Tesco profit margin larger in Ireland

penexpers

Maybe this belongs in the Tesco thread(s)?

SUPERMARKET GIANT Tesco’s profit margins in the Republic are significantly higher than in the rest of the company, according to a confidential draft business plan seen by The Irish Times .

The document reveals that Tesco Ireland’s profit margin, which has long been a closely-guarded secret, was 9.3 per cent last year and is projected to rise to 9.5 per cent this year. This compares with a margin of under 6 per cent in its parent company.

Last year, the State’s biggest supermarket chain was on course to make profits of €248 million, the document states. This is equivalent to about €124 per customer a year. Profits are projected to rise to €255 million this year.

The figures are contained in a draft business plan drawn up in mid-February, which set out the company’s ambitious price-cutting plan eventually unveiled last week. Tesco’s financial year runs up to the end of February.

It details how Tesco aims to become significantly cheaper on brands for which people travel to Northern Ireland and to gain customers from competitors that cannot match its price investment. At the same time, the company aims to boost profits and market share in a declining market.

Tesco last week announced that it was cutting 12,500 prices in stores near the Border by an average of 22 per cent.

The plan shows that the across-the-board reduction in prices at its stores is 8.3 per cent. After the price cuts, goods in Tesco’s Irish stores will still be 13.2 per cent dearer than in the UK. The document warns that Tesco may have to raise prices again if sterling appreciates against the euro or inflation rises in the UK. This would mean that goods sourced in Britain would be dearer to purchase.

The company foresees a major supermarket price war arising from its strategy, with Dunnes following Tesco on price, but eating into its “war chest” for driving price cuts and promotions by doing so.

The plan forecasts Dunnes losing customers to Tesco, and says SuperValu will not be able match all price reductions and will lose customers to both Tesco and Dunnes. Superquinn, it is forecast, will lose customers to all its rivals.

According to the document, Tesco Ireland’s head office in Dún Laoghaire is being “transformed” into a country office by redeploying roles to the UK and outsourcing work to India. This is expected to save €13 million.

Some suppliers have criticised the increased prominence given to UK brands in Tesco’s new store layout and have claimed traditional Irish brands will lose out.

The company has been seeking price cuts of over 20 per cent from Irish suppliers to match those achieved in the UK.

The document says a “large proportion” of commercial buying will be “aligned” with the UK business in order to reduce cost prices.

Tesco was 0.5 per cent dearer than Dunnes Stores before the latest round of price cuts, it says, but the target is to be 2 per cent cheaper than its rival.

It says that although the Irish market is very challenging, the current environment in which consumers are more price-conscious provides an opportunity for Tesco to use its global scale and skill to lead the market through a period of change.

“This will not only give us a strong competitive position versus Irish competitors but it will also close some of the price gap with Northern Ireland.”

The Irish Farmers’ Association yesterday called on the Government to introduce legislation to regulate the retail grocery sector.

IFA president Pádraig Walshe claimed powerful supermarket groups were “out of control”.

http://www.irishtimes.com/newspaper/frontpage/2009/0511/1224246256045.html

gurramok

Caught with their pants down. http://www.irishtimes.com/newspaper/ireland/2009/0512/1224246324534.html

IT wrote:

SUPERMARKET GIANT Tesco charged high prices in its Irish stores at the start of the year in order to achieve profit targets, according to a confidential draft business plan seen by The Irish Times .

The UK multiple then lowered them from March on in preparation for a price war against competitors, the plan shows.

Tesco are a rip-off when they want to.(previous posts in this forum has detailed their prices going up on occasions)

Every little bit helps raping your wallet.

escobar

The orig. tesco thread was about irish products, though it did meander a little,:) this is about tesco overpricing....


Tesco's are the dearest supermarket in Ireland for branded good (see national consumer agency survey below)and have reduced their prices in 11 stores along the border and also have recently published record profits......

http://www.irishtimes.com/newspaper/breaking/2009/0211/breaking45.htm


So the question beckons are Tesco overcharging in all their other stores, considering they have changed their supply chain,
and have already been making 50 % profit over and above what they're making elsewhere as shown above?

