Below-cost selling has been outlawed in the Irish Republic's E8bn grocery market for the past 14 years, in defiance of advice from independent analysts, economists and the country's Competition Authority. Successive governments, whatever their political philosophy or the pressure of inflation statistics, have been persuaded to retain the ban. Current Enterprise and Trade Minister Mary Harney, a woman whose free market approach has been denounced as Thatcherite, was the latest to do so, arguing last year, as she renewed it, that the UK experience had shown below-cost selling was "not in the public interest". And yet, ironically, the fastest growing segment of the Irish market is the two German discount chains, Aldi and Lidl, which have a market share of 3%. Their prices are so sharply honed that they have earned an official reminder about the below-cost regulation. Aldi and Lidl arrived in the Irish market just over two years ago, when trade pundits predicted that their no-frills, low-price policies would never win over local consumers, accustomed to being cosseted and plied with branded products. They could not have been more wrong. Together the two chains have almost 40 stores doing bumper business across the republic, with five more under construction and planning permission for several others. Aldi has opened just 10 stores, but aims to increase this to 35 over the next three years, rising to between 60 and 70 by the end of the decade. Lidl's programme has been much more ambitious, with 27 stores already trading and another half a dozen or more being built or at the planning stage. At a time when new outlets proposed by Tesco Ireland, Dunnes Stores and Superquinn are being delayed for up to a year because of objections and planning snags, the success of the German chains in negotiating the system has raised more than a few eyebrows. To date, Lidl has received planning permission for 340,000sq ft of retail space, which is the equivalent of 10 supermarkets. Regulations restrict the size of new outlets in the Dublin area to 37,000sq ft, and to 32,000sq ft in the rest of the country. In contrast to that, Tesco has built approximately 235,000sq ft of new retail space over the past three years, including four replacement stores, while the figure for Dunnes over the same period is 235,000sq ft. Privately, Tesco and Dunnes complain about the delays of up to a year to gain permission for new outlets, though they won't say so publicly. But they blame the overloaded planning system and the objectors, not the fact that the discounters are getting their outlets sanctioned. In most cases, RGDATA, the retail grocers' organisation, leads the objectors to any expansion by the multiples. And yet, remarkably, it has not lodged a single objection to the Aldi and Lidl stores. Its director Ailish Forde is on record as saying: "We believe there is a market niche for the discount retailers, but would not feel threatened by their expansion as research shows that Irish consumers are too brand conscious to buy own brand products. We object to larger supermarkets because we don't want to end up like the UK, where 42% of town centres are without small retailers." Town planner Auveen Byrne believes the explanation for the ease with which the discount chains have negotiated the Irish planning labyrinth is that size does matter. Most of their stores are 10,000-17,000sq ft, she says, and billed as neighbourhood outlets. Local retailers don't object because they don't see them as a threat. By the end of the year, according to some trade estimates, the German chains will have built at least a 5% share of the Irish market. That has set the alarm bells ringing among local food and drink suppliers, as neither chain sources much of its product in Ireland. "Government ministers should have insisted on a commitment from them to buy and promote Irish food, just as they did with Tesco," says Rosemary Garth, of the Food & Drink Federation. "Irish jobs and businesses are at stake here, so we're concerned." The 100,000-strong Irish Farmers' Association has already clashed with the Germans on the issue of cut-price milk, imported from Northern Ireland. More recently, it warned of direct action unless the discount stores offered consumers a greater range of Irish products. For the chairman of the Irish Consumers' Association, however, the arrival of Aldi and Lidl is a cause for celebration. "They provide competition and choice," says Michael Kilcoyne, "and their success proves that people like their prices and what they're offering. I've no problem about where they source their goods, so long as it's clearly marked and the quality is right." Their entry into the Irish market was good for the consumer and for the trade, he believes. "They've forced everyone else to keep their prices down, which benefits all of us." n {{FEATURES }}