The Warehouse says freeing up grocery supply chain has done nothing for competition or prices

Thursday, 23 March 2023

The Warehouse has been expanding its grocery offering, and now offers fresh produce in six stores.

Warehouse Group chief executive Nick Grayston says the Government’s move to help free up wholesale grocery supply has done nothing to enable competition.

The operator of The Warehouse, Warehouse Stationery, Noel Leeming and TheMarket.co.nz last year began selling groceries in its Warehouse stores. It followed with the introduction of fresh fruit and vegetables in six stores in February.

However, despite the Government’s announcement last year that it would force the supermarket duopoly of Foodstuffs and Woolworths to open up their wholesale supply chains to enable competition and access to better prices, Grayston said efforts until now had been effectively redundant.

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He maintained that groceries remained a focus for The Warehouse group, and said it had redirected some of its investment spend from its digital transformation to expanding the grocery channel.

“On the cost side, I don’t think the action taken as a result of the Commerce Commission work has really provided benefit or encouraged more competition in the New Zealand market.

“It certainly hasn’t given us the opportunity to buy at greater, more equitable prices,” Grayston.

“Clearly it is something that customers need in these tough times.”

Nick Grayston says the retail market is under significant pressure and consumer spending is slowing.

Grayston said he would like to see the Government take action with suppliers to ensure better buying prices.

The Warehouse’s grocery category has picked up momentum in the past six months and sales have increased by 34%. Grocery sales now make up more than 22% of the red shed retailer’s total sales.

Its early sales of fresh produce in the six stores was encouraging, Grayston said, adding that its mostly locally sourced offering was much needed by consumers as the cost of living continued to spiral.

With recent grocery inflation running at 10.8%, and 23% for fruit and vegetables, “the price of groceries has now taken over as Kiwis’ single biggest concern – people are doing it hard out there”, Grayson said.

He said the plan was to extend the fresh produce sales to all Warehouse stores, but was unable to confirm when that would be. “We’re still very much testing it, but the initial hope is that we can roll it out fairly quickly.”

The Warehouse did not plan to become another supermarket, he said.

Grayston made his comments in the wake of The Warehouse Group’s latest earnings report, and confirmation of 340 job losses as it tries to tackle costs.

In the 26 weeks to January 29, the Warehouse Group made a net profit of $17.4 million, down 60.9% compared with $44.4m in the same period last year.