Five responses to Government's supermarket changes

Monday, 30 May 2022

A school breakfast club is seeing more and more children turn up for a feed as the cost of living surges. (First published May 17, 2022)

Changes are coming for supermarkets.

Commerce and Consumer Affairs Minister David Clark announced the Government’s response to the Commerce Commission supermarket study on Monday, with a warning that supermarkets will have to change “at pace” or face regulation to force them to do so.

One of the most significant of the changes required is that supermarkets open their wholesale operations to competitors, which Clark said should help a competitor to set up shop or expand here.

The Government is also introducing an industry regulator and code of conduct.

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

* Supermarkets should get the message: the guillotine is primed

Feedback so far has been positive, although some have warned that change may not be as swift as some shoppers would hope.

Matthew Tukaki

National Māori Authority chair made a submission to the Commerce Commission arguing that the saupermarket duopoly did not ensure the fair treatment of Māori suppliers.

He said he was “very happy” with the Government’s response.

'This is probably one of the clearest signals in a generation to a third and even a fourth market operator to enter, to come in.'

'The other thing I'm really happy about is the grocery code of conduct.

Spencer Sonn, the managing director of Woolworths NZ.

'The big bugbear for me was the emergence of now chemists in supermarkets, not just the old liquor outlet, the bakery, the butchery and so-forth, so the 'capture all' grocery code of conduct is going to be excellent.”

He said he hoped the market regulator would not “just be a small stick, it’ll be a bit of a whack”.

'These organisations have been on the receipt of in excess of $1 million a day in profits over the course of the last 12 months. Nobody can tell me there's not fat in their margins.

'From my perspective it was always about sending a signal to the market operators, and I think that's what's happened today. Still got to see the devil in the detail, but wouldn't it be great if one of those fourth operators now emerged as Te Pātaka, the pantry, a Māori provider.'

Spencer Sonn

Spencer Sonn is managing director of Woolworths New Zealand, which owns Countdown.

He said it was a privilege to be part of communities across New Zealand.

“We know things are tough right now, and we’re continuing to try and provide food and groceries at the lowest prices we can - this remains our absolute focus,” he said.

“We support the Commerce Commission’s recommendations. While the Government’s response goes further than these, we accept that change is needed, and we’re committed to playing a positive role in a competitive grocery market for Kiwis.

“We don’t yet have the capability to offer large scale wholesale supply, however we are already in the process of planning how we achieve this. We’re committed to working with the government to meet their expectations and with our supply partners who will play an important part in this.”

Chris Quin

Chris Quin, Foodstuffs’ managing director, said his organisation was “embracing the challenges” laid down.

Consumer NZ chief executive Jon Duffy says add-on insurance is a nice little earner for car dealers and insurers, but a rip-off for consumers.

“Our two co-operatives, Foodstuffs North Island and Foodstuffs South Island, are focused on delivering better value for all New Zealanders and addressing the proven issues raised through the market study. We already have a comprehensive work programme underway to achieve this, and we’re making good progress.

“The Foodstuffs co-operatives are working constructively with MBIE towards a well-designed, mandatory code that will give clarity to the rules of engagement with our supplier partners to ensure the industry works well for customers – and we have indicated our support for a set of principles that we believe will make a difference in providing clarity, certainty, fairness, meaningful consequences, and opportunities for redress when the code is not honoured,” he said.

“We have also confirmed our support for the establishment of a specialist grocery regulator to monitor compliance with the code and undertake effective enforcement action where appropriate. We understand that industry funding for the regulator will potentially be a part of the new regulatory framework, and we’re supportive of paying a fair proportion of the costs. We are up for change, supportive of the timeframe of an annual review advised today, and for being held accountable and look forward to operating in this new environment.”

He said Foodstuffs was committed to being an active participant in the wholesale market.

“What is key now is understanding the demand landscape and ensuring that suppliers work with us and our wholesale customers to enable those customers to access wholesale groceries at competitive prices.”

Jon Duffy

Jon Duffy, chief executive of Consumer NZ, has been outspoken about the need for change in the supermarket sector, including running a petition asking the Government to go further than the Commerce Commission’s recommendations.

“It is beyond debate that competition is not working well for consumers in the grocery sector,” he said.

“The Government’s response demonstrates a commitment to fixing the underlying issues that are producing lacklustre competition and high profits, and contributing to high prices at the checkout.

“We are pleased the minister has recognised the importance of this issue to New Zealanders and rejected two of the commission’s key recommendations, which would have seen New Zealand shoppers putting up with the status quo for at least the next three years.”

He welcomed the Government’s decision not to leave wholesale access to supermarkets to deal with on a good faith basis.

“We need to create an even playing field for new and emerging grocery retailers,” Duffy said.

“The voluntary regime recommended by the commission would have left competitors at the mercy of the very companies they’d be competing with. Putting a regulatory regime in place will ensure that new and emerging retailers must be treated fairly.”

Duffy said it was also positive that the state of competition would be reviewed annually by a grocery sector regulator, rather than waiting three years as the commission suggested.

“This is a practical and necessary step for the Government to take. Three years is just too long for New Zealanders to have to tolerate the status quo,” Duffy said.

Chris Claridge

Chris Claridge is chief executive of Potatoes New Zealand, which represents growers.

He said there were only two ways in which growers would achieve better farm gate prices and that was if costs were pushed on to consumers or if supermarkets accepted smaller margins.

Growers were faced with increasing costs on every front, with labour, fertiliser, compliance and fuel costs increasing, Claridge said.

“There's no way out of this. At some point the cost has to be transferred from farmers so they can achieve better margins.”

Any competition was good but supermarkets did not have any incentive to change, he said.