Tesco Ireland targets Aldi and Lidl with price match scheme

LONDON Fri Oct 25, 2013 12:45pm EDT

LONDON Oct 25 (Reuters) - Tesco, the world's No. 3 retailer, has launched a price matching scheme in Ireland that targets discount grocers Aldi and Lidl in an attempt to reverse market share losses in the country.

According to market researcher Kantar Worldpanel Tesco's share of the Irish market fell to 26.8 percent in the 12 weeks to Sept. 15, down from 28.7 percent in the same period of the previous year.

In contrast the combined market share of Aldi and Lidl in Ireland has risen from 9 percent in 2010 to over 14 percent in 2013.

Earlier this month Tesco, which has invested 1 billion pounds ($1.6 billion) in a turnaround plan for its core British market, reported second-quarter underlying sales declines in all ten of its overseas markets. Like-for-like sales fell 4.4 percent in Ireland.

Tesco's Price Promise in Ireland, launched on Thursday, compares the overall cost of over 1,000 comparable groceries within a basket in Tesco against products from Aldi or Lidl.

If the basket could have been purchased more cheaply at Aldi or Lidl a voucher of up to 10 euros is issued at the checkout.

Tesco launched a Price Promise in the UK in March. That uses Wal-Mart's Asda, Britain's No. 2 grocer, J Sainsbury , the No. 3, and Morrisons, the No. 4, as the reference points.

Shore Capital analyst Clive Black said the pricing move in Ireland could hit Tesco's gross profit margin in the country.

"If the price matching with Aldi and Lidl is sustained then there is every likelihood that we will be downgrading our forecasts for Tesco Europe once again," he said.

A spokeswoman for Tesco said the firm had no plans to extend its existing Price Promise scheme in the UK to cover Aldi and Lidl. Black said if Tesco did, it would "severely jeopardise" the firm's UK operating margin goal of 5.2 percent.

Shares in Tesco, up 19 percent over the last year, closed down 0.2 percent at 370 pence, valuing the business at 29.9 billion pounds ($48.3 billion).