JP Scally, chief executive of Lidl supermarkets on the island of Ireland has told the Irish Farmers Journal that they are fully engaged with the agri food regulator.

He said that he had met with them recently and that “We are delighted that they are up and running,” and added that “we have told them we will give them full transparency on everything that we do and the way we operate as a business”.

When it was put to him does this mean that anything the agri food regulator asks them for they will get and he responded “absolutely.”

He went on to say that this is “the way we do business, we are fully transparent and have nothing to hide. We don’t do hello payments or introductory payments or special payments for certain locations in store. We have a very simple contractual arrangement with our processors and suppliers and we stick by those contracts.”

Strong relationship

Throughout the interview, JP Scally constantly referenced the strong relationship that they have with their suppliers and that “we support them as it is in our interest to protect them as well and to help them grow their business.”

When he was asked why do supermarkets sell below cost of production as is usually the case with vegetables at Christmas, he responded by saying that “the retail price and buying price from the processor are totally different”.

He went on to use the example of Government legislating for a minimum retail price for alcohol below which they weren’t allowed to sell. “We have to sell alcohol at a higher price and we are making money on that which we can invest on promotions like fresh produce.”

Lidl arrived on the island of Ireland 25 years ago with their first store in Cookstown Co Tyrone and their first store in the Republic of Ireland opened the following year.

They have grown their share of the Irish grocery market to 13.8% for the 12 weeks to 12 May 2024 according to Kantar data, making them the fourth largest retailer in the Republic of Irelandmarket place, Figure 1.

JP Scally attributes the success of Lidl in Ireland to the efficiencies that they achieve in their operating model. This is in the form of “the way we present our products in cases on the shelves as opposed to loose and big efficiencies in how we deliver to stores as well” and that “every element of our operations is analysed in absolute minute detail to find the most efficient way of doing business.”

Bricks and mortar retailer

When the Irish Farmers Journal asked him about Lidl’s ambitions for online, JP Scally replied that “95% of food is purchased in bricks and mortar retail, that’s where our focus is and where it will continue to be.”

He went on to explain that: “It is a different kind of business model to deliver groceries to someone’s door, [it] is costly and people are paying a premium for it whereas we are focused on providing good value for money.”

Lidl have been actively building new stores and rebuilding established stores. JP Scally explained that there are different reasons for store upgrades.

New stores have more space, enabling an increase product range from about 1800 to 2800, with mainly the fresh products area expanding.

He described the new buildings as “world class from a sustainability perspective” with the latest solar energy, refrigeration and water exchange systems. They cost less to operate and have more customer appeal.

JP Scally also said that they are nowhere near finished yet when it comes to adding stores. As well as the store upgrades and rebuilds, he said that “the property team are constantly looking for new sites” and that there is scope for up to 50 more stores in addition to the 179 that they currently have and a further 15/20 more in Northern Ireland where they have 41 stores at present.

Sustainability

Sustainability was a recurring theme with JP Scally during our interview. Like all retailers, over 98% of their emissions are generated outside the operation of their business.

These are what are known as scope 3 emissions and they are generated along the supply chain before the goods arrive on the retailer’s shelf.

Products from a ruminant livestock base are particular contributors and Lidl are stepping into the beef supply chain to drive efficiency.

They have signed up a cohort of twenty beef producers initially which Lidl hope will grow, and along with the processor Liffey Meats, and will use the through AgNav, the farmer-centric sustainability support platform developed by Teagasc, the Irish Cattle Breeding Federation (ICBF) and Bord Bia to monitor performance in reducing emissions using verified data. Participating farmers will be assisted in identifying and implementing measures that will reduce emissions and improve efficiency in their farm business but no additional price premium will be paid.

JP Scally said that this initiative is “to support the beef industry in Ireland in becoming more sustainable” We source €100m of Irish beef every year, €25m of which is exported to Lidl stores in 13 countries across Europe.”

When JP Scally was asked would they consider removing or reducing meat and dairy products on their shelves to achieve reduction in emissions his response was “there is one principle I believe in retail above all else and that is give the customer what they want and the customers wants beef at the moment”.

He was referring to the fact that at present 92% of the population are meat consumers with 8% vegetarian.

Lidl and Aldi are in many ways the retail story of the 21st century and between them they now account for a quarter of the Irish grocery market with Lidl being the larger of the two.

Dunnes and Tesco lead the way with 23.1% and 22.4% respectively with Supervalu in third place with 20.6% according to the latest Kantar data.

Pilot project

As with all supermarkets on the journey to reducing their emissions, it is those in Scope 3, the category which are outside their direct control that are the biggest problem and hence this initiative starting with 20 farmers in what is essentially a pilot project.

Farmers have a symbiotic relationship with supermarkets. They are an essential link in the chain to get product from the farm to the consumer but farmers look at the on-shelf price and see that it bears little relationship to what they receive at the farm gate. Of course, there is the processing, distribution and retail costs to be added but farmers are the most vulnerable link in the chain it comes to securing a profit margin.

In this respect it is encouraging that Lidl are frank in their commitment to engage with the agri food regulator and give them full transparency on their side of the business.

It now falls to the office of the agri food regulator to put this to the test.

The pandemic, Russia’s invasion of Ukraine and recent trouble in the Middle East have made retailers more conscious of their supply chains and how vulnerable they can be, and this was also referred to by JP Scally.

Economic sustainability for farmers, the first link in the supply chain, is an essential element in any sustainable beef project.

Lidl and Aldi are in many ways the retail story of the 21st century and between them they now account for a quarter of the Irish grocery market with Lidl being the larger of the two.

Dunnes and Tesco lead the way with 23.1% and 22.4% respectively with Supervalu in third place with 20.6% according to the latest Kantar data.

As with all supermarkets on the journey to reducing their emissions, it is those in Scope 3, the category which are outside their direct control that are the biggest problem and hence this initiative starting with 20 farmers in what is essentially a pilot project.

Farmers have a symbiotic relationship with supermarkets. They are an essential link in the chain to get product from the farm to the consumer but farmers look at the on-shelf price and see that it bears little relationship to what they receive at the farm gate. Of course, there is the processing, distribution and retail costs to be added but farmers are the most vulnerable link in the chain it comes to securing a profit margin.

In this respect it is encouraging that Lidl are frank in their commitment to engage with the agri food regulator and give them full transparency on their side of the business.

It now falls to the office of the agri food regulator to put this to the test.

The pandemic, Russia’s invasion of Ukraine and recent trouble in the Middle East have made retailers more conscious of their supply chains and how vulnerable they can be, and this was also referred to by JP Scally.

Economic sustainability for farmers, the first link in the supply chain, is an essential element in any sustainable beef project.