The next presentation will be made by representatives from ADM Londis plc. I welcome Mr. Peter Foley and thank him for his attendance. We have a very busy schedule, so I ask him to be as brief as possible in summarising his submission. We will allow five minutes for his presentation, which will be followed by a discussion with members of the committee. I draw attention to the fact that members of this committee have absolute privilege but the same privilege does not apply to witnesses. 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 Houses or an official by name or in such a way as to make him or her identifiable.
ADM Londis.
Mr. Peter Foley
I thank the Chairman, Deputies and Senators. I am commercial director of ADM Londis. I thank the committee for inviting ADM Londis to make a submission on the committee's review of planning guidelines for new retail outlets in Ireland.
ADM Londis plc operates and supplies the Londis franchise in Ireland. We employ almost 8,000 staff in over 370 independent stores nationwide and, perhaps uniquely, our franchise is owned by independent retailers across 26 counties. The group has operated successfully in Ireland since 1954 and for over 54 years has established a reputation for superior customer service and excellent value for money. As a key operator in the Irish retail market, it is in our interest that the Irish retail market represents a thriving local market economy that best serves the needs of Irish consumers. It is evident that there is already significant competition in the Irish market; one need only pick up a national newspaper to see the range of competition in the market.
A recent report by the Competition Authority concludes that the planning guidelines, as they currently apply, combine to limit competition between grocery retailers and also between brands. The authority arrived at the rather blinkered view that these factors combine to limit consumer choice and value for money and ADM Londis has difficulty with these conclusions. The Competition Authority has assumed that the current cap on retail size has a negative effect on pricing in the sector and stymies competition for consumers. The key issue we have addressed in our submission is whether the effect of the retail planning guidelines, as they currently stand, is to hurt the consumer by undermining competition in the sector. We would argue that the existing retail environment in Ireland represents a dynamic, value-led offering to the consumer. The retail planning guidelines, as they stand, accommodate environmentally sound developments and a diversity of offerings within the Irish retail market in an equitable and sustainable manner.
I thank Mr. Foley for his succinct presentation.
As a general question, would Mr. Foley accept that, given the nature of demographics in Ireland and our population structure from major cities to mid-size towns to small villages, there must be some control of the size of retail outlets? If these controls did not exist there would be a race to the bottom and small, less competitive groups would be kicked out of the market. Would Mr. Foley accept that?
Mr. Peter Foley
The Deputy has put his finger on it. Ireland is unique, as is the manner in which its population is dispersed. We have small communities and medium and large towns; there is a uniqueness to our community ethos, the importance of the local shop in the community and so on. As the Deputy said, a race to the bottom could involve the adoption of retail planning guidelines similar to those in other countries that would suck the lifeblood from small town Ireland.
In Mr. Foley's submitted paper, rather than the presentation, ADM Londis comes out strongly against the Competition Authority's position on the removal of the cap. Can Mr. Foley expand on this position? Is the cap at an appropriate level at the moment or could it be lowered further?
Mr. Peter Foley
The Competition Authority has a blinkered view that there is not enough competition in Ireland. We argue that there is adequate competition. As I mentioned, the daily newspapers show the range of competition that exists. There is no evidence of retailers making excessive profits in Ireland and we cannot support a suggestion that the cap be lifted. The lifting of the cap would result in large, out of town retail businesses harming independent retailers in Ireland.
Part of our ultimate decision may be to retain the planning guidelines and focus on town centre shopping. I accept that many of the delegates' clients may not be in town centres. What can we do to improve the town centre shopping experience? Some people are happy to drive to and park at a shopping centre and do their shopping under one roof, while many realise the benefits of sustaining town centres. Have the delegates identified the three main areas that we must improve to make shopping a better experience?
Mr. Peter Foley
There are Londis stores in almost every large Irish village and town. I would mention simple things such as ease of parking, ease of access, making it easier for independent retailers to do business in terms of regulations such as those for waste disposal, the level of commercial rates and so on. Independent small retail businesses are being stymied significantly by the level of regulation. From where we stand, the view is that the small retailer, who in many cases is a one man band, is subject to the same level of regulation as large multiples. The amount of form filling and the costs imposed on businesses are significant.
