Commerce Commission Report on Grocery Sector

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#2753655 2-Aug-2021 13:12

jonathan18:
I think a number of these situations of two Countdowns so close to one another at least originated with Woolworths’ purchase of Countdown (where there had been one of each company); that they have kept both stores open is no doubt to exclude the competition. Another example of this is Johnsonville, where one is in the mall and another just opposite.

The larger of the two in Johnsoville (the one not in the mall) was originally a "Big Fresh" store - the ones with the singing/dancing animatronic chickens and vegetables. Off-topic I know, but interesting article about Big Fresh history here: https://thespinoff.co.nz/society/07-04-2017/remembering-big-fresh-new-zealands-greatest-supermarket-of-all-time/

(edited to clarify)

empacher48

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#2753713 2-Aug-2021 13:53

Anyone who thinks there is going to be massive change in this space must be quite deluded.

If you want to see what is going to happen to the supermarket business, then take a look at what has changed in the Petrol market.

They were legislated to make sure that any body can purchase fuel from the same wholesalers at the same rate as the wholesalers charged themselves, this was to encourage more participants.

So far all I've seen is NPD appearing in South Auckland. But the prices of that fuel never changed, there wasn't a reduction in price in those areas where NPD appeared, in fact NPD just raised their prices to match Gull, which was the same price as was charged at the nearest Z, BP or Mobil site.

If the decision is made to separate the wholesalers from the retailers in the Grocery game, prices will go up. At the moment with the integrated vertical supply chains is that it doesn't matter if the wholesaler makes a profit, that profit will come from the retailer selling to the public. Separate the two and it means the wholesalers will be less likely to be accepting of running losses or small margins (the business still has to make a profit to survive and without the retailer providing a share of the profit from the public, they have to make it themselves selling to retailers). Those increases will just be passed onto the retailer, who will either have to accept a smaller profit or raise prices.

All that separating the wholesalers from the retailers will do is make it slightly cheaper for a new retailer to enter the market, or have more "mum and dad" dairies. But, that is what we were promised with the fuel companies. But yet, there hasn't been the huge increase in smaller independent fuel retailers.

A second thing that has been missed, is that Foodstuffs is owned by the owners of the relevant NW, Four Square and Pak 'n Save store owners. (Well it was the case for Foodstuffs in the SI when I was tied up with it from the mid 90's to 2010). By having that it meant the owners of a Four Square in Franz Josef paid the same price for their products from the Foodstuffs warehouse in Christchurch as the person who owned a Four Square in Woodend. Even better, there was no charge for the truck to deliver it, so prices would be the same across the brand. Force the wholesaler to separate and there will be some large charges coming for retailers in remote locations to pay to get the products delivered, end user will end up having to pay more.

BlueShift

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#2753726 2-Aug-2021 14:35

The Warehouse tried, within living memory, to branch out into supermarket merchandise. With their decent sized installed base, existing stores and purchasing power, they couldn't manage to sell enough stuff at a price people were happy with to keep on in that business. There's still a few stores branded "Warehouse Extra" and they still have a few non-perishable grocery items, but they couldn't compete with the other two. If TWC still can't manage to sell V & Bluebird chippies as cheap as Countdown, then it'd be an uphill fight for a completely new competitor, and they'd have to be prepared to burn a lot of cash before they even got a sniff of a profit.

GV27

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#2753734 2-Aug-2021 15:04

BlueShift:

The Warehouse tried, within living memory, to branch out into supermarket merchandise.

The Warehouse (at the time) didn't exactly have a store environment that screamed 'buy food you plan on eating from me'.

They've been on a rejuvenation kick since but at that point some stores hadn't made it to the polished concrete level of presentation.

And I've never felt the level of merchandise control within Warehouses were anywhere near the level they are at for the supermarkets they were competing with.

It's a shame because they are one of the few players who would have had the outright floor area to do a hypermart at the sort of scale you'd need to dent the supermarkets.

tdgeek

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#2753736 2-Aug-2021 15:14

GV27:

The Warehouse (at the time) didn't exactly have a store environment that screamed 'buy food you plan on eating from me'.

They've been on a rejuvenation kick since but at that point some stores hadn't made it to the polished concrete level of presentation.

And I've never felt the level of merchandise control within Warehouses were anywhere near the level they are at for the supermarkets they were competing with.

It's a shame because they are one of the few players who would have had the outright floor area to do a hypermart at the sort of scale you'd need to dent the supermarkets.

Yep, if you've ever been to a Walmart, with a supermarket. and a chemist and and a couple of other like shops in the building, its a good experience. The Warehouse shoppers will often grab a couple of grocieries they need, the grocery shoppers will grab the odd Warehouse product, it would be a great combo

mattwnz

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#2753794 2-Aug-2021 15:53

I could never get over that they allowed the market to get into a duopoly situation. I wonder how much it has cost NZers as a result. I remember when TV3 used to do comparison shopping a good decade ago showing how much more we paid compared to other countries. I don't think they are going to be able to do too much now to solve it. Is similar to many things including the housing crisis. They have been left for too long without action.

quickymart

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#2753861 2-Aug-2021 16:18

richms:

Yeah, they kept both running and let one of them get really dire inside it just because they knew if they left that it would be a prime site for someone else.

They also wasted forever objecting on every method possible to delay the pak n save in wairau from happening. Scummy company. Need aldi/someone to come along and sort them out and sort out the ability for a compeditor to use the RMA to prevent competition from blocking their stores.

