Commerce Commission supermarket report.

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#2883768 9-Mar-2022 14:49

Jas777:
marmel:

Large companies exploiting their duopoly to charge more to customers and pay less to suppliers is bad. Hence the CC investigation.

I also note that neither Foodstuffs or Progressive have come out swinging, all we got was a muted response accepting “there was work to do”. I think they realise they have probably dodged a bullet here.

I think if Labour get a third term and there hasn’t been some real action from the companies involved we may see more invasive measures taken.

What measures?

Some of the other options considered by the CC. Forced sales of some stores to allow easier access to a third player into the market, possible split of wholesale and retail parts of the business.

Labour have already said they may go beyond what the CC have recommended if there is no sign of progress which actually leads to lower grocery prices however I suspect this will take a few years to monitor and see the trends.

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#2883821 9-Mar-2022 15:17

marmel:

Some of the other options considered by the CC. Forced sales of some stores to allow easier access to a third player into the market, possible split of wholesale and retail parts of the business.

Labour have already said they may go beyond what the CC have recommended if there is no sign of progress which actually leads to lower grocery prices however I suspect this will take a few years to monitor and see the trends.

Can't see split of wholesale and retail resulting in lower prices, but you never know

Is NZ attractive for a 3rd party and more importantly will NZers use them if it involves being less lazy.

The best bet would be to help consumers deal direct with suppliers if at all possible but how that is done is million dollar question

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#2883822 9-Mar-2022 15:21

Another issue is that if I grew Broccolli, I will be locked into one buyer, not allowed to sell to the other, I guess that means the price I get is not market price its what I'm told to live with?

marmel

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#2883823 9-Mar-2022 15:23

Jas777:
marmel:

Some of the other options considered by the CC. Forced sales of some stores to allow easier access to a third player into the market, possible split of wholesale and retail parts of the business.

Labour have already said they may go beyond what the CC have recommended if there is no sign of progress which actually leads to lower grocery prices however I suspect this will take a few years to monitor and see the trends.

Can't see split of wholesale and retail resulting in lower prices, but you never know

Is NZ attractive for a 3rd party and more importantly will NZers use them if it involves being less lazy.

The best bet would be to help consumers deal direct with suppliers if at all possible but how that is done is million dollar question

Perhaps an online only chain? Given the prevelance of online grocery shipping already and the success of the ‘meal bag’ companies I think kiwis would embrace a low cost, no frills online only store with home delivery service.

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#2883839 9-Mar-2022 15:55

The thing is that food is an essential service and kiwis have been over paying for a couple of decades since Foodtown was allowed to merge,so there needs to be done immediate changes. I just wonder how much this has ended up costing the economy. I remember they used this argument when there was a telco monopoly leading to the unbundled. Removing GST on food could make an immediate effect to at least make food cheaper if they want to make an immediate change but that may only bring prices back to pre covid. I am surprised there isn't more outrage. However I have noticed more people inside the supermarket complaining about the prices. Food in the UK is much cheaper but they have real competition, but that didn't used to be the case and when I lived over there food was more expensive than NZ.

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#2883845 9-Mar-2022 16:17

mattwnz: The thing is that food is an essential service and kiwis have been over paying for a couple of decades since Foodtown was allowed to merge,so there needs to be done immediate changes. I just wonder how much this has ended up costing the economy. I remember they used this argument when there was a telco monopoly leading to the unbundled. Removing GST on food could make an immediate effect to at least make food cheaper if they want to make an immediate change but that may only bring prices back to pre covid. I am surprised there isn't more outrage. However I have noticed more people inside the supermarket complaining about the prices. Food in the UK is much cheaper but they have real competition, but that didn't used to be the case and when I lived over there food was more expensive than NZ.

If we removed GST then thats a huge hole in Govt revenue, we already dont have enough money. Then prices drop overnight and then they are back to todays prices, "because they cost more to buy" the supey's will say. Too small for a third operator.

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#2883853 9-Mar-2022 16:40

Removing GST is never going to do anything, because they set the GST inclusive price to what the market will bear. If the GST is zero then the market will bear more exclusive price, and then they will have to allocate their expenditure between GST inclusive and exempt goods and only claim back the GST on the ones that they have charged GST on, which would be hell for them with advertising etc.

If people cannot afford food then its up to social aid to help them out, not forcing places to operate at a lower margin as charity.

