No Aldi immediately, but better deals may be coming for supermarket shoppers

Tuesday, 8 March 2022

The Commerce Commission insists supermarket reforms it is recommending will make a difference.

There won't be an Aldi on every corner any time soon, but shoppers are being told they may get a better deal at the supermarket in future, thanks to changes to the grocery sector recommended by the Commerce Commission.

The commission released its final report on Tuesday, and shied away from some of the more drastic reforms that had been discussed in the draft stages, such as forcing the supermarket giants to sell shops to a new competitor.

The commission estimated Countdown-owner Woolworths NZ and Foodstuffs, which owns the Pak ’n Save, New World and Four Square chains, were making about $430 million a year in excess profits.

It said New Zealand had the fifth most-expensive food prices among 38 countries in the Organisation for Economic Cooperation and Development (OECD).

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Chairwoman Anna Rawlings said competition in the $22b grocery sector was not working well for consumers.

But she said forcing the sale of shops or other parts of the supermarket businesses would have been complex and “unprecedented”.

Instead, it recommended lesser steps to improve competition, despite acknowledging they might not be sufficient to attract a major new competitor into the market.

Consumer NZ chief executive Jon Duffy said the steps the commission had proposed relied on the supermarkets “doing the right thing” and it was disappointed the watchdog had not done more.

“Change is likely to be slow and consumers are not going to see lower prices at the checkout any time soon,” he said.

But he said the proposal of a regulator to “keep the spotlight on” would be a big change. “We know when the spotlight is put on the supermarkets, as it is at the moment, they make concessions and start acting in a more pro-consumer way.”

He said the report might seem like more of a win for suppliers than consumers but if suppliers could deal with supermarkets on a more equal basis that would boost choice for shoppers.

Commerce Minister David Clark signalled the Government might not stop at the commission’s recommendations.

The commission recommended a mandatory code to stop supermarkets being unfair to suppliers and a ban on supermarkets using land covenants to prevent competitors from setting up nearby.

Countdown and Foodstuffs will be encouraged but not forced to wholesale groceries to other retailers, to make it easier for the likes of dairies and speciality food shops to buy groceries at lower prices.

Green Party commerce spokesman Ricardo Menendez March said the commission had not gone far enough.

He wanted to see the Government support a new publicly funded food retailer to compete with Countdown and Foodstuffs.

Commerce Minister David Clark hinted that the Government could go further than the competition watchdog had suggested.

“It’s clear there is a problem with competition that needs to be fixed,” he said.

“I have not ruled out some of the other options that the Commerce Commission tabled while developing its report, if consumer benefit is not achieved from the changes recommended in the report.”

Consultant Ernie Newman, a former chief executive of the Telecommunications Users Association, said the commission’s recommendations were very good for supermarket suppliers.

They were “not so good” for anyone hoping to set up a third supermarket group, but did give hope, he said.

The commission had agreed to a further review in three years, which was important, he said.

“Thinking back to telecommunications, it took 10 years and a series of missteps and half-hearted moves before we cracked that one,” he said.

Nick Hogendijk, managing partner of Australian retail consultant HexisQuadrant, said he “threw his toys out of the pram” when he first heard the commission’s plans.

The public had not got the immediate gratification they wanted from strong action, but forcing Countdown and Foodstuffs to sell some of their stores would have led to a long legal battle, he said.

“At least this way anyone who wants to have crack at entering the market knows what hand they are playing with” and could not be blocked in their dealings with suppliers, he said.

National Party commerce spokesman Andrew Bayly said the commission had left open the option that Countdown and Foodstuffs could be forced to separate out their wholesale operations down the track.

“I think they have gone far enough for the moment, If they didn’t have the three-year review I’d be more concerned,” he said.