Finance Minister Nicola Willis will announce the Government's next steps to increase competition in the grocery sector this weekend.
RNZ reported this on Friday morning as the Government strives to motivate an international grocery player to come and combat New Zealand's supermarket duopoly.
“We’re not saying any more today,” a spokesperson from Willis’ office said after interest.co.nz queried if Sunday's announcement would include making changes to the Overseas Investment Act in order to make it easier for an international grocery player enter the NZ market.
Willis is now responsible for overseeing the Government’s plan to increase competition in the country’s supermarket sector. The Minister of Finance is also responsible for the Overseas Investment Act.
Supermarket regulation had previously been a job for the Minister for Commerce and Consumer Affairs. However Scott Simpson, who is the new minister, is unable to be involved due to a family member owning a supermarket.
Simpson took over the portfolio after previous Minister Andrew Bayly resigned following an altercation with a staffer.
Grocery Commissioner Pierre van Heerden told interest.co.nz in September last year the Overseas Investment Act creates additional costs, delays and uncertainty in relation to site acquisition by overseas entities looking to enter or expand in NZ's grocery industry.
Willis said last month at the Waikato Economics Forum that international supermarket chains and local investors have expressed interest in entering the NZ grocery market.
“I want to help them succeed,” she said. This help would include removing unnecessary regulations from the Overseas Investment Act.
Interest.co.nz also asked Willis’ office if any consideration was being taken to break up NZ’s two major grocery players. Researchers recently wrote in The Conversation that it would be faster, and more straightforward to break up NZ’s local dominant supermarket players than wait for a foreign company to enter the country.
The Commerce Commission released its first annual grocery report in September 2024, revealing the Commission’s efforts to boost grocery competition hadn’t had much impact. Major retailers still increased their margins and retained high levels of market share and profitability.
The Commission’s report found between 2019 and 2023, price-cost margins on non-fresh products across the New World, Pak’nSave, and Woolworths brands increased by 3.1% on average, while fresh food margins rose a lesser 0.4% on average.
(The Commission defines price-cost margins as a measure of the difference between the price a firm receives for the sale of an item and the direct supply costs incurred).
Sue Chetwin, chair of the Grocery Action Group (GAG), said earlier on in the week that a government announcement on the prospects for a new supermarket chain was “extremely positive”.
However, “rolling away the red tape” won’t be enough, she said.
“For example, Aldi’s 20-year journey in Australia is often cited about how long it can take for a new entrant to get up and make any useful headway in restraining grocery price rises. Aldi still has less than 10% of the market in Australia.”
In a press release on Friday, Consumer NZ said that it continued to see “significant issues” in NZ’s grocery sector.
“With fewer players in the market, our situation is, in many ways, worse than Australia’s, meaning we need a stronger response to address the issues shoppers face,” Consumer NZ chief executive Jon Duffy said.
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“For example, Aldi’s 20-year journey in Australia is often cited about how long it can take for a new entrant to get up and make any useful headway in restraining grocery price rises. Aldi still has less than 10% of the market in Australia.”
German hypermarket Kaufland owned by one of the world's leading retail companies Schwarz Group withdrew from the Aussie market in 2020. This decision came as a surprise, given the company's significant investments and expansion plans.
Kaufland had invested over $500 million, including the purchase of multiple store sites, a distribution center, and a headquarters. The company decided the return on effort / investment didn't add up and has concentrated on its European core markets, where it saw greater growth potential. However, there were speculations about other factors, such as suppliers being discouraged from supporting Kaufland and issues with acquiring suitable retail sites.
Why would a foreign retailer punt on Aotearoa?
Is this propensity to make policy announcements over the weekend a new phenomenon or have I just not noticed it previously?....and if it is so ,why?
It has been a thing with the current government. In terms of the why bit I can only speculate that they see it as a good time to make announcements.
"In terms of the why bit I can only speculate that they see it as a good time to make announcements."
That would be my guess too....though I cant imagine what benefit they expect.
The sixth Labour government resorted, ad nauseam to a series of mind numbing announcements about announcements that inevitably resulted in nothing of much substance. You would have thought the current government would have taken note. Sadly not so, it seems. How about just a change in terminology. For instance, to present, or implement or even just introduce. Even so, for those of us in the audience, in the jaundiced section, guess it is nothing better than the usual political speak, in whatever shape or form.
Indeed "Statler and Waldorf " traits runs deep on these boards, me included.
I think she will announce that the main players must sell. from their distribution centers, to anyone who asks....
IE split out distribution from retail sales, this might give the suppliers a better deal as it "may" limit the charges imposed on them......
This is like the telecom split into chorus and sparc.
It could unintentionally mean a touch of inflation as suppliers try and regain lost margins, I am not sure what it would mean for home brands like pams etc?
Easy political win as supermarket owners only have about 200 votes across NZ vs consumers.
May seek to stop existing players trying to stop new entrants in RMA applications for new sites etc as well
Making your announcements out of normal work hours means you can stall on further comment becasue: "no-one is in the office" - it lets you check the reaction on social media and then adjust your next statements accordingly.
Ah....I guess they may well consider that an advantage.
dp
In a relatively free market economy it is possible that the current duopoly is an optimal outcome given the size of the NZ population.
A third player in the market would, likely, be inflationary because they would create additional demand on existing local suppliers. In other words a third player would need to build up inventory and footprint over and above what is currently available from suppliers and shopfront in the market as it is now.
Would suppliers be able to ramp up output to meet the additional demand quickly enough to prevent price rises?
NZ's geographic location makes it difficult to establish an external supply chain for a new supermarket player and the potential market share in a small economy makes it difficult to justify large upfront investment.
It's hard to picture a suburb in NZ that has more than one supermarket let alone 3 - is it commercially realistic for 3 competing operators in close proximity competing within very small populations. From an economic perspective that feels very unlikely.
"It's hard to picture a suburb in NZ that has more than one supermarket let alone 3 - is it commercially realistic for 3 competing operators in close proximity competing within very small populations. From an economic perspective that feels very unlikely."
Lower Hutt has Woolworths, New World & PaknSave within a 500m circle radius. Wellington CBD has Woolworths, New World & MooreWilsons similarly situated.
Thanks kiwikidsnz - yes of course there will be places in NZ where population and foot traffic is sufficient - such as Wellington CBD and affluent suburbs - but are there enough of those places to warrant the massive upfront, loss leading investments needed to gain market share for a new entrant? Even over the long term does that look like a good investment in a country with a population of 5 million or so.
We just made an announcement that by mid year, perhaps we will have an announcement...
You are running out of time Willis , tick tock, tick tock.
Meanwhile it seems Winnie is about to actually deliver a Ferry plan?
Jeez we all thought the last lot were bad.
Making an announcement about requesting information and setting up some else to look into things. What heck have they been doing up till now.
We have a duopoly that doesn't serve consumers well.
We also have an unattractive market for groceries becasue we: are tiny and thinly spread, are a long way from anywhere, have degrading distribution systems, and have hugely entrenched historical firms with a culture of cosy arrangements. Why on earth would an overseas competitor possibly want to enter this market?
It's not that we have a the situation; it's more about what can possibly be done to change things by the formal and informal political systems that got us in to this situation in the first place.
Don't expect the people who got you in to this situation to get you out of it.
Why did Costco enter the market?
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