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#2883856 9-Mar-2022 16:44

mattwnz: The thing is that food is an essential service and kiwis have been over paying for a couple of decades since Foodtown was allowed to merge,so there needs to be done immediate changes. I just wonder how much this has ended up costing the economy. I remember they used this argument when there was a telco monopoly leading to the unbundled. Removing GST on food could make an immediate effect to at least make food cheaper if they want to make an immediate change but that may only bring prices back to pre covid. I am surprised there isn't more outrage. However I have noticed more people inside the supermarket complaining about the prices. Food in the UK is much cheaper but they have real competition, but that didn't used to be the case and when I lived over there food was more expensive than NZ.

If you drop GST then you will have to raise personnel income taxes

The UK also has 15 times the population.

They do have more competition but a lot is smaller competitors who carry less lines. Not sure if that can work in NZ due to supply issues and customer mindset. I think a lot of people here think more competition will be another one with the same size stores.

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#2883858 9-Mar-2022 16:47

marmel:

Perhaps an online only chain? Given the prevelance of online grocery shipping already and the success of the ‘meal bag’ companies I think kiwis would embrace a low cost, no frills online only store with home delivery service.

Or people get together and 1 goes to source to get the goods and distributes to the others, or on a rota system.

This however needs buy in and people to continue to do it. Problem in NZ is that people will just revert back to easy and complain lol.

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#2883859 9-Mar-2022 16:50

Jas777:

mattwnz: The thing is that food is an essential service and kiwis have been over paying for a couple of decades since Foodtown was allowed to merge,so there needs to be done immediate changes. I just wonder how much this has ended up costing the economy. I remember they used this argument when there was a telco monopoly leading to the unbundled. Removing GST on food could make an immediate effect to at least make food cheaper if they want to make an immediate change but that may only bring prices back to pre covid. I am surprised there isn't more outrage. However I have noticed more people inside the supermarket complaining about the prices. Food in the UK is much cheaper but they have real competition, but that didn't used to be the case and when I lived over there food was more expensive than NZ.

If you drop GST then you will have to raise personnel income taxes

The UK also has 15 times the population.

They do have more competition but a lot is smaller competitors who carry less lines. Not sure if that can work in NZ due to supply issues and customer mindset. I think a lot of people here think more competition will be another one with the same size stores.

They also have a Europe on their doorstep growing fresh produce all year around.

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#2883885 9-Mar-2022 17:58

1101:

well, they found that PRIVATE COMPANIES can set whatever profit margin they choose

My god, what a surprise.
Every other company can decide their own prices, so why cant supermarkets.

The commerce act has provisions for anti-competitive and cartel behaviour.

When a company gains too much market power then the government always has the ability to take action, Telecom is the obvious example referred to above.

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#2883886 9-Mar-2022 17:59

Jas777:

Can't see split of wholesale and retail resulting in lower prices, but you never know

It's worked very well in the telco market.

ANglEAUT

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#2884054 9-Mar-2022 23:01

mattwnz: ... should never have allowed Foodtown to be sold in the 90's, ...

Really? Since the 90's? I still saw Foodtown stores after 2010. 🤯

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#2884094 10-Mar-2022 08:30

I don't think the CC went far enough down the rabbit hole either. Granted I have not read the report yet, but I haven't seen any analysis why we pay such high prices for food produced here nor any recommendations to correct that. I can't be the only person who's bought NZ meat and wine overseas for cheaper than I can get it here, and I've seen a fair few articles about our milk products being cheaper overseas. Reigning in the end point is a good start, but there's a lot of bolts in the delivery chain that could be tightened.

EDIT: Glaring word mistake that I somehow did not spot

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#2884144 10-Mar-2022 09:59

ANglEAUT:

mattwnz: ... should never have allowed Foodtown to be sold in the 90's, ...

Really? Since the 90's? I still saw Foodtown stores after 2010. 🤯

Yep, 2011 the last Foodtown was rebranded as a Countdown.

About the same time, Countdown (Progressive) absorbed Woolworths/Big Fresh as well.

Who absorbed 3 Guys? Progressive as well?

Something the commission could have done was forced them to divest some sites. There are many examples of a Countdown over the road from a Countdown because previously one of them was a Woolworths or Foodtown. Pretty sure that St Lukes mall had a Countdown at each end for a while.

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