Supermarket Excess Profit Petition

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#2920475 30-May-2022 16:39

“If supermarkets do not strike good-faith wholesale deals with their competitors – our regulatory measures will make it happen for them"

I can't really see this doing much more than possibly reducing the number of time you see the owner of the local corner dairy queuing at Pak N save to bulk buy their current dry goods loss leader... be it confectionary or fizzy drink

If another international retailer was looking at the market, hasn't this just made it harder because they would be forced to open their (presumably lower cost) wholesale to the existing nz competitors, or Am i reading it wrong...

Expecting 3 national supermarket chains for a population the size of Sydney is probably a big stretch

Geektastic

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#2920554 30-May-2022 18:41

I can’t see how a similarly average supermarket with a different name, buying the same dull selection of food wholesale and selling it to us like everyone else will really make much difference.

gzt

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#2920605 30-May-2022 19:18

Many of the existing 'Indian' and 'Asian' supermarkets (for want of better description) are very well run and extremely competitive. Opening up wholesale will allow many of these competitors to stock more NZ sourced products. That will be a good thing for many NZ based suppliers and manufacturers.

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#2920624 30-May-2022 20:22

Geektastic: I can’t see how a similarly average supermarket with a different name, buying the same dull selection of food wholesale and selling it to us like everyone else will really make much difference.

Ah, well, you haven't seen the positive impacts of an Aldi Süd, or a Lidl (coming from the UK, I would have thought you would have!)

They don't try to compete on brands, but rather offer "own brands" at prices which are often very attractive (noting that Aldi in Australia alone owns 607 trademarks for their "own brands", often stylised to look dangerously close to famous brands like Cadbury chocolate or AJAX cleaning spray, but just barely different enough that a lawsuit would fail) and due to their quality control and picky contract negotiation, usually just as good as the famous brands they come dangerously close to infringing on.

On the plus side, Aldi seems to focus quite heavily on local procurement where possible, using their "own brands" to bring local products at cheaper prices by exploiting their procurement scale.

Not every competitor needs to be "similarly average, buying the same dull selection wholesale" - there are alternative models.

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#2920634 30-May-2022 20:55

wellygary:

[snip]

Expecting 3 national supermarket chains for a population the size of Sydney is probably a big stretch

That's exactly what we had prior to Progressive Enterprises acquiring the Woolworths NZ group from Dairy Farm International in 2002 when the Commerce Commission started the wheels in motion to what we have today. At that time the market was split approximately 55% to Foodstuffs (Pak 'n Save, New World, Write Price and Four Square), 25% to Progressive Enterprises (Foodtown, Countdown and 3 Guys), and 20% to Dairy Farm International (Woolworths, Big Fresh and Price Chopper).

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#2920666 31-May-2022 00:40

Kyanar:
Geektastic: I can’t see how a similarly average supermarket with a different name, buying the same dull selection of food wholesale and selling it to us like everyone else will really make much difference.

Ah, well, you haven't seen the positive impacts of an Aldi Süd, or a Lidl (coming from the UK, I would have thought you would have!)

They don't try to compete on brands, but rather offer "own brands" at prices which are often very attractive (noting that Aldi in Australia alone owns 607 trademarks for their "own brands", often stylised to look dangerously close to famous brands like Cadbury chocolate or AJAX cleaning spray, but just barely different enough that a lawsuit would fail) and due to their quality control and picky contract negotiation, usually just as good as the famous brands they come dangerously close to infringing on.

On the plus side, Aldi seems to focus quite heavily on local procurement where possible, using their "own brands" to bring local products at cheaper prices by exploiting their procurement scale.

Not every competitor needs to be "similarly average, buying the same dull selection wholesale" - there are alternative models.

I certainly have seen it. The wide range of very high quality products in Tesco, Waitrose or M&S represents something largely unobtainable here at any price. I’d welcome that sort of competition.

However the government is suggesting that the wholesale arms of our existing supermarkets be obliged to sell to other supermarkets. I just don’t see the point of that. You just end up with the same limited range with a different logo on the shop door.

If you’re going to shake it up, shake it up. Price isn’t the only USP a supermarket can have.

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#2920673 31-May-2022 04:24

Waitrose is a great example of overpriced groceries. They are horribly expensive while being no better in quality than Carrefour.