Wasn't the reason for sourcing their produce out of Ireland , which isn't exactly great for the irish economy, to reduce their prices and not just in a few stores somewhere..... ?

It seems ''every little helps'' Tesco raise their profit margin,
think I'll be voting with my feet...

Jip

Escoabr, have you moved here to peddle the same oul tale you've been peddaling everywhere else yet refuse to answer one challenge to your argument ? Time to drop it now I think, and that's an undisputed fact.

rubadub

gurramok wrote: »

Every little bit helps raping your wallet.

I have said before in regards to many of these "ripoffs" that there is NO RAPE taking place, it is all CONSENSUAL.

I expect the national consumer agency survey ignored store offers since it is often the rule, of which I find tesco have many. All the survey REALLY revealed was the negligible differences in prices between stores.

Dunno why people appear to have or think others have strange loyalties towards stores. I shop in several supermarkets, some things are cheaper in some, some are cheaper in others. None is more expensive on all counts.

escobar

Jip wrote: »

Escoabr, have you moved here to peddle the same oul tail you've been peddaling everywhere else yet refuse to answer one challenge to your argument ? Time to drop it now I think, and that's an undisputed fact.[/quo

Nice to talk to you again Jip......that's my cathphrase:( still imitation is the sincerest form of flattery I hear.. Diff point here actually......

though it seems I've been called out..... shall return to other thread to answer

escobar

rubadub wrote: »

I have said before in regards to many of these "ripoffs" that there is NO RAPE taking place, it is all CONSENSUAL.

I expect the national consumer agency survey ignored store offers since it is often the rule, of which I find tesco have many. All the survey REALLY revealed was the negligible differences in prices between stores.

Dunno why people appear to have or think others have strange loyalties towards stores. I shop in several supermarkets, some things are cheaper in some, some are cheaper in others. None is more expensive on all counts.

It is best to shop around....The survey showed that Dunnes was cheaper on branded goods with Aldi and Lidl cheapest on own brand goods. As Tesco say ''every little helps''

I think all the supermarkets have great special offers now, they all get the offers from the same suppliers .

I don't think it's anything to do with strange loyalties at all.
Tesco isn't sourcing it's produce from Irish wholesalers anymore because it needed to, to bring down prices,:pac:
Even though tesco just made record profits and makes 50 % over and above the UK profit even before the change in wholesalers.
The change in wholesalers will without doubt affect Ireland adversley.

The fact is that tesco havn't brought down their prices by 8% except in 11 stores out of 86 stores which for example is of no use to anyone in Dublin, Galway, Limerick Cork etc

Jip

escobar wrote: »

Even though tesco just made record profits and makes 50 % over and above the UK profit even before the change in wholesalers.

Again I have to correct you, they have not made record profits 50% over and above the UK profit. Borrow a junior cert business book from someone before you continue to post incorrect and misleading posts on the internet.

escobar

Jip wrote: »

Again I have to correct you, they have not made record profits 50% over and above the UK profit. Borrow a junior cert business book from someone before you continue to post incorrect and misleading posts on the internet.

Again mmmm.....Grass really is green you know:rolleyes: ......

''The document reveals that Tesco Ireland’s profit margin, which has long been a closely-guarded secret, was 9.3 per cent last year and is projected to rise to 9.5 per cent this year. This compares with a margin of under 6 per cent in its parent company.''

If you read the OP from which I have a quote above you'll find that a profit margin of 9.3 % when compared to a margin of under 6% is in fact min. 55% more profit in Ireland than in the Tesco UK. :eek:


Link showing Tesco has made record profits this year.....:eek:http://www.breakingnews.ie/business/eyauqlojmhql/




Perhaps you'd understand this better :pac:

http://www.youtube.com/watch?v=j039fNBGA-Q&feature=related

Jip

Escobar, I noticed that you didn't reply to my more detailed reply in the other thread, hopefully the reason being is that you realised your silly mistake.

