Food suppliers being hurt by lack of competition among supermarkets

The report found they have little power when bargaining the price of their product and fear retribution if they demand higher prices.

Supplying supermarkets is the biggest part of some fruit grower's business, but often they won't break even.

A grower 1 NEWS spoke to doesn't want to be identified for fear of repercussions.

“I like to think we have a good relationship with supermarkets but what we don’t have is power to negotiate.”

“We are being squeezed.”

He's not alone in that feeling.

Feedback from 126 current or former suppliers to supermarkets was submitted to the Commerce Commission. 

It contained feedback including that supermarkets hold all the cards and leave producers with few ways to sell their goods. The imbalance creates an imbalance and suppliers fear their products will be pulled from the shelves if they don't agree to terms set by supermarkets.

A grower 1 NEWS spoke to doesn't want to be identified for fear of repercussions.

Competition lawyer Neil Robinson says it is not surprising.

“With a market structure like that it’s not surprising to see suppliers feeling vulnerable.”

Commerce Commission chair Anna Rawlings told media today the findings are detrimental to suppliers' business growth.

“It limits the incentives for suppliers to invest or innovate and that can affect the offer that is provided to consumers and ultimately if suppliers exit the market it can affect the range that is available to consumers as well.

“Suppliers have told us about extended payment terms and waiting up to 60 days for payment for their goods.”

The Food and Grocery Council represents some food suppliers and says the problems have been going on for decades.

“During the whole market study process, one of the supermarkets has just rolled out very extreme demands on suppliers, asking for them to pay more money for displays, for co-op fees, more deductions, at a time the commissions looking at it,” chief executive Katherine Rich explained.

To rebalance the power between supermarkets and food producers, the draft report suggests establishing a Government-mandated code of conduct like in other OECD countries and making changes to allow collective bargaining.

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