Minister for Enterprise, Trade, and Innovation Batt O'Keeffe speaking to staff in Tesco last week after the grocer announced plans to invest €113m and create 748 new jobs across the country

At a press conference announcing Tesco's new shop openings last week, enterprise minister Batt O'Keeffe made a very interesting comment. Ireland, O'Keeffe said, had been very good to Tesco. However, Tesco, said the minister, had also been very good to Ireland, something that "should not be forgotten by the detractors".

After the furore surrounding the introduction of the retailer's 'Change for Good' programme in May 2009, it may have taken a lot of new jobs for a senior government figure to gush so effusively.

However, as the Kantar figures show, the Irish public fell in love with Tesco again a long time ago.

For the 12-month period to mid-June, Tesco's market share was 26.7%, a gain of almost one full percentage point on the equivalent period in 2008-09.

In a market where one share point is worth around €80m-€90m in sales, this is a hugely significant shift.

On this front, Tesco's "detractors" point to historical trends, arguing that Tesco's gains have only really brought it back to where it was in 2008.

This is a fair point. However, a closer analysis of the figures, particularly the key 12-week metric, shows a steady upward trend, particularly since the full conversion of the Tesco estate to the Change for Good model.

In the period before and immediately after the introduction of Change for Good, Tesco had three rolling 12-week periods where its market share fell as low as 25.6%.

However, for the most recent 12-week period in 2010, Tesco's share has reached 27.4% – a hike of close to two percentage points.

So why has Tesco been so successful? Is this a case of its price cuts gaining cut-through at the checkout, or have its rivals taken their eyes off the ball?

Tesco's resurgence is the result of a combination of factors. After being hammered by Dunnes in late 2008 and early 2009, Tesco's price cuts and aggressive advertising strategy have certainly grabbed customers back from its main multiple rival.

Furthermore, even though the discount channel remains the fastest-growing grocery segment in the market (led by a resurgent Aldi), Tesco is now growing faster than Lidl, the biggest discounter in Ireland. This suggests that Tesco is now seen as a credible alternative to the discounters – a considerable achievement given the leakage of Tesco shoppers to Lidl and Aldi when the recession began to bite.

Arguably the biggest factor in Tesco's success, however, is that the flow of revenue to Northern Ireland has been halted, both by the introduction of lower prices and by external factors.

In the four weeks to mid-May alone, the Kantar data shows that Tesco won back over €1m in customer spend from the two biggest NI retailers (Sainsbury's and Asda).

Of course, all the major retailers here have benefited from the reduction in cross-border spend. However, as the retailer most affected by the cross-border picture, Tesco has now gained the most as shoppers return to supermarkets in the Republic.

This is not to suggest that Northern Ireland is no longer an issue. At 2% market share, Sainsbury's and Asda remain a key threat, particularly to those operating in border areas.

However, with the price of groceries in the Republic now significantly lower than in 2008, many shoppers have realised that the perceived savings to be made in Newry and Banbridge are not as great as they were in previous years.

On a wider level, the recovery of tax revenues previously lost to the British crown is certainly welcome, even if the UK government itself has been one of the chief architects in narrowing the gap.

In particular, the combination of an increased UK VAT rate and the reduction in excise duty here have narrowed the price difference on alcohol, which is arguably the biggest attraction for shoppers going north.

The overall North-South differential has also been narrowed by reductions in supplier pricing in the Republic, with the cost of international brands – which make up around 80% of all goods sold – now more aligned to pricing available throughout the UK.

In fairness, many of these reductions have been facilitated by changes in the exchange rate. However, the impact of Tesco should not be understated.

By implementing a sourcing model that enabled such significant price cuts, both its indigenous rivals and the Irish supply base were forced to react, with pricing being pushed down across the board.

Certainly, this seismic shift has not been without its casualties: the new world order has put increased pressure on smaller shops, indigenous chains and suppliers who have now been bypassed or delisted.

However, from a shopper perspective, the most obvious consequence has been lower prices across all Irish retail outlets.

As such, while "detractors" (presumably driven by the farming lobby) may continue to grumble, to use the minister's own Leeside vernacular, the real winner, for now at least, is not just Tesco, but 'de consumer'.

John Ruddy is editor of grocery trade magazine 'Checkout'

Tesco's €113m expansion

Tesco Ireland said last week that it is investing €113m in new shops, creating 748 jobs across the country.

It will open seven new shops at Thomas Street and Kimmage in Dublin, and in Kinnegad, Oranmore, Swinford, Ballybeg and Naas. The investment plan also includes a replacement shop at Roscrea in Tipperary. It continues to roll out more convenience stores, opening a new Express store in Bray last month.

Tesco's annual contribution to the Irish economy is €2.5bn. It says it buys €655m of Irish food and drink for its international shops, making it a larger destination for Irish food and drink exports than the entire French or German markets.

Tesco said recently that it is looking for stand-alone shops for its clothing brand F&F in central London. However, at present there are no plans to open stand-alone fashion shops in Ireland, according to Tesco, despite the category's increasing importance to the retailer.