If you read the OP from which I have a quote above you'll find that a profit margin of 9.3 % when compared to a margin of under 6% is in fact min. 55% more profit in Ireland than in the Tesco UK.

Profit Margin does not equate to profit, it really is that simple. I'll do some simple sums for you with a very simple and basic example.

For every €1 of sales Tesco Ireland has a profit margin of 10% after all overheads have been deducted, basically they have 10c for every €1 spent . Now Tesco UK for examples sake has only half the profit margin of Tesco Ireland, therefore they have a profit of 5c in every €1.

So Ireland with a much smaller population and therefore market only sells 10,000 units of this item giving a profit of 10,000 * 10c = €1,000.

Now Tesco UK has a much larger population and therefore a bigger market so they sell 3 times as many of this item as they do in Ireland, 30,000. So the profit Tesco UK make is 30,000 * 5c = €1,500.

Now it's been a long time but when I was last in school a profit of €1,500 is bigger than €1,000. Twice the profit margin does not equte to twice the profit.

gurramok

rubadub wrote: »

I have said before in regards to many of these "ripoffs" that there is NO RAPE taking place, it is all CONSENSUAL.

I expect the national consumer agency survey ignored store offers since it is often the rule, of which I find tesco have many. All the survey REALLY revealed was the negligible differences in prices between stores.

Dunno why people appear to have or think others have strange loyalties towards stores. I shop in several supermarkets, some things are cheaper in some, some are cheaper in others. None is more expensive on all counts.

Yes, lots of it is consensual either through laziness of shopping around or people not just having time or motivation or just being too poor to shop up north.
It does not help that the other retail players in ROI like Dunnes price match them on nearly every item. The only other option down here is Aldi/Lidl who do not stock alot of products that consumers want and only help in a small way pricewise.

It does expose the lie of Tesco being consumer friendly as they have repeatedly stated that their prices are competitive. It is a rip-off as many consumers do not have the northern choice to shop around plus no-one else is cheaper for their choice of food.(that Dunnes pricematch thing)

Their motto is 'helping you spend less' on their website, that is outright false by todays revelation.

They have lost the trust of the consumer.

escobar

Jip wrote: »

Escobar, I noticed that you didn't reply to my more detailed reply in the other thread, hopefully the reason being is that you realised your silly mistake.




Profit Margin does not equate to profit, it really is that simple. I'll do some simple sums for you with a very simple and basic example.

For every €1 of sales Tesco Ireland has a profit margin of 10% after all overheads have been deducted, basically they have 10c for every €1 spent . Now Tesco UK for examples sake has only half the profit margin of Tesco Ireland, therefore they have a profit of 5c in every €1.

So Ireland with a much smaller population and therefore market only sells 10,000 units of this item giving a profit of 10,000 * 10c = €1,000.

Now Tesco UK has a much larger population and therefore a bigger market so they sell 3 times as many of this item as they do in Ireland, 30,000. So the profit Tesco UK make is 30,000 * 5c = €1,500.

Now it's been a long time but when I was last in school a profit of €1,500 is bigger than €1,000. Twice the profit margin does not equte to twice the profit.

Ooh dear.... Jip the thread is called ''Tesco Profit Margin larger in Ireland'' therefore I am discussing the profit margin.

Firstly Of course a bigger country will generate more sales and profit for Tesco ,.

Having a higher profit margin in Ireland means Tesco are overcharging on products in Ireland compared to elsewhere and as shown on previous posts they are already the dearest supermarket on branded goods...

This is especially relevant because the reason Tesco gave for changing suppliers was about price when they wern't even trying to compete, just charging more than the rest and fill their pockets and then changing to help their own economy.

Jip

Are you a politician ? You try worm your way out of very incorrect point you make like one.

