Ahead of the release of monthly food price figures later this week, the Government's coming under increasing pressure to rein in the supermarket operators.
After annual food price inflation hit 7.6% in March - the highest level in 11 years - Commerce and Consumer Affairs Minister David Clark then immediately put out a pro-active press release, obviously designed to head off public outcry, in which he said the Government was "committed to taking action to pave the way for additional players to enter the New Zealand grocery market in order to increase competition".
Referring to the recent Commerce Commission inquiry into the supermarket sector, Clark said then: “Given the importance of healthy levels of competition in our retail grocery sector I have not ruled out going further than the options that the Commission tabled in its final report.”
In that report the commission recommended a series of tweaks to the operation of the supermarket sector, but stopped well short of some of the tough measures it earlier contemplated.
Some of the tough measures that had been mooted included making market participants structurally separate their wholesale and retail businesses, or even being forced to divest some of their brands.
Instead, in the final report, much emphasis was placed on things such as easy availability of land for development of new supermarkets. The commission is recommending that both a grocery sector regulator and a dispute resolution scheme be established.
"A sector-specific regulator could have responsibility for general oversight of the retail grocery sector. This could include monitoring and reporting on its performance, both publicly and to government," the commission said.
The commission is proposing another review after three years. The Government is due to give its response to the commission's report this month.
Statistics NZ is due to release the monthly Food Price Index figures for April on Thursday (May 12). And the figures are sure to be viewed with rather more interest than is usually the case. They follow on from release last month of figures that showed NZ's annual rate of inflation to March 2022 as measured by the Consumers Price Index hit its highest level in more than 30 years of 6.9%.
Now independent watchdog Consumer NZ has amped up the pressure by launching a petition, asking Minister Clark to "put consumers first" and go beyond the Commerce Commission’s recommendatons.
“Every day the supermarkets are taking more than $1 million in excess profits from our collective back pockets," Consumer NZ chief executive Jon Duffy said.
"These profits are twice what they should be. We need more competition to drive down prices and give New Zealanders a fairer price at the checkout."
No-one was going to start up a competing supermarket without reliable access to wholesale groceries, Duffy said, "but currently the duopoly dominates access to wholesale supply".
The commission's recommendation that the supermarkets consider supplying other retailers "is unrealistic to expect from an entrenched duopoly used to calling the shots".
"That is why we’re launching a petition."
Consumer is asking Minister Clark to consider regulating access to wholesale supply or setting up a state-owned wholesaler. The details of Consumer's request has been outlined in an open letter to the minister.
56 Comments
The split of the wholesale and retail arms, and hard action to end land banking and the use of covenants are key here.
In the mean time, Govt should simply say to the duopoly "Here is the list of things we put in the CPI basket - with their respective weightings - make sure these goods do not add anything to the CPI for the next 12 months".
Oh, peachy. Price Controls, on entities which typically run between 10-30k SKU's on their shelves, is gonna take a lotta Gubmint Drones to administer. Still, glass half full, it will keep unemployment down. Same for the suggestion of a State Wholesaler. This, from the bozos who could not order enough 'vaccines', organize priority application to vulnerable population segments when the jabs finally dribbled in, pay health staff enough to keep them onshore....Plenty of examples.
The mind boggles....
Oh, pooh. There's a stock-out on boggles....
Not price controls at all - and zero extra public servants required. What you would be doing is saying is "If the food component of CPI continues to go up like crazy, we will take this as evidence that we need to take firmer and quicker action to break things up". Leave it up to the supermarkets to work out how they do that.
The US used this approach in the 60s - they called it 'pricing guidelines' - things that they would keep an eye on to assess whether companies where abusing their market power (not dissimilar to the data we collect on margin price of fuel at the ports).
When Marilyn Monroe sang 'Happy Birthday' to President Kennedy, she included the immortal line '... the way you deal with US Steel' - she was referring to how Kennedy had got the CEO into his office for a hard word about price gouging.
This government will bend over for any movie producer with a dream. Do something really useful. Send an MBIE delegation to Australia to meet with ALDI management and find out how much it will cost to get them to come to NZ and set up at least one store in Auckland, Wellington and Christchurch. Then pay it. Also offer them brownfields government land to build on.
Send an MBIE delegation to Australia to meet with ALDI management and find out how much it will cost to get them to come to NZ and set up at least one store in Auckland, Wellington and Christchurch
Aldi will not do business in NZ. Not enough mkt scale or supply chain efficiencies. Shelf prices will reflect that. For your reference, Lidl pulled out of Australia as the size of prize was not big enough.
Make it efficient. One giant store near Auckland motorway junction. Retail in the font. Warehouse and cold storage in the back with enough storage for 1 months stock. Daily dry and reefer containers from the Australian distribution center direct to the store from the ports. All products pre approved by Customs, MPI, MPI Food. That failed Nido site in Henderson would have been ideal but it is probably covenanted.
Make it efficient. One giant store near Auckland motorway junction. Retail in the font. Warehouse and cold storage in the back with enough storage for 1 months stock. Daily dry and reefer containers from the Australian distribution center direct to the store from the ports. All products pre approved by Customs, MPI, MPI Food. That failed Nido site in Henderson would have been ideal but it is probably covenanted.
