A €28 million (£25m) fruit and vegetable co-op in the Irish Republic has been put under severe pressure by the loss of a major supply contract with Tesco.

Dublin Meath Growers (DMG) was established in 1987, with its 50-plus members producing more than 2,000 acres of fruit and vegetables. Over 90 per cent of its output has been supplied to Tesco stores across the Republic and the co-op also has a small supply contract with Marks & Spencer.

Now, however, Tesco has ended its partnership with DMG, one that both sides had earlier hailed as a big success. Seamus Banim, communications spokesman for the multiple, said: “We are no longer sourcing produce from DMG. Alternative arrangements are being made with another company. The good news is that there will be no impact on the growers involved.”

Reports that DMG is about to be wound up as a result of the lost contract, and that 80 staff have been laid off at its Dublin headquarters, have been denied by the co-op’s general manager, Pat O’Connor. He insisted it was “business as usual”, while conceding that some jobs had been lost, although he declined to say how many.

Ironically, DMG is in the heart of the Dublin North constituency of horticulture minister Trevor Sargent. Last September he officially opened a new €4.8m packing, grading and storage facility for the co-op at its premises in north county Dublin, with a quarter of the investment coming by way of government grant.

Representatives of the co-op acknowledged at the time that their investment would not have happened but for the supply contract with Tesco. The multiple’s then marketing director, Kenny Jacobs, repaid the compliment, describing the partnership with DMG as “a success story that, hopefully, will grow and grow and stay as fresh as when it started”.

Neither side is revealing what caused the final rupture. Significantly, however, the first hint of trouble between the parties came just over a month ago from the president of the Irish Farmers’ Association, Padraig Walshe, when he warned of the high cost of doing business in the Republic, especially with a minimum wage of €8.65 an hour, one of the highest in the EU.

Speaking at his association’s AGM, Walshe said that DMG staff grading and packing potatoes for Tesco were paid €8.65 an hour, while their counterparts across the Irish border in County Armagh, doing the same work for Tesco, earned £5.73, or €6.09, per hour.

Walshe added: “That makes our labour costs in the Republic 40 per cent more expensive. Now Tesco has notified DMG that it is reviewing its business with the co-op and jobs are on the line. Can anyone really be surprised?”

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