New World store owner spoke of trying to 'break' people, says suppliers' body

Tuesday, 27 July 2021

New World store owner cheerily talked of “pushing people until they break”, says Food & Grocery Council.

The Food & Grocery Council has launched an extraordinary broadside on New World and Pak ‘n Save franchise owner Foodstuffs in the run-up to a Commerce Commission review of the groceries market.

Posting on LinkedIn the council’s chief executive, former National Party MP Katherine Rich, accused Foodstuffs North Island of threatening its members with “extreme demands”.

Rich also said an unnamed New World store owner had said its strategy was to “break people”.

“A member of one of the Foodstuffs North Island store committees has cheerily explained that their approach is to employ ‘the Walmart strategy …. push people until they break and then come back from there … and it’s working really well for us’,” she wrote.

* Supermarket suppliers offered anonymity in Commerce Commision competition study

* Supermarket accused of bullying suppliers, terrorising sales reps

Food and Grocery Council chief executive Katherine Rich – was called “perky” by the MC after delivering a major business speech

“It's remarkable that there are still grocers who think this sort of approach, ie working to ‘break’ people is acceptable in 2021,” she wrote.

Foodstuffs North Island has been approached for comment. Rich declined further comment.

The Commerce Commission is carrying out an inquiry into prices and a lack of competition in NZ's supermarkets. (First published November 2020)

The Food & Groceries Council represents suppliers who sell products to the supermarket chains and others and has long argued there is a power imbalance between the supermarket chains and its members.

Rich has previously said that a minority of large owner-occupied stores had a “general culture of bullying, intimidation, or penalising suppliers for non-cooperation”, some to the point where that had become a health and safety issue.

“In extreme circumstances suppliers have had to move their staff due to concerns that poor treatment and its potential effects on mental health is a health and safety issue,” she said in 2019.

The Commerce Commission is due to publish a draft market study into the $22 billion groceries industry on Thursday.

It is widely assumed the watchdog will recommend a new mandatory code setting out how Foodstuffs and rival chain Countdown need to treat suppliers, similar to codes that exist in Australia and the UK.

There is some speculation the commission may also recommend some form of forced split for the supermarket chains to help make way for a new competitor.

In May 2021, the Commerce Commission filed proceedings against Hutt and City Taxis Limited after alleging it had agreed with two competing taxi companies, Kiwi Cabs and EkoCabs, to implement a minimum charge of $25 for pick-up trips from the on-demand taxi rank at Wellington Airport. (File photo)

Rich indicated in her post that she believed Foodstuffs North Island had misread the political environment.

“What has surprised many within the NZ Food and Grocery Council membership has been the way Foodstuffs North Island continues to push ahead with extreme demands,” she wrote.

Those demands included “new charges and deductions” for suppliers, she wrote.

“Even this month members have faced deletion threats simply as a negotiation tactic and ongoing margin grabs.

“In a total lack of understanding of the current political environment, some suppliers are even awaiting the news of whether they are to be deleted this Thursday, the day of the ComCom report.

“This lack of awareness from some grocery retail decision-makers is hard to believe.”

Some of the council’s members had been pressured “to get rid of their sales teams and ‘invest’ into the supermarkets’ wages bill,” she wrote.

“I've spoken to a couple who have and they report their sales ‘plummeted’ and ‘tanked’.

“These are the sorts of ‘asks’ that get across the line only when there is unbridled market power.”

Rich wrote that if there was genuine competition in the New Zealand market, suppliers would be able to “decline these unreasonable demands and choose not to supply”.

“Unfortunately many have no choice but to accept the latest demand, fee, rebate, levy, deduction or discount,” she said.

Nick Hodendijk, managing partner of Melbourne retail consultancy Hexis Quadrant, said Foodstuffs North Island had adopted a new more aggressive business model in earnest at the start of last year.

“It has locked in terms favourable to Foodstuffs and in many instances very unfavourable to the vendor,” he said.

But a Food and Grocery Council member had told him they were too frightened to ‘like’ several recent social media posts concerning Foodstuffs North Island “for fear of being targeted”, he said.

The Commerce Commission gave suppliers the chance to anonymously fill in a survey relating their experiences dealing with retailers and wholesales, during the research for its market study.