Here's a quote from you which will end this argument, if you try deny what you were saying you're a fool. Man up and admit you were wrong.

escobar wrote: »

Even though tesco just made record profits and makes 50 % over and above the UK profit even before the change in wholesalers.

bladespin

I really fail to undrstand why people associate a profitable company with ripping people off, how is this the case?

Do Tesco hide their true prices or something? Aren't they clearly displayed for the customer to either take or leave?

escobar

Jip wrote: »

Are you a politician ? You try worm your way out of very incorrect point you make like one.

Here's a quote from you which will end this argument, if you try deny what you were saying you're a fool. Man up and admit you were wrong.

Jip you sure do like flogging a dead horse.

This thread is about profit margin, the point has been well explained.

If you want foolish you could always re-read your posts.:rolleyes:

escobar

bladespin wrote: »

I really fail to undrstand why people associate a profitable company with ripping people off, how is this the case?

Do Tesco hide their true prices or something? Aren't they clearly displayed for the customer to either take or leave?

Well recently Tesco did say they were bringing prices down by 22% when it's actually 8 %....in the 11 nominated stores....


Tesco did just make record profits and in Ireland 50% over and above the group profit margin.
They've also been found to be the dearest supermarket in Ireland on branded goods.
If that isn't a rip off I don't know what is..... and the reason they gave for having to change suppliers which was of course the only way they could bring down prices :pac: for the good of the consumer of course....

This information has only come to light recently so as you say customers can take it or leave it.....

Jip

escobar wrote: »

Tesco did just make record profits and in Ireland 50% over and above the group profit margin

You're gas, only now that I showed you that you're original point was wrong are you actually clarifying it's the profit margin as opposed to profit, a bit different than every other point you've been making. If you felt it was obvious that this is what you were talking about all along why the need to clarify it, surely not to please me.

And again you've quietly dropped the claim you were making previously that Tesco were the most expensive on all branded goods without actually admiting it.

There's only one person flogging a dead horse around here and that's yourself. As I said before, have a read up on basic econoimcs and you'll see that making a profit is not a rip off. How they do it and how it would affect jobs and other businesses may not be morally right but a business is a business and since the dawn of time a companys purpose is to make a profit. By your reckoning you'll only shop in non-profitable organisations from now on ?

ejmaztec

I think that there is a strong possibility that Tesco's 9% profit margin is quite similar to the profit margins of Dunnes, Superquinn and SuperValu etc.

It's hard work trying to explain to folks that it was the existing high margins that brought the foreigners here in the first place. I understand that the margins on mainland Europe are half the UK's average, so both Aldi and Lidl must be happier than Tesco.

Jip

ejmaztec wrote: »

I think that there is a strong possibility that Tesco's 9% profit margin is quite similar to the profit margins of Dunnes, Superquinn and SuperValu etc.

It supposedly is. According to the same report that people have no problem quoting when commenting on Tesco, industry insiders believe Dunnes profit margins are also around the 9% mark.

rubadub

gurramok wrote: »

It does not help that the other retail players in ROI like Dunnes price match them on nearly every item.

But who is matching who here?

ejmaztec wrote: »

I think that there is a strong possibility that Tesco's 9% profit margin is quite similar to the profit margins of Dunnes, Superquinn and SuperValu etc.
It's hard work trying to explain to folks that it was the existing high margins that brought the foreigners here in the first place.

+1. It would be quite foolish of tesco to come here and not maximise profits by charging what the market is willing to pay. Even if they did get stuff at a fraction of the cost that dunnes do it would be a stupid businessman to not charge the same. If I won a car am I ripping somebody off by charging the same as my neighbour selling his second hand.

escobar wrote: »

Well recently Tesco did say they were bringing prices down by 22% when it's actually 8 %....in the 11 nominated stores....

It was said..

Tesco last week announced that it was cutting 12,500 prices in stores near the Border by an average of 22 per cent.