Is the issue the cost of parking or the convenience of finding a parking spot?
Mr. Peter Foley
It is probably a bit of both. It depends on the location and varies by location.
In his submission, Mr. Foley seems to suggest that if the cap on size is removed or increased, there will be an invasion of international retailers which will close down every small shop in the country, similar to the experience in medium-sized towns in the United States. Does Mr. Foley have evidence that the international conglomerates such as Wal-Mart, Sainsburys and so on are interested in the Irish market?
Mr. Peter Foley
One only needs to look at the UK market to see evidence of the high street that has become a ghost street. In the United Kingdom where they had unfettered planning legislation, many small stores and independent retailers failed to survive. With the disappearance of the lifeblood of retail trade, many villages and small towns have become ghost towns.
If the planning cap is removed, does Mr. Foley have evidence to support his claim of an invasion of operators?
Mr. Peter Foley
It opens the door to that possibility, but I do not have evidence of what planning applications are ready. If we open the door, we are saying effectively that we are happy to allow it to happen.
Will Mr. Foley comment on the variance in the planning regulations in the different county council areas? What is the average size of a Londis store and the average size of the community which a Londis store would service? Most of the Londis outlets are family-run businesses. In his submission, Mr. Foley mentioned a figure of 800 staff. Is that the number of staff employed by ADM Londis or the number employed in the retail outlets?
Mr. Peter Foley
We have 8,000 staff that serve in our 350 retail outlets. In many cases it ranges from five or six employees in a small store in a neighbourhood community to the medium-sized food market-supermarket that exists in a number of small towns which employ more staff. The key element is that the store is owned and managed by a locally-based independent retailer.
Will Mr. Foley comment on the purchase of goods and employment in local stores?
Mr. Peter Foley
Without exception, the local retailer decides on hiring staff. The stores are community based and focused on the needs of the community. The stores would be involved in things that do not come up on the radar such as sponsorship of a local GAA club, the local drama society, etc. This would be lost to the local community if the structure that is in place was changed.
Will Mr. Foley comment on central purchasing?
Mr. Peter Foley
My day job in ADM Londis is buying. ADM Londis has very strong loyalty to the Irish supply chain, such as Irish fruit and vegetable suppliers and the brand owners that exist in Ireland supply and deliver to all our stores. We are extremely loyal to Irish suppliers at local level for such products as local cheeses and bread.
I must declare an interest, because I am a director of a family business which supplies some of the outlets involved.
On the cap size on floor space, is there any difference? For example, Mr. Foley's stores are located in many large villages, small towns and bigger towns. Is there any merit in considering a bigger cap in bigger towns and even cities in order to generate volume in those high population areas?
Mr. Peter Foley
No. Of the major cities, in Dublin, for example, I suggest there are adequate out of town retail solutions — three or four — scattered around the M50. In Cork, the position is similar. In Limerick, there is plenty of access and choice for consumers to go out of town to access international chains.
On economy of scale, we all know that there is merit in economy of scale in a bigger store. How would Mr. Foley respond to that? How does he offset such economy of scale that must be difficult to generate?
Mr. Peter Foley
It is a challenge. It goes back to our proposition in every neighbourhood. We offer a locally-owned business, we strive to deliver value and we believe that the shopping experience in ADM Londis stores everyday delivers value and choice for our consumers. It is a challenge when we are up against international multiples. We would argue that despite that challenge, there is adequate competition in place.
On a similar theme, Mr. Foley has a network across the country in small towns and big cities. We all know the Londis name and where it is. On that experience and the information he would have from that network, should there be a cap on the size of stores, not for out of town retailers but for local shops in neighbourhoods and communities? Does he have any opinion on that? One of the submissions made to the committee was that the cap size in local neighbourhoods should be increased.
Mr. Peter Foley
That is probably a good suggestion. The ability to carry it off and deliver it is probably a challenge. I would suggest to the committee that the fundamental aspect it needs to consider is what type of local environment one wants at a parish or community level. Whether one wants local shops is the question the committee needs to face and decide upon.
Does Mr. Foley think there should not be a cap on the size of a local store?
