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Govt could intervene to break up 'supermarket regime' - NZ Food and Grocery Council

The Government could intervene to help break up the country's current "supermarket regime" seeing growers and customers lose out, the New Zealand Food and Grocery Council says. 

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Food & Grocery Council head Katherine Rich says supermarkets are telling her its “war” over the Commerce Commission’s review. Source: Q+A

New Zealand Food and Grocery Council chief executive Katherine Rich told Q+A the 500-page draft report, released on Thursday, provides an “accurate reflection of the state of grocery in New Zealand”.

“We don’t have enough competition – certainly there are areas that the Government can intervene, but there are also some easy steps that would make a difference for consumers and suppliers next week.”

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Consumer NZ tracked online prices of 22 items for three months at Countdown, New World and Pak’nSave. Source: Breakfast

Among those potential avenues is a code of conduct for suppliers “makes business relationships more transparent”, she said.

“In many cases, discounts squeezed from suppliers do not get passed through to consumers, so that’s one area that a code could cover.”

Rich added that asking suppliers to pay for store thefts, display fees and “a whole host of other behaviour” is also in need of improvement.

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The Commission's draft report makes a number of recommendations, including the addition of a third party to help break up the duopoly currently held by Foodstuffs and Woolworths New Zealand.

Rich said while she believes the arrival of an international supermarket chain such as German discount supermarket chain Aldi “is some way off”, there are “things that can happen tomorrow that could make a difference”, including online grocers and The Warehouse potentially “step[ping] up its grocery offering”.

She said there are also ways that the Government could help “facilitate the entry of a independent – we need an independent”.

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Yum Granola founder Sarah Hedger says smaller suppliers are entering negotiations "blind". Source: Breakfast

“The Government doesn’t need to own it but the Government can create a regulatory framework where competition can be increased, and that’s why there’s a suite of responses that’s needed,” she said.

“The Government’s changing the Fair Trading Act, they’ve changed the Commerce Act, but also a mandatory code of conduct for grocery will make it better for suppliers and for consumers as well.”

Rich said while the Council was not opposed to a grocer acting as a state-owned enterprise – one of the options put forward by the Commission – they called for an “independent, additional retailer to come into New Zealand”.

“There are other entities in New Zealand that could step up. The thing that’s stopping competition in New Zealand is the fear of what the two supermarkets will do if you supply other retailers, and we’re seeing that now with the new online entry.

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“The Government could own but more importantly, there are other retailers right now who could step up their grocery offering and that would be better for consumers to provide more choice."

She said one of the weaknesses of New Zealand’s current “supermarket regime” is a lack of wholesale options, preventing food manufacturers and growers the opportunity to negotiate with supermarkets.

There are some food and grocery producers who “just don’t get a fair opportunity to make normal profits,” Rich continued, including a strawberry grower who has been “paid the same for a punnet of strawberries today as he was 45 years ago”.

She said overall, the Commission has done a “really good job in providing the Government with a smorgasbord of options” which paints “a very accurate picture of the market”.

“It provides the data and the information that proves once and for all that the New Zealand market is the most concentrated in the world and the most profitable and we need to make some changes.”

The final Commerce Commission report will be released later this year.