The plan shows that the across-the-board reduction in prices at its stores is 8.3 per cent.

So a totally different thing, I expect they did reduce by 22% on those items, naive people fall for marketing tricks like this and actually might expect 22% off everything. You have to read between the lines on all marketing techniques, I love spotting crap like this, and it is certainly not just tesco doing stuff like this. The media also laps it up, twisting everything for a good story too, like how even the irish times and I think RTE turned gutter press with that "6% difference" north & south report, knowingly misleading the public, I do not believe any qualified journalist is that stupidly "illiterate".

wmpdd3

What that particular piece of leaked document didn't say was what percentage of sales in Ireland is from non food.

In Ireland only Aldi and Lidl do own brand technical products, profit margin on those items is more likely to make up the % difference.



I have heard figures closer to 3% profit on groceries banded about hence the massive investment in Non food and clothing.

"Well recently Tesco did say they were bringing prices down by 22% when it's actually 8 %....in the 11 nominated stores...."

"Tesco last week announced that it was cutting 12,500 prices in stores near the Border by an average of 22 per cent."

Where do you get the 8% from. If a store such as an extra stacks all the effected products then the average saving will be 22%. Two shopping trollys were shown, one shopped before the cuts one after, the difference was 22%

escobar

Jip wrote: »

You're gas, only now that I showed you that you're original point was wrong are you actually clarifying it's the profit margin as opposed to profit, a bit different than every other point you've been making. If you felt it was obvious that this is what you were talking about all along why the need to clarify it, surely not to please me.

And again you've quietly dropped the claim you were making previously that Tesco were the most expensive on all branded goods without actually admiting it.

There's only one person flogging a dead horse around here and that's yourself. As I said before, have a read up on basic econoimcs and you'll see that making a profit is not a rip off. How they do it and how it would affect jobs and other businesses may not be morally right but a business is a business and since the dawn of time a companys purpose is to make a profit. By your reckoning you'll only shop in non-profitable organisations from now on ?[/quote


What is this econoimcs you speak of......... must check into it. You're saying that making a profit isn't a rip off. Congradulations you've finally got something right and contributed to the post, to quote myself

''Tesco did just make record profits and in Ireland 50% over and above the group profit margin. They've also been found to be the dearest supermarket in Ireland on branded goods.If that isn't a rip off I don't know what is''

.It has nothing to do with the profit but the price consumers have to pay




Just to confirm I havn't retracted Tesco are the dearest on branded goods

http://www.irishtimes.com/newspaper/...breaking45.htm

rameire

does anyone know when the next survey is out,
as the article you keep on subjecting us to is 3 months old.
prices have changed dramatically for all brands and supermarkets since then.

Morgans

I know there seems to be some staunch guardians surround the word rip-off on the forum, but can someone explain to me why Tesco (and others) don't publish their profits. Basic econmics mean that they shouldnt be ashamed of how much they make from ROI customers when compared to the UK. If everyone with common sense has the sanguine approach to a 50% differnece in profits between IRE and UK why hide it.

That it takes a leaked document to confirm the strong anecdotal evidence that ROI are being charged higher for groceries than other countries. At least, it will shut some defenders of Tesco who demanded proof of the overwhelming anecdotal evidence.

It is one thing to have press releases on a 22% cut in prices in selected stors and have it reported by gullible reporters and even more gullible consumers, its a different thing to have a CEO of a company declare the same half-truths on national airways and make other dodgy representations to Dail committees.

http://www.irishtimes.com/newspaper/ireland/2009/0515/1224246568864.html

No defence from Tesco as of yet I see. I'm sure their lawyers have been busy though since the leaked document.

Of course the price of goods in the largest supermarket in the country has no effect on Consumer Price Index, the rate of inflation, the wages paid to union members at discussion times, and social welfare bill of the country. So when govt looks to the loss of trade to Northern Ireland and why the cost of living is so expensive in ROI, it would be best for all if the truth were told.

