Chris Lynch
Chris Lynch is a journalist, videographer and content producer, broadcasting from his independent news and production company in Christchurch, New Zealand.
The Commerce Commission is pushing for increased regulatory powers to improve competition in New Zealand’s $25 billion grocery sector, following the release of its first Annual Grocery Report.
The report painted a “concerning picture” of the market, with high profitability, increasing retail margins, and dominance by the major supermarkets – Foodstuffs North Island, Foodstuffs South Island, and Woolworths NZ.
Grocery Commissioner Pierre van Heerden said there is a need for more competition and pressure on the major supermarkets to benefit consumers. “We want to see more competition and sustained pressure on the major supermarkets to deliver better outcomes for consumers,” he said.
The commission’s findings showed that retail prices for major grocery brands have been rising faster than the prices supermarkets pay to their suppliers, indicating limited price competition.
Van Heerden called this a “red flag” for the state of competition in the industry.
To address the issue, the commission plans to review the Supply Code implemented last September, aimed at correcting the power imbalance between suppliers and grocery retailers.
Effective implementation of the code could lead to more innovation and consumer choice, with breaches potentially resulting in fines up to three million dollars.
The commission is also focusing on the wholesale market, where current offers from major supermarkets have had little impact. It plans to introduce enforceable rules to improve access for more retailers, with penalties for breaches reaching up to $10 million.
Additional tools to ensure fair treatment of wholesale customers may also be considered.
Van Heerden called for the need for three national supermarket networks to foster competition.
The commission has already taken steps to remove restrictive land covenants that block new entrants, but remains concerned about the scale of land held by major retailers, which could stifle market entry.
“We’ll be engaging with potential new entrants and investors to better understand their view on how we can remove remaining barriers to enable a third player to enter the market,” van Heerden said.
The commission supports reviewing the Fair Trading Act to impose stricter penalties for pricing inaccuracies, aiming to protect consumer rights and improve market competition.
**Commerce Commission calls for stronger regulation to boost competition in New Zealand’s grocery sector**
The Commerce Commission is pushing for increased regulatory powers to improve competition in New Zealand’s $25 billion grocery sector, following the release of its first Annual Grocery Report. The report painted a “concerning picture” of the market, with high profitability, increasing retail margins, and dominance by the major supermarkets – Foodstuffs North Island, Foodstuffs South Island, and Woolworths NZ.
Grocery Commissioner Pierre van Heerden said there is a need for more competition and pressure on the major supermarkets to benefit consumers. “We want to see more competition and sustained pressure on the major supermarkets to deliver better outcomes for consumers,” he said.
The Commission’s findings showed that retail prices for major grocery brands have been rising faster than the prices supermarkets pay to their suppliers, indicating limited price competition. Van Heerden called this a “red flag” for the state of competition in the industry.
To address the issue, the commission plans to review the Supply Code implemented last September, aimed at correcting the power imbalance between suppliers and grocery retailers. Effective implementation of the code could lead to more innovation and consumer choice, with breaches potentially resulting in fines up to three million dollars.
The commission is also focusing on the wholesale market, where current offers from major supermarkets have had little impact. It plans to introduce enforceable rules to improve access for more retailers, with penalties for breaches reaching up to $10 million. Additional tools to ensure fair treatment of wholesale customers may also be considered.
Van Heerden emphasized the need for three national supermarket networks to foster competition. The commission has already taken steps to remove restrictive land covenants that block new entrants, but remains concerned about the scale of land held by major retailers, which could stifle market entry.
“We’ll be engaging with potential new entrants and investors to better understand their view on how we can remove remaining barriers to enable a third player to enter the market,” van Heerden said.
The commission supports reviewing the Fair Trading Act to impose stricter penalties for pricing inaccuracies, aiming to protect consumer rights and improve market competition.
In response to the report, Spencer Sonn, managing director of Woolworths New Zealand, said, “While the cost of living continues to make it a tough time for Kiwi families and businesses, our absolute focus is on giving our customers more value, convenience and a fantastic shopping experience – and we’re committed to getting on with that.”
Sonn acknowledged the impact of inflation on Woolworths, stating that profits are at their lowest levels since FY16, with a 57 per cent decline compared to FY23. “In FY24, we made a loss of 0.5 cents for every dollar spent in our stores,” he said.
He added that Woolworths has been working hard to improve competition and supplier relations, supporting initiatives like the Grocery Supply Code and unit pricing. Sonn expressed surprise that the commission was considering further changes without allowing recent regulations to take effect.
Sonn also pointed to the role of suppliers in grocery pricing, suggesting that large, multinational suppliers should be scrutinised for their impact on consumer prices.
“The amount suppliers charge us has a much bigger impact on the prices shoppers pay than anything else,” he said.
This article was originally published by Chris Lynch Media.