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#2920679 31-May-2022 07:05

What you all forget or may not know...

This opening of "wholesale", is just basically asking the two major supermarket chains to open up their logistic centres for "cross docking" for a 3rd player to access. I cant see them offering the $1.99 packet of chips deal to the 3rd player. thats up to the manufacturer of the product to fund.

I cannot see suppliers extending further extending their arm (financial investment in terms/discounts) to the existing two players to then pass on to the 3rd player..... these such suppliers would rather negotiate directly with the 3rd player.

As it stands theres "many" who access countdown online and buy in bulk from them at retail pricing....very often.

Same applies for NW and PNS, any fool can access their wholesale branches (gilmores and trents).

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#2958823 24-Aug-2022 15:46

Press release:

An unprecedented shake-up of the grocery sector will see the supermarket duopoly forced to sell groceries to their competitors at set prices and terms if they fail to adequately wholesale market voluntarily, the Government has announced today.

“No ifs or buts, greater competition, a wider range and cheaper products will be provided to New Zealanders through these changes,” Commerce and Consumer Affairs Minister, David Clark said.

“The Commerce Commission found New Zealand supermarkets earn $1 million a day in excess profits because of a lack of competition. These regulatory measures will deliver a more competitive wholesale grocery market.

“With New Zealanders experiencing pain at the checkout this is one action we are taking to tackle the causes of cost of living increases.

“Ultimately we have decided to take stronger action than the Commerce Commission suggested. They said any wholesale regime should be voluntary. We’re not confident that will deliver the results consumers deserve.

“Alongside their retail stores, supermarkets have behind the scenes wholesale operations. The changes announced today will ultimately require the duopoly to open these up to would-be competitors.

“Our plan will give a leg up to the likes of smaller retailers and new market entrants. It means other retailers will now be able to source and sell a wider range of groceries at better prices.

“Under these changes the existing duopoly will be required to negotiate wholesale offerings to their competitors on commercial terms. However if those prices are not what we would expect in a competitive wholesale market the new Grocery Commissioner will be able to impose additional regulation to force fairer prices.

“Ultimately if these interventions don’t deliver a fair deal new regulations can be utilised to require the major retailers to provide wholesale supply at certain terms, including price and range.

“The new system will incentivise the major supermarkets to play fair. But if they don’t the Commission will be able to use powerful new tools to make them do so.

"Supermarkets are well advised to lock in good-faith wholesale arrangements on their own terms, or we will have no problem stepping in to make it happen.

“The grocery sector needs to change, so that competing retailers – whether they are independent dairies, smaller chains, or a new entrant – can offer a wider selection of products at competitive prices.

“Alongside these improvements to wholesale access, the Government is also building flexibility into its approach to a collective bargaining exemption for grocery suppliers. Many suppliers, particularly small ones, are unable to effectively negotiate terms of supply with the major grocery retailers on their own. This exemption will allow greater scope for them to do this collectively, helping to address imbalances in bargaining power.

“The Government is working to address the systemic lack of grocery competition in New Zealand. Today’s announcement is just the latest in our plan to deliver a fairer deal at the checkout for Kiwis,” David Clark said.

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#2958828 24-Aug-2022 16:01

freitasm:

Press release:

Err. so the PM held a press conference and put out a press release to repeat what they already told us they would do 3 months ago in May !!!
Its almost as if they want to distract from something else.....

https://www.beehive.govt.nz/release/government-acts-supermarket-duopoly

30 MAY 2022
Government acts on supermarket duopoly

"“Alongside the retail stores, supermarkets have wholesale arms. We are calling on the duopoly to open these up to would-be competitors, at a fair price. Do this knowing the Government is determined to get a regulatory backstop finalised by the end of the year.

“If supermarkets do not strike good-faith wholesale deals with their competitors – our regulatory measures will make it happen for them. We are not afraid to unlock the stockroom door to ensure a competitive market."

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#2958831 24-Aug-2022 16:02

I think the release three months ago was a notice of what was to come and the result from the review. Today's one is the formal plan being enacted.

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#2958833 24-Aug-2022 16:03

From Consumer:

Consumer NZ welcomes today’s announcement on supermarket wholesale access from Commerce and Consumer Affairs Minister David Clark.