In simple economics, if you dont like Tesco, drive 20 miles to the nearest Dunnes, as would be the case if i still lived in my home town. Its how competition works stoopid. If only it were quite as simple as that.

rubadub

escobar wrote: »

Just to confirm I havn't retracted Tesco are the dearest on branded goods

http://www.irishtimes.com/newspaper/...breaking45.htm

Yes the difference between the cheapest and dearest was a staggering 1.2%, truely shocking...

rameire wrote: »

does anyone know when the next survey is out,
as the article you keep on subjecting us to is 3 months old.
prices have changed dramatically for all brands and supermarkets since then.

I would also like to see all the details of such studies, what is included, what is excluded, do they have rules, and what were all the prices and overall stats, what brands did they select..

I find tesco more likely to play the same game as powercity and woodies and several others. They like to TELL you that you are getting a bargain, and naive gullible people fall for this. I see women mindlessly filling trolleys with stuff since it is "on offer", big sign up and it might be 5cent off a €4 product, and the product is often way overpriced anyway. Powercity used to have way energy saving lightbulbs "on offer", and costed far more than other shops, but people think "well I know the tellies are cheap compared to other places, so everything else must be", powercity will charge you €20 for a €2 printer cable etc

I have a good memory for prices, I know what is a rip off in tesco, many things are overpriced. As I said in the other thread many of these surveys have a strict rule of ignoring any offers and have a list. This is the exact opposite of how I, and many others, do their shopping. I seek out the true offers esp. in tescos. In other shops I tend to find less extreme offers but certain things are always cheaper in tesco so I get it there.

Shelflife

some of those surveys have a bizarre set of rules, there was one a few years back in which a typical weekly shop included a litre of vodka an electric toothbrush and a razor (not blades ).

as rubadub said they dont include offers which makes some sense but then what price to they use then?

they then conclude that lidl are cheapest , but how do you compare lidl orange juice with tropicana? yes its cheaper but it doesnt give the full picture.

rameire

Shelflife wrote: »

some of those surveys have a bizarre set of rules, there was one a few years back in which a typical weekly shop included a litre of vodka an electric toothbrush and a razor (not blades ).

as rubadub said they dont include offers which makes some sense but then what price to they use then?

they then conclude that lidl are cheapest , but how do you compare lidl orange juice with tropicana? yes its cheaper but it doesnt give the full picture.

maybe they didnt realise you could charge the tooth brush after it depleated,
or maybe they were shopping for a depraved sexual predator.

rubadub

Shelflife wrote: »

as rubadub said they dont include offers which makes some sense but then what price to they use then?

they then conclude that lidl are cheapest , but how do you compare lidl orange juice with tropicana? yes its cheaper but it doesnt give the full picture.

As it said branded I expect they compared specific brands, e.g. how much was 2L of coca cola in the shops. How much was a jar of dolmio sauce. Though you mention lidl and it might be hard to find the exact product stocked in all shops, i.e. lidl & aldi stock very few popular brands.

My point is I see better offers in tesco, e.g. if I went in for a pasta sauce I am not loyal to any particular brand. For around the last 3 weeks in tesco lloyd grossman pasta sauces have been half price (and a true half price), so I get them. In other supermarkets I find it is less likely to get a real 50% off stuff. If it is stuff with a wide selection, like bread, bars, soft drinks, meat etc, there is nearly always a good offer on, to ignore them is not being realistic about how consumers shop.

ch750536

An example of powerful supermarkets in another country.

http://www.mirror.co.uk/news/columnists/phillips/2009/05/16/supermarket-profits-is-not-good-for-farmers-115875-21362714/

'Tesco, Morrisons and Asda have already done it. And on Wednesday Sainsbury’s announced that, despite the recession, its profits are also up. The £543million profit means that the chief executive Justin King is in line for a pay package totalling £6million.'

All that money is eiter added on to the cost to make an obscene profit, or taken away from suppliers, to make their life more ****e.