In the Commerce Commission’s first grocery report, will the Grocery Commissioner give NZ’s grocery goliaths a gold star for effort – or will they be slapped with a negative report card?

Two years after the Commerce Commission published its market study into the grocery sector, the consumer watchdog says it will be releasing its first-ever Grocery Annual Report on Wednesday (September 4).

The report will detail ComCom’s findings since the market study wrapped up and its next steps for the grocery sector. 

Grocery Commissioner, Pierre van Heerden, will be delivering a presentation on the report to the media on Wednesday morning.

The grocery sector has been a focus of the Commission in recent years, beginning when the Government tasked ComCom in November 2020 with undertaking a market study into the sector.

ComCom released its final report in March 2022. It found – among other discoveries – that there’s not enough competition in the retail grocery sector.

In the study, ComCom looked at:

• how retailers dealt with their suppliers such as manufacturers, producers, farmers and growers
• competition at the supplier level of the grocery market
• who consumers bought groceries from and who supplies those retailers
• competition between retailers when selling groceries to consumers
• what retailers charged consumers for groceries and how they decided on their prices, as well as the associated levels of service, product ranges and quality of groceries

So what will be covered in ComCom’s first ever annual grocery report? Interest.co.nz doesn’t have a crystal ball but here are some guesses.

The current state of NZ’s grocery competition – and if it’s getting better.

Despite the work that ComCom has undertaken, NZ’s grocery sector is still controlled by a duopoly via Woolworths NZ (previously named Countdown) and the Foodstuffs North Island (FSNI) and Foodstuffs South Island (FSSI) co-operatives.

The Commission has priced NZ’s supermarket sector as being worth $25 billion.
There was chatter when the international retail mammoth Costco set up a shop in Auckland’s Westgate back in 2022 that it could become a serious grocery competition contender but the country’s supermarket duopoly has remained strong.

According to Woolworths NZ, it has over 185 supermarkets around the country and is the franchisor of 69 Super Value and Fresh Choice supermarkets.

When it comes to Foodstuffs, members in the North Island co-op operate under grocery brands New World, PAK’nSAVE and Four Square. The South Island co-op members operate under New World, PAK’nSAVE, Four Square and also Raeward Fresh and On the Spot.

FSNI is the larger co-operative of the two and is owned by 3,326 co-operative members who are all based in the North Island. FSSI is owned by 1,987 members who are all based in the South Island.

The lack of new competition on the block won’t be helping Foodstuffs North Island (FSNI) and Foodstuffs South Island (FSSI) in getting their proposed merger greenlit either. 

The two co-ops lodged a merger application with ComCom at the end of last year with the two co-ops seeking approval and clearance to merge into one co-op.

Since then, ComCom has pushed out its decision date on the merger twice, with the new decision date set for the 1st October. 

Debate around the merger has been spirited, with merger critics arguing in their submissions that the merger will decrease competition while the Foodstuffs co-ops insist that the merger isn’t capable of doing so. 

ComCom said in mid-August that it is currently not satisfied that if the merger goes ahead, it won’t cause substantial less competition in NZ’s grocery market.

Based on the above, it will be interesting to see what ComCom’s grocery report has to say about competition on Wednesday. Does the competition watchdog believe grocery competition is improving – or is it getting worse?

An update on the Grocery Supply Code – and why ComCom is already testing to see if the “rule book” is working.

The Government introduced the Grocery Supply Code in September 2023 because the 2022 Market Study showed suppliers relied heavily on big retailers, while retailers could pass costs and risks on to suppliers, cramping their ability to invest and innovate – which in turn limited choices for consumers.

The Grocery Supply Code acts as a supplier code of conduct that supermarkets had to make sure their supplier agreements were compliant after it was launched.

ComCom announced in August that it was launching a review into the new Code – just eleven months after the Code came into effect. 

The competition watchdog said the review is going to show if the Code is helping to fix the “ongoing power imbalance” between major supermarkets and suppliers. 

With the Code not even having been underway for one year before going under a review, iIt’ll be interesting to see what ComCom’s report on Wednesday does and doesn’t say about it.

Has the Grocery Commissioner achieved his top 3?

In October 2023, van Heerden released three items on his “current fix-it list” when it came to NZ’s supermarket sector: accurate pricing, suppliers supporting competition and leveling the playing field for new entrants. 

He’s made progress on the first two items of that list but it remains to be seen if he’s ticked off making it easier for new entrants to enter NZ’s grocery market.

Van Heerden said in April earlier this year that he wanted to stamp out “old-style handshake supply agreements” amongst New Zealand’s supermarket duopoly and suppliers.

And he’s had communication with both Foodstuffs co-ops and Woolworths NZ – which was published in August – over what van Heerden described as “tens of millions of dollars a year” lost from supermarket pricing errors. 

Van Heerden said he’s had positive communication with the grocery goliaths about the issue – but the Commission will be watching to see if the supermarkets follow up their words with action.