Mr. Peter Foley
We suggest there is adequate competition in place and we are not looking for further restrictions. We experienced the abolition of the groceries order a couple of years ago, which it was suggested would dramatically changed the marketplace. It did not. We are ready to compete toe to toe with the large multiples and we are prepared to continue to do that, but lifting the cap will tilt the balance unfairly in favour of the multinationals.
Aside from the cap issue, the submissions of some of those who have made presentations to the committee expressed enormous frustration with the current planning system, how it is run and delays. What has been the experience of ADM Londis?
Mr. Peter Foley
At a local level, many of our stores have invested and made applications for planning. I suppose one of the frustrations would be the length of the process and the different decision-making processes in each planning area, and perhaps a little streamlining in that area might help.
If Mr. Foley could recommend suggestions on planning, what would they be?
Mr. Peter Foley
The main matter would be the existing cap, which we would say should not be removed.
Should it be reduced? What is the average size of the Londis outlets in Ireland, the average size of the catchment area served and the average population of catchment area? I think Mr. Foley stated ADM Londis had 360 stores.
Mr. Peter Foley
We have 370.
How many stores did ADM Londis put in place in 2007 and 2008 and what plans has it for 2009 and 2010?
Mr. Peter Foley
The Londis group has grown and we have added 20 to 25 stores over the past number of years. Typically, there is a degree of churn where we would lose some stores and gain others.
What is the net gain?
Mr. Peter Foley
Our plans would be to continue to grow and sustain independent retailing stores. Our stores would be community-based neighbourhood stores throughout Dublin and the larger towns in every county. We would be a key part of the community in competing with the local multiple.
What is the mechanism for sourcing produce? Does ADM Londis have central acquisition?
Mr. Peter Foley
We have a certain amount of central distribution but now all our fruit and vegetable deliveries come directly from the supplier. We would have a policy of supporting Irish suppliers wherever possible.
What percentage of Irish produce would be in the store?
Mr. Peter Foley
It would be fair to say that virtually all our produce is sourced from the Irish market, either directly from local suppliers or the supply chain based in Ireland. We do not have a situation similar to that of competitors who have already announced they will source the product off the island. We support the Irish supply chain.
What is the average number of full-time employees and part-time employees?
Mr. Peter Foley
We have 8,000 staff across 370 stores. That is a combination of full-time and part-time staff, depending on the working hours in each local store.
Are there examples of towns with several Londis stores? Could a particular owner operate a number of Londis stores and in that way limit competition?
Mr. Peter Foley
No, a handful of retailers may own four or five stores but that would be very modest. Within each town, just one Londis store tends to have the franchise. That is typical of most towns and villages where one franchise operates. For historical reasons, it is rare for the same franchise to operate in the same town.
Deputy Cyprian Brady asked if the cap should be reduced. I think what he was trying to get at was that town X with a population of say, 1,000, would cap Y in towns Z and M. Has Mr. Foley any view on that issue?
Mr. Peter Foley
That comes back to my core challenge of what the committee wants in every town or village. If one believes in the importance of the local retailer, that would push one in the direction of moving down the cap.
I declare a interest. We have a local shop in a rural area. I put that on the record in case there is any confusion.
Mr. Foley knows the mess we are in at present. One of the biggest difficulties is the lack of competitiveness. Ireland was significantly more competitive four or five years ago. What would Mr. Foley say to those who claim they would have a much better range in a bigger store, that prices would be significantly cheaper, as in the massive mega stores? It is a compelling argument.
Mr. Peter Foley
I invite members to visit any convenience store, not just the ADM Londis stores, where I suggest the customer experience is as good as it gets. In terms of range, convenience, the hot or deli counter, what is on offer is as good as anything one will get in Europe.
Mr. Foley expressed faith in the Irish supply chain a couple of minutes ago. Some people have identified that in their submissions, ahead of tomorrow's hearings, as being one of the factors for the higher price differential. In his submission, Mr. Foley appears to say that the higher price differential is all due to costs. Is Mr. Foley satisfied that there is no issue with price differentials in the supply of the Irish grocery market?
Mr. Peter Foley
I do not attribute the present difficulties entirely to cost but costs are a significant factor. The cost of doing business for independent retailers in Ireland is too high.
