These days, with the cut-throat nature of the retail world, we have become accustomed to tales of suppliers left high-and-dry by the big retailers.
Those which have been burnt are regularly held up as examples of why its bad news to throw your lot in with the multiples.
However, it is not so common to have suppliers standing up to say the opposite; that dealing with one of the big retailers has made a massive difference to their business, even, in some cases, providing a future where perhaps there might not have been one otherwise.
Over in Ireland, there are two such suppliers who have come forward to pin their colours to the mast, to declare their loyalty, allegiance and delight to be supplying one of the big retailers.
And which retailer might that be? Waitrose, with its well regarded fair dealing? The Co-operative Group with its renowned ethical trade policies? No, none of the above. The retailer that has generated such dedication from its Irish suppliers is none other than UK number one, Tesco.
Dublin Meath Growers (DMG) and Country Crest are two companies that have seen their businesses transformed since Tesco first opened up in Ireland.
Pat O’Connor, general manager of vegetable supplier DMG, based in County Dublin, says the retailer’s arrival in the market was not initially seen as a good thing by most of the Irish fresh produce industry.
“When Tesco first arrived back in 1997, there was a huge fear within Ireland that this big UK giant was simply going to come in and ignore Irish suppliers,” he says.
John Clarke, md of Country Crest, adds: “Costs are a lot higher in Ireland, the cost of living is higher, but Tesco has acknowledged that. It would be cheaper for it to bring in produce from the continent or the UK, but it hasn’t, it has supported the Irish growers.”
It was certainly fair to say the retailers move into the market was treated with a fair amount of suspicion, and O’Connor says there were a number of companies and growers who didn’t like what the retailer was looking to do.
“Tesco was very up front about what it wanted, which was to help improve standards within the industry. It was prepared to work alongside us to bring us up to the levels it wanted, and it was also prepared to accept that something like that would take time.”
“A lot of the growers thought what Tesco was suggesting was so different it was unworkable, and there were some growers who decided to pass on the opportunity.”
However, growers that did embrace the new ideas the retailer was bringing, says O’Connor, have not looked back. “I think if we hadn’t taken the decision to work with Tesco, then some of us would not be around today.”
Clarke agrees: “There are growers out there now, particularly in the County Dublin area who simply wouldn’t be here now if it wasn’t for Tesco’s business,” he says.
Admittedly, Tesco was asking a lot from its growers. Many of them had been growing for generations, and to spread the risk of crop failure, grew a wide variety of produce, from carrots to cauliflower and broccoli to potatoes.
However, the retailer was looking to create efficiencies and cut costs, and was looking for its growers to specialise in certain products to gain scale and volume advantages.
Certainly, DMG has benefited from its relationship with Tesco, O’Connor claims. “We started doing business with it in 1998 and have progressively grown our operation year-on-year since then.”
He says his company started supplying around nine to 10 lines and 7,000 trays a week and this level has increased significantly since then. “We’re now doing 35 to 40 lines and around 21,000 trays a week. Tesco’s business is growing over here, and so is ours,” he added.
The retailer has been a big help in allowing DMG to expand beyond its own horizons as well, says O’Connor.
“After a while, we began to look outside of the Irish season, to try and ensure we had sustainable business for the full 12 months of the year. Tesco quickly helped us develop our business by allowing us to supply core crops year-round.”
DMG started dealing with approved suppliers in Spain and O’Connor says the company has now established a thriving import business helping it consolidate costs over the full year.
Potato supplier Country Crest has also seen remarkable change since signing up to the retailer. “Before Tesco got here, we employed seven people, and now we have 60 people working for us,” says Clarke.
“When it first came in, representatives came and visited us and our offices were in portakabins. We had to hunt around for some anoraks for them to wear to protect their suits from the dirt in the packhouse.
“When they had finished they told us that next time they came, they wanted us to give them white coats to protect the product from them. I looked at them as if they had two heads.”
Despite this, Country Crest embraced the new philosophies Tesco was proposing to them and borrowed €3.5m to create an up-to-date packhouse - and white coats became the norm.
Having Tesco’s business has given the Irish industry increased confidence, particularly when it comes to investing in its businesses, the two suppliers say.
“People have been able to make considerable investment at grower level,” says O’Connor, “and to do that you need market stability and consistency - something Tesco has provided.
“It’s probably wrong to say the other retailers weren’t introducing systems, but Tesco brought in new systems and procedures on how to best get things on shelves and achieve economies.
“It introduced the concept of specification on product for the first time here, saying ‘we want product like this, and we want this much of it’.”
He says his business has invested a sizeable sum in its site and many of the growers were doing the same: “If you haven’t got that stability and consistency, it would be a brave man to be making those kinds of investments.”
Clarke agrees the retailer has provided vital support when it came to expanding his business: “When we’ve wanted to expand, it has given us the commitment we need and without that guarantee, its very difficult. Tesco will work with you and send people to help out.”
The introduction of centralised distribution has also had a dramatic transformation on the Irish industry, says O’Connor.
“It was a new concept at the time, it made a huge difference and has been a key factor in our success.
“Previously we had been delivering direct to stores nearby, but with the Tesco system, that meant we could supply all its stores throughout the country. We couldn’t afford the logistics operation to do that before, to run a fleet of lorries to supply all those stores.”
The retailer also introduced something that really surprised its suppliers, says Clarke: “When we first spoke to Tesco, it said we would get paid in three weeks, and I thought yeah, that will never happen - the other multiples were paying in three months or even longer in some cases.”
However, Tesco was true to its word and Clarke said the cheques came in promptly, three weeks later. “That forced the other retailers to follow suit as the suppliers put pressure on them to adopt the same method as Tesco.”
Clarke says innovation is also somewhere the retailer has scored highly, and Country Crest has done a great deal of work to push its own category forward.
“We’ve introduce a wide range of new potato varieties and have also launched a potato under Tesco’s Finest brand. We thought sales would be small initially, expecting it to have around a two per cent share of the market, but it’s been extremely successful and now has around 11 to 12 per cent of sales.”
Of course, its easy to dismiss the praise of these two suppliers as two companies simply looking to curry favour with Tesco, but in the current climate of suspicion and fear, finding suppliers who are willing to say anything about their retail customers is rare, perhaps at the risk of upsetting other customers.
Both Country Crest and DMG supply other retailers, Superquinn in the case of Country Crest, while O’Connor and his team have a strong and successful business with Marks & Spencer.
“I simply want to go on the record and be public about how much Tesco has done for us as a business,” says O’Connor. “We’re not looking to knock the other retailers simply to build Tesco up, they’ve all had a big part to play in the success of Irish horticulture.”
There have been downsides with the arrival of Tesco, and price competition has certainly intensified in the Irish sector, but O’Connor says that is a fact of life.
“Margins have certainly got much tighter, and everyone has to manage their costs, there’s a great deal of pressure on price. But Tesco is in the front-line on that as well, and we all have to be more efficient.”
He says the media focus on ‘Rip Off Ireland’, particularly on the multiple sectors pricing is inaccurate. “If you look at the prices from three to four years ago, there hasn’t been a huge increase, and I think we’re now giving much more value for money.”
But of course, there are no guarantees in this sector that you’ll keep your business, however O’Connor is confident of continued success.
“There are no guarantees, no, but if you keep giving Tesco the service it wants, as long as you keep doing the job, then there’s no problem, and you’re not giving it a reason to look elsewhere.”
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