Returning to today's agenda, we recognise that pricing is a very complex issue and that Irish consumers are profoundly concerned, particularly in light of the current economic situation. We would like to explain our view of the challenge. Although the committee members may not agree with everything we say, we want to present the issues as we see them. In particular I want to talk through what Musgrave is doing to bring value to the Irish consumer in these very challenging times, what we are doing to reduce the price gap between North and South and the support needed from the Government to help local entrepreneurs survive, be they retailers or suppliers.
As we stated yesterday, Musgrave itself is not a food retailer. We partner retailers who own their own stores and support them in bringing value and choice to the consumer. Our partnership with our retailers, together with the support we give to Irish food suppliers, means that we are a key contributor to the success of the Irish economy.
In a country with approximately 6,500 shops, our retail partners are competing head to head with major international operators. They are part of the communities they serve and have a unique knowledge of local needs. Through their daily conversations with shoppers, they see at first hand the impact that the changing economy is having on their customers. They understand and are responding to their shoppers — Members' constituents — who are struggling with their weekly food budgets and through necessity are demanding lower prices. Profound changes have taken place over the last nine months and we are now experiencing a contracting food market. In my 20 years of working in retail, I have never experienced such unprecedented adverse change.
SuperValu and Centra are responding. The evidence of this can be seen through our advertising in the pages of the national newspapers on any given day. We have driven price reductions and are continuing to do so. Over the past six months we have reduced the average weekly household basket, which is about €150, by 7% at a time when food inflation has been growing in excess of 5%. These reductions have been made across the entire range from fresh meat to frozen products, fruit and vegetables to household and health care to baby products, and they equate overall to price reductions of over €100 million. In each of the NCA surveys covering the largest weekly basket, SuperValu has consistently emerged as the cheapest player in the marketplace. Our approach was recognised in an NCA press release which stated that SuperValu was providing real competition to the multiples. Centra was also recognised as the most competitive convenience brand.
The Irish grocery market is also contracting because of the exodus of shoppers to the North. This extremely worrying trend is having a devastating impact on our retail partners operating around the border and is impacting the viability of food retailing and manufacture in Ireland. Through our business in Northern Ireland, we are able to see first hand what is going on between the two markets. The price gap is clear but we are working to reduce it. We were making progress in the autumn but the further collapse of sterling by 16% in the last eight weeks, together with the simultaneous increase in our VAT rate and the reduction in the UK rate has had a significant impact.
Ours is a low margin business. Our accounts, which are published, show that after tax we made a margin of some 1.4% across the group. We are working on two areas. We are co-operating with our retail partners to reduce the cost of running a store and working with our suppliers to reduce the cost of products. These measures are about bringing price reductions to the consumer. Running a store can be up to 25% more expensive for a retailer in the South, thereby driving a 10% difference in retail prices to cover these costs. The reasons for the higher costs have been widely reported and together with our retailers we are scrutinising every cent. However, we need the Government to urgently commit to reducing costs set by the State, such as waste disposal, commercial rates, local authority charges and electricity. Given that our retail partners own and run their own businesses it is critical, as this committee is aware, that the efforts by the Government to stimulate the banking system flow quickly to, first, reduce the cost of borrowing and, second, make funds available to support much needed investment in the sector.
I will now turn to the cost of products. In Ireland, over 70% of the products sold by our retail partners are branded. We are committed to Irish supply and 75% of all the products in SuperValu and Centra are sourced through a network of relationships with indigenous food suppliers and the Irish based offices, distributors and agents of international branded suppliers. With the unprecedented changes of the last six months, businesses in the South are now in direct competition with those in the North. Although uniquely sharing a land border, the two markets are fundamentally different. Northern Ireland benefits from being part of a supply network that supports a population of over 60 million. The structure of the branded supply base is such that we have to deal with the two countries separately.
At this point I should explain an important point in regard to our UK business. We have two businesses in Northern Ireland and Great Britain and together they account for just over 1% of the UK grocery market. Our scale is such that we are unable to work directly into the UK buying structure of the branded suppliers. However, when opportunities do present themselves we grab them. The Musgrave Group is negotiating with our suppliers so that cost savings can be passed onto the consumer. It is a complex issue because some suppliers have their manufacturing bases in Ireland, while others source through the UK but manufacture elsewhere or are based and manufacture in Britain. We are working to improve processes to find cheaper ways to import products from Britain and continental Europe. We are equally working to improve our own efficiencies and to cut costs in our own business, all of which has the aim of the passing savings to the Irish consumer by way of price reductions.
In summary, we are an Irish business working with our retail partners to bring value to the Irish consumer during these extremely challenging times. We are committed to price cuts and to pressing suppliers to pass on sterling savings to consumers. A contracting food market in Ireland will have major consequences not only in regard to employment in the retail sector but also the knock-on impact on Irish suppliers. The food sector is a major contributor to the economy and the industry, the Government and this committee through its recommendations need to work together if we are to come out of this recession stronger. I thank the members of the committee for the opportunity to make my presentation on this important issue.