Grocery commissioner says he's seen supermarkets play tough

Monday, 10 July 2023

Pierre van Heerden will be the grocery commissioner, starting Thursday.

The country’s first grocery commissioner, Pierre van Heerden, says he saw supermarkets play tough with suppliers during his 25-year career in the food industry and is pleased they will soon need to abide by a mandatory code of conduct, which he will help police.

Van Heerden will take up his role at the Commerce Commission on Thursday, with his primary responsibility being to keep supermarkets in line with new rules embodied in the Grocery Industry Competition Act that are designed to promote competition and protect consumers and suppliers.

Born in South Africa, van Heerden spent 12 years at Sanitarium in New Zealand and Australia and chaired the Food and Grocery Council between 2012 and 2016 where he represented “small, medium and large businesses all the way through Fonterra” in their dealings with the supermarkets.

The supplier-supermarket relationship was always “very robust” and while that relationship was sometimes tough but fair, he indicated his experience was that it could also be tough and unfair.

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“It would vary depending on the people involved to a large extent, and cultures within each of the companies change over time as well.

“You do go through some rocky times in terms of the negotiations with supermarkets very often. So something that I'm very passionate about is to use this once-in-a-lifetime opportunity to make a difference for Kiwi consumers by levelling the playing field and getting more competition in the market.”

Van Heerden said he had advocated for a code of conduct for the supermarkets since around 2008, so the law change paving the way for the code had been a long time coming.

People had different views on whether rules also contained in the Grocery Industry Competition Act requiring Countdown and Foodstuffs to wholesale groceries to rival retailers on reasonable terms would be enough to bring about a significantly better deal for consumers, he acknowledged.

Competition advocate Tex Edwards and Westpac researchers have voiced doubts that consumers will see much benefit from the Government’s reforms unless it also takes the big additional step of forcing Countdown and Foodstuffs to sell some of their stores or chains to help make way for a third major rival.

But the Cabinet has yet to decide whether to proceed with public consultations over a possible break-up of the two supermarket groups after commissioning research into the potential costs and benefits last year.

Westpac argued in a research report in May that the Government needed to break up Countdown and Foodstuffs if it wanted to significantly improve competition in the supermarket industry,

Van Heerden said he expected the debate on divestment to continue and it was a good thing there were varied views.

“My focus is really to perform the role that I've been appointed to and make sure that we get the changes done in terms of that.”

There had been positive changes within the supermarket industry since the Commerce Commission conducted its market study into the sector in 2021 and last year, he said.

“Since that started, the land covenants have been taken off, and over the winter period a lot of prices have been frozen by the grocery retailers. So when I look at it, there have been some short-term gains already.

“The big thing for me, in my role, is to ensure that we take this once-in-a-generation opportunity and make the changes for the long term by levelling the playing fields and getting additional competition in the market.”

Van Heerden said his priorities during his first 100 days would be to meet his 12-strong team and others within the Commerce Commission, and then to engage with all stakeholders to establish expectations before setting out to make a “long term difference”.

“I’ve done 81 marathons and ultra-marathons around the world, so I do have endurance. The supermarkets won't wear me down.”

Commerce Minister Duncan Webb said van Heerden was an experienced chief executive and director with deep knowledge of the grocery industry in New Zealand, Australia and the UK.

He said his appointment, which will be for an initial period of five years, was the latest step to boost competition in the supermarket industry, following the commission’s claim last year that Countdown and Foodstuffs were earning about $1 million a day in excess profits because of a lack of competition.

Consumer NZ chief executive Jon Duffy said the cost of food continued to put pressure on households and remained a major concern for many, based on its own research.

“Now Pierre van Heerden has been appointed as grocery commissioner, the commission can get on with updating its data on supermarket profitability. This should include an analysis of the margins supermarkets have been able to achieve through this period of high inflation and cost of living pressure.”