What does Mr. Foley think of the Forfás argument?
Mr. Peter Foley
Forfás has underestimated the differential. Its figure is 5% or 6% but the cost of doing business in the Republic of Ireland is significantly higher than in other countries, due to the level of regulation. On prices, there are difficulties with brand owners in Ireland. If we buy from a brand owner in Ireland it is difficult to unlock the same value as can retailers in the UK.
Is Londis challenging that?
Mr. Peter Foley
Yes. Brand owners blame the exchange rate but that is not sustainable.
Which part of the Forfás argument is wrong? It says our operating costs are approximately 30% higher than in the North but the fact that operating costs only account for some 20% or 25% of the total indicates that the figure of between 5% and 6% is correct.
Mr. Peter Foley
It depends on what the 100% equates to. Something significant has happened to the currency in the past five or six months and the impact relative to the UK has not been fully passed on, though there is evidence it is starting to happen. It is very clear that the cost of doing business in Ireland is a real challenge in comparison to Northern Ireland and the rest of the UK.
Therefore, Mr. Foley is saying the Competition Authority and Forfás are wrong, as is every independent State-backed agency which produces a report suggesting the price differential is greater than it should be. Can Mr. Foley give us independent figures which we can compare to those of Forfás and the Competition Authority?
Mr. Peter Foley
Today's discussion relates to planning guidelines and I am not sure the Competition Authority has made any significant observations on Forfás. I can only convey the experiences of our members in trying to source product at this moment using the Irish supply chain.
The problem with the Forfás report is that it states the costs of retailers to be 30% higher but forgets the fact that suppliers' costs are also 30% higher, leading to a compounding of costs which has not been properly discussed. It is unfair for the Minister and others to avoid going into the details of those costs.
Does Mr. Foley's organisation buy through distributors or wholesalers? Are there problems in that regard? If there are, Mr. Foley should tell us and provide evidence so that we can bring about changes. We have heard about such problems but no one has actually shown us what is happening. If there are problems we can focus on them rather than on other costs. Do smaller retailers feel larger multiples let them down in the area of price competition, by matching each other's prices? They have increased competition among themselves in the past few weeks but what about prior to that?
Mr. Peter Foley
Our members, the independent retailers, feel there is significant competition. For example, the daily newspapers, particularly the large multiples, are currently highlighting their prices relative to others. That is the arena in which we are battling.
What about wholesalers?
Mr. Peter Foley
ADM Londis is a wholesaler and buys from many hundreds of brand owners and direct suppliers. I am sure there is evidence of particular distributors and brand owners making higher profits relative to the UK market. I suspect they will point to the cost of doing business in Ireland and to the number of jobs they sustain.
Is Mr. Foley or any of his members able to give us proof that there is a problem with wholesalers looking for greater margins?
Mr. Peter Foley
There was evidence in the Sunday Business Post last week relating to Pampers. It was found that Pampers are available to retailers in Northern Ireland at a price half of that paid by retailers in the Republic of Ireland. As wholesalers, we are not making an excessive margin on that product and this is something that could be examined.
With regard to planning issues and the impact on the local community, does Londis have any local multiplier figures for us? Are there guidelines on the value of shops like Londis to local communities?
Mr. Peter Foley
If one takes a typical independent retailer like Londis, a small community store will employ between ten and 15 people. That is direct employment for people living within a mile of the store. In terms of providing a service to the 1,000 to 2,000 people living in the locality, the shop will take deliveries from the local milkman and bread man and the retailer will invest in local community sponsorship.
I thank Mr. Foley and the members for keeping to the deadline. We must run this committee regimentally, due to time constraints. We strayed a little outside our remit and I thank Mr. Foley for answering questions in that respect, though he may not have been prepared. Mr. Foley will not be here tomorrow and some of the members wished to have him address some of the issues.
We thank Mr. Foley for assisting us and for being forthright and frank. The inquisition on some points was quite strong. We must ask some hard questions to try to reach a decision. We will prepare a report for deliberation and we will forward to Mr. Foley a copy of our final recommendations, which will also be given to the relevant Minister.