Earlier this year, the not-for-profit petitioned the Government to go further than the Commerce Commission’s recommendations and look into regulating access to wholesale supply. Consumer’s petition racked up more than 78,000 signatures.

“Although the devil will be in the detail, wholesale access is the key to healthy competition in the grocery sector,” Consumer NZ Chief Executive Jon Duffy said.

“It will remain difficult for grocery retailers outside the duopoly to set up or expand if they can’t access a decent range of wholesale groceries at reasonable prices. This is the logical next step in the Government’s work plan to fix the broken supermarket sector.

“We are pleased the Government has recognised that relying on the supermarket giants to play fair was never going to work,” he said. “It’s clearly not in the commercial interests of the duopoly to voluntarily open up their wholesale supply to competitors.

“New Zealand consumers are fed up with excessive profits in the supermarket sector – they deserve better. Without a genuine regulatory threat from the Government, the status quo will continue. Today’s announcement sends a clear message to the duopoly: The party is over and now it’s time to start playing fair.”

Nationally representative research from Consumer found that trust in the major supermarkets has plummeted over the past 12 months. In June 2021, 17% of New Zealanders said they did not trust the supermarkets. Fast forward to July 2022 and lack of trust in the industry has reached 40%.

Consumer’s Sentiment Tracker found that New Zealanders’ concerns about the cost of living has risen sharply over the past year, with food prices a key component. At present, the cost of food ranks second highest on a list of financial concerns, behind housing payments. Last year, food ranked as the eighth highest concern, trailling other household outgoings such as healthcare and personal debt.

“We understand there are a host of factors driving the current cost-of-living crisis and that many of these are beyond the direct control of businesses,” Duffy said. “At the same time, we believe cost-of-living pressures must be borne evenly and fairly between consumers and the big businesses, such as supermarkets, that we all rely on.

“New Zealanders should be able to trust that they’re paying a fair and competitive price at the supermarket. While factors such as transportation costs, the international situation and Covid-related delays contribute to high food costs, the lack of competition in the supermarket sector is also a key contributor,” he said.

“The Commerce Commission found that supermarkets are earning more than $1 million in excess profits a day. How is that fair, as many people struggle to feed their whānau?

“Meaningful change in the supermarket industry won’t happen overnight, but there are clear signals from the Government that it will hold the duopoly to account and make changes that create a framework for a competitive and healthy supermarket sector. This has our strong support.”

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#2958921 24-Aug-2022 16:47

wellygary:

Err. so the PM held a press conference and put out a press release to repeat what they already told us they would do 3 months ago in May !!!
Its almost as if they want to distract from something else.....

An announcement about an announcement. What's new. Yet supermarkets continue to hike their prices. The thing is that prices of items aren't going up by a few cents with inflation, often it is by $1 or more on something low priced. eg Custard powder in my supermarket, the normal price was $1.99 (been that price for months). Then the next day they had hiked it to $3.19. Now it is on 'special' for $2.49. They seem to be able to get away with this sort of thing.

I am having a go at my local store for have a guaranteed low price until next year on an item, but they decided to raise the price anyway.

Fuel prices have dropped by quite a bit so that should be reflected into food prices. But we know that we are all overpaying by over $1million each day due to the lack of competition and is one contributor to why NZs cost of living is so high compared to wages, and why we have problems attracting skilled workers from overseas. Many countries have far lower wages than NZ, but their cost of living is also far lower.

mattwnz

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#2958922 24-Aug-2022 16:52

Handle9: Waitrose is a great example of overpriced groceries. They are horribly expensive while being no better in quality than Carrefour.

But at least consumers over there have alternatives that are far cheaper. NZ also has expensive supermarket brands.

Kyanar

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#2958925 24-Aug-2022 16:57

I highly suspect the outcome of this is that the supermarkets will simply structurally seperate (remember what that did when Telecom did it?) increase the price they "charge" their retail arms, and then declare that the prices they offer are already competitive, or they will pressure suppliers to accept less in order to preserve margins. Foodstuffs will probably engage with most third parties by saying "here's your Gilmours/Toops/Trents card, have at it".

As always, the devil is in the detail and the supermarkets will be picking at every detail with a fine toothed comb!

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