I remember that, they made up some bs objection about the Fire Service losing road access or something equally as ridiculous - like it would make any difference to their situation!

https://www.nzherald.co.nz/nz/epic-supermarket-stoush-solved-in-court/T55JQWQPPNMSH563FJQYBKARHY/

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Fred99

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#2753862 2-Aug-2021 16:19

mattwnz: I could never get over that they allowed the market to get into a duopoly situation. I wonder how much it has cost NZers as a result. I remember when TV3 used to do comparison shopping a good decade ago showing how much more we paid compared to other countries. I don't think they are going to be able to do too much now to solve it. Is similar to many things including the housing crisis. They have been left for too long without action.

Seems that markets often naturally develop into effective duopolies.

Android/IOS, Microsoft/Apple, Facebook/Google (Ads), Nikon/Canon, Coke/Pepsi, AMD/Intel, Visa/Mastercard, Airbus/Boeing, etc. It's extremely hard to break in.

Some of those examples there's also a failure of democracy when politicians fail to represent the people who elected them but the lobbyists and donors instead - maybe that coincides with FPP systems which result in a duopoly of political parties.

quickymart

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#2753863 2-Aug-2021 16:20

tdgeek:

GV27:

The Warehouse (at the time) didn't exactly have a store environment that screamed 'buy food you plan on eating from me'.

They've been on a rejuvenation kick since but at that point some stores hadn't made it to the polished concrete level of presentation.

And I've never felt the level of merchandise control within Warehouses were anywhere near the level they are at for the supermarkets they were competing with.

It's a shame because they are one of the few players who would have had the outright floor area to do a hypermart at the sort of scale you'd need to dent the supermarkets.

Yep, if you've ever been to a Walmart, with a supermarket. and a chemist and and a couple of other like shops in the building, its a good experience. The Warehouse shoppers will often grab a couple of grocieries they need, the grocery shoppers will grab the odd Warehouse product, it would be a great combo

I visited a Walmart in the US with a little Pizza Hut inside. That place made really good pizza :)

Fred99

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#2753868 2-Aug-2021 16:23

quickymart:

I remember that, they made up some bs objection about the Fire Service losing road access or something equally as ridiculous

Haven't read the link, but I'm surprised that anybody could think that inadequate Fire Service access to large busy shops could be ridiculous.

Handle9

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#2753871 2-Aug-2021 16:27

Fred99:

quickymart:

I remember that, they made up some bs objection about the Fire Service losing road access or something equally as ridiculous

Haven't read the link, but I'm surprised that anybody could think that inadequate Fire Service access to large busy shops could be ridiculous.

Generally sure but in the case of a supermarket on Wairau Road it was patently ridiculous.

eracode

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#2753875 2-Aug-2021 16:36

empacher48:

Anyone who thinks there is going to be massive change in this space must be quite deluded.

If you want to see what is going to happen to the supermarket business, then take a look at what has changed in the Petrol market.

Yep - you’re right.

Based on some of their actions in the petrol market, in this case ComCom will probably force the supermarkets to put up outdoor signs showing their prices for various octanes of milk - Trim, Full-fat, Long-life, Soy etc.

Sometimes I just sit and think. Other times I just sit.

mattwnz

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#2753878 2-Aug-2021 16:43

Fred99:

mattwnz: I could never get over that they allowed the market to get into a duopoly situation. I wonder how much it has cost NZers as a result. I remember when TV3 used to do comparison shopping a good decade ago showing how much more we paid compared to other countries. I don't think they are going to be able to do too much now to solve it. Is similar to many things including the housing crisis. They have been left for too long without action.

Seems that markets often naturally develop into effective duopolies.

Android/IOS, Microsoft/Apple, Facebook/Google (Ads), Nikon/Canon, Coke/Pepsi, AMD/Intel, Visa/Mastercard, Airbus/Boeing, etc. It's extremely hard to break in.

Some of those examples there's also a failure of democracy when politicians fail to represent the people who elected them but the lobbyists and donors instead - maybe that coincides with FPP systems which result in a duopoly of political parties.

NZ used to have Foodtown though, so 3 big payers. But they were allowed to merge, and I remember back when it happened there were these same fears over lessening competition. Watching the press conference on it, so much of what they were saying was obvious.

gzt

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#2753895 2-Aug-2021 17:40

BlueShift: The Warehouse tried, within living memory, to branch out into supermarket merchandise. With their decent sized installed base, existing stores and purchasing power, they couldn't manage to sell enough stuff at a price people were happy with to keep on in that business.

It wasn't a serious go. The selection was terrible, far worse than most small dairies, and on a large scale. No one could complete a shop there, not even close. It looked doomed from day one.

Ironically the selection is better now than when they started. Add frozen food + bagged veges + dairy. It could be a contender with the new store hours. Logistically, not that easy for them.

mattwnz

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#2754021 2-Aug-2021 19:10

A part of Auckland could be getting Costco. But can't see people traveling specially to it just to get groceries. The problem when you allow a duopoly to continue to decades, is that it is almost impossible to rewind. NZers have paid a huge cost as a result IMO.

I do wonder why more money and resources isn't put into our competition watchdog, considering how important it is to ensure NZers are getting good value. Took them ages to sort out the telcos, and people must spend far more on food than telecommunications.

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