I think it’s a message about making you’ve got diversity and a marketplace and you have many players and that’s why the model of the independent running their own shop works.
Presenter:
But you no longer have many players if this deal goes through; three retailers are going to control seventy percent of the grocery market in this country Tara.
Tara Buckley:
Well I think there’s a difference between the model which is the Dunnes/Tesco model which is one owner. You know the model that the Supervalu runs is the individual retailers have relationship with Musgraves but they own their own stores and make decisions about their own stores and I think that is important in local communities all around this country. Because they play a much bigger part in their local community and make much more investment in their local community than a global player who organises things centrally. So you know I think this is good news in terms of Irish suppliers going forward that a strong player in the Irish market has got involved.
Damien McLoughlin:
And two of the three Mary owned by Irish, Irish families who’ve had a, you know, fifty or seventy year commitment to this country. I think that’s a great Irish story to tell.
Presenter:
Well we are talking about good news for suppliers, good news for the workers in Superquinn, is this good news for shoppers Damien?
Damien McLoughlin:
Well Mary I think the, you know if I, if I, if I was teaching a case study about Superquinn or when we do in the future what I will be saying to them is that they were unfortunate in who they chose to be their competitors. I think Tesco is the greatest retailer in the world today and Dunnes Stores is not far behind them. So you’ve got this very very small market where we’ve had this huge contraction in incomes and Superquinn are up against two of the greatest retailers in the world. I mean they had no chance; it’s David and Goliath or the Lions in the Coliseum kind of situation. Dunnes Stores is not going to give up market share to Tescos, Tescos is not going to give up market share to Dunnes Stores and Supervalu is a very very competitive Irish owned like Dunnes Stores organisation. These guys are going to fight it out amongst themselves.
Presenter:
And adding to that, just adding to that we’ve lost our resistance to going to discount stores.
Damien McLoughlin:
I don’t think that’s, I don’t think that’s really true Mary.
Presenter:
Do you not?
Damien McLoughlin:
No not really no, I mean I think people, I think people do go, I think everybody’s gone for a look, but I think that those guys are building market share in two ways. One is they’re opening stores left, right and centre and I know of one town where Aldi and Lidl have basically opened opposite to each other, which is, I don’t quite understand that. But what they’re also trying to do is they understand the Irish shoppers’ love affair with the brand and this has been a historic matter of interest to marketing guys like me for years. Why do Irish people love brands in the way that they do and Aldi and Lidl are stocking brands now to try and draw in our, our customers.
Presenter:
Tara Buckley, just briefly what sort of impact are the discounts, the Aldi and the Lidl having on your, on your people?
Tara Buckley:
Well I mean, I mean what I suppose it shows you once again how competitive this marketplace is, I mean they arrived in this country only back in 2000 and now they have a hundred and seventy stores so it shows you that people can come in here and start to compete but I mean the thing is I suppose that Irish consumers still go for quality, they want to buy Irish food, they like convenience, they like the person who knows them in the shop. There’s lots of things that the independent trade do very well that Irish consumers appreciate and they give them value.
Presenter:
All right Tara Buckley Director General of RG Data, Damien McLoughlin Professor of Marketing at the UCD Smurfit Business School thank you both very much for coming in to us.