You'll have to pitch that idea to Aldi. Their business model is not really a hypermarket.
A good reference Nzdano, explains the situation clearly. Don't hold your breath on effective government action on the Countdown/Foodstuffs situation. Neither Red nor Blue is capable of organising a booze up in a brewery.
If there is so much money to be made, someone,...(perhaps The Warehouse might try again,) will make a move.
The main issue for gummit is to organise satisfactory "restraint of trade" legislation...and enforce same across our entire small market. But don't hold your breath on even this small action! Parliament is far too busy looking after it's own comfort.
One even despairs about the ability of consumers to shop with discernment ....look at the numbers of folk who moan about the "Aussie" banks ripping us off and yet ignore using the many quality local banks available. What on earth is hard about shopping at farmers markets and the small independents, eg greengrocer? Okay, means walking a few yards from shop to shop rather than do the one shop at the mega store.
Agreed. Call up Aldi (or any other credible competition who wants a go) and give them what is needed to get them into the market. Tell them they can have a guaranteed 15 years of 0% tax on their profits, or whatever it takes within reason as the continued trend of excessively high food prices are a vastly worse alternative.
I'd much rather see a few more $ go offshore than people going hungry because they can't afford to feed themselves.
The duopoly will kick and scream, and they can be told to shove it.
Unfortunately there is zero political will to do the right thing. Labour-Greens are happy to keep the "worst-affected demographic" or, as they call them, loyal voters, hooked on welfare payments.
National-ACT don't want to upset their wealthy voters with effective market reforms and rather propose cutting GST and PAYE. Their working class hardline supporters don't understand that, in the absence of market reforms, the duopoly will likely gobble up much of the extra margins from a GST cut, and pass on a tiny sliver to the consumer; leaving the taxpayer worse off.
Supermarket gouging is a cancer. If it were me (I'm too sane to want to be a politician though), I would be on the phone to Aldi giving them whatever they required to come here. Aldi are widely credited with bringing competition to the Australian market.
See my comment above. The reason why NZ does not have a diverse retail sector with quality discounters is that the market profile is not attactive enough. We are not Japan.
Indeed. If supermarkets are squeezed they'll squeeze their suppliers, who by many reports are price takers because of the lack of competition. If the supermarkets pay fair prices to their suppliers and continue to take excessive profits prices will go up even more. So the fair return may need to be regulated such as for power companies.
Would readers be happy paying current prices if it means suppliers get a fair return?
Another crisis thats should have been sorted out before it became a crisis. Still waiting for that action promised by Labour in the cost of Petrol but everyone has already forgotton about that. When Petrol hits $4.00 a litre there will be much panic and more hot air about the gas stations fleecing us. Not to worry a change of government next year is now guaranteed.
In Oz they are keeping it for at least 6 months. So IMO it won't come back in until after the next election, as it will cause a spike to inflation numbers. Petrol is already higher now (minus the tax) than it was when it was removed. So reintroducing it will be a lot worse than before.
too late -- we already had all the fanfare and virtue signaling smiley face nodding head publicity ---- which as with everything else that looked a good initiative -- ended up with nothing actually happening
Still at least the sheeple public knows -- that its all talk and no action again -- starting to see the pattern
Kiwi $ at 63.4 cents ........ thats another 10% of pain on its way for food , good s and fuel
I'll never forget during 2021 when only major supermarkets (Countdown and New World in my area) were allowed to be open, while my local outdoor vegetable market was forced to not operate for months. It never made sense to my from a Covid or business perspective, my partner and I enjoyed doing all our fruit and vege shopping outdoors at the market - I would estimate saving 30%+ each week whilst being outdoors.
Instead we had to line up like everyone else and pay a premium to shop at one of the duopoly stores.
So once inflation arrives the supermarkets have suddenly started price gouging, just for the hell of it.
Great PR.
But when prices were reasonably stable 2-3 years ago ?
Heaven help us if the Govt get involved, most of the current problems are of already of their making, we just don't seem to be able to learn from history.
The absurdity is that ComCom allowed the duopoly in the first place.
The government must:
a) Amend the rules ComCom works under to ensure greater weight is put on competition in decisions. It takes 6 to 7 market players with equal market share to have perfect competition (HHI Index). We are a long way from that with a duopoly.
b) Go beyond ComCom's recommendations and force the retail split of the supermarkets
c) Fix the wholesale access issue
There is no accountability though. Think about how much richer NZ would be if that $1 million a day being sucked out of NZers pockets, was put into infrastructure and businesses to increase productivity. It could be about 7 billion dollars over the last 20 years that has been sucked out of NZers pockets. Everyone needs to sign the consumer petition.
Oh god, I almost fell off my chair laughing so hard about the last 4 words. They have proved time and again that if they act, its almost universally in the wrong direction. What's the bet they will say supermarkets have to start stocking building supplies as well. HA! They will think they are fixing two birds with one stone (yes the misuse of the saying is intentional).
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