10 fixes for the supermarket industry
What’s needed to fix the grocery market.
What’s needed to fix the grocery market.
High prices, high profits and high barriers to enter the market: that’s how the Commerce Commission described our supermarket sector in its report on competition in the market.
We’ve put in our submission on the report highlighting what needs to be done to fix the industry.
We’ve identified 10 key things that we reckon could be easily put in place in the next three to 12 months.
We strongly back a mandatory code of conduct to govern relations between grocery suppliers and supermarkets, and address the huge imbalance of power. To ensure the code is effective, it must:
have legislative backing
contain fair conduct obligations, and
set out penalties for non-compliance.
We recommend a Supermarket Commissioner be appointed to enforce the code and make sure supermarkets play fair.
Collective bargaining would also help redress the imbalance of power between suppliers and supermarkets.
We think there’s merit in the commission’s proposal to require supermarkets to supply other retailers with groceries at competitive wholesale prices. It would not only improve access to the grocery supply chain but also foster retail competition.
There are strong grounds to tighten the law to prevent supermarkets putting restrictive covenants on land use, just to stop competitors setting up shop.
Mandatory unit pricing is long overdue. Research shows it helps consumers compare the price of goods and assess value for money.
Confusing pricing and promotional strategies make it difficult for consumers to gauge what they’re getting for their money. We want rules in place to stop the stores creating this confusion.
We think loyalty programmes result in price discrimination against consumers who don’t want to sign up. Many shoppers are also likely to be “reluctant” members, forced to join to get advertised prices.
Regular monitoring of retail prices and stores’ margins is a must, not only to keep supermarkets under scrutiny but to gauge the effectiveness of market interventions.
Penalties under the Fair Trading Act for misleading pricing need to be increased to provide a better deterrent to offending. Maximum fines are currently $600,000.
The option to break up the supermarkets must remain on the table. If there’s no change in the market within two to three years, the next step would be to look at breaking up the big chains – including requiring that supermarkets sell off some stores.
You can read our full submission here.
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Before Covid I used to travel to England to visit my sister once a year. I have been staggered by the price difference of goods there compared to New Zealand. We are being screwed by our only 2 supermarket chains.
NZ has a population of 5M with 2 supermarket chains [both with several brands]. Australia has 25M people and 4 major chains. The UK has 7 major chains for a population of 66M. How does "adding more competition" or "breaking them up" thereby increasing overheads, and pushing up costs, help. The Warehouse tried and failed. Current NZ lockdown policies have hurt small business and helped the supermarkets. People vote with their cheque books. If they were dis-satisfied they shop elsewhere - but at some inconvenience. That said, there has to be change, but not with oppressive regulation.
Don't waste time, don't believe their promises. Conflicts of interest cannot be 'managed', they need to be eliminated.
Our Commerce Commission, or whatever it was called back in the day, did Kiwis a massive disservice by allowing the 6 supermarkets to merge into 2, apparently(?) believing that the resulting 'increased buying power' would somehow benefit consumers!
Unbelieveable! It was always foreseeable that it would only benefit the 2 resulting chains; they can place huge markups on products, and threaten suppliers with blacklisting, meaning suppliers get screwed on price, are forced to produce products with the chains' labels on them, and have to adjust their ingredients and screw their own employees in order to survive.
Why is it that so many Kiwi brands can be bought cheaper in Europe than here?
Failure to take radical action right now proves that this is just political window-dressing; nothing will change.
Also they all demand that potato suppliers don't put best before date or even packed date.
They use the Julien calender to confuse the shopper.
All goods have an ascertainable true production cost - materials, labour, transport. Then the seller adds a handling charge - their costs plus profit. Competition is meant to keep this element under control, but does it? And will a triopoly be any better than a duopoly? In my dreams I see a government with the guts to govern, to regulate profits on groceries and indeed all essential services. We are a country with a population about half the size of a single city in Europe or Asia; we don't need a plethora of participants in many areas of economic activity - just one, well regulated and held to performance criteria, including staff management, will do. And if their profits are unreasonable, tax them!
At my usual supermarket, I can't read the unit prices, the typeface is so tiny
Especially during these covid levels when I suspect the supermarkets are creaming it. Manufacturers are getting around price increases by reducing the packet sizes.
I travelled around Europe for 3 months in Italy, France, Germany, Spain and UK. Prices were consistently one third to one half of price in NZ at that time. I had Strawberries or raspberries every morning for breakfast as price was around $2-3 (NZ) per punnet. Milk $1.50 per litre. Bread half NZ price. NZ meat half NZ price and much, much better quality. Today we get gristle, almost always, in our steak, Gristle> Really? not when I was young. I've stopped buying it. In UK I saw meat of a quality we never, ever see. I was shocked. Now prices simply crazy.
Aldi in Australia have stated they are not interested in entering the NZ market. OK so why doesn't the NZ Warehouse owner access the Aldi products for a fee, and provide competition .
What about returning to the days of requiring 'recommended retail price' to be printed by manufacturers on all pre-packaged goods - across the boards!
Neil S.
What we actually require is another major supermarket chain to upset this comfortable duopoly. The government should seek to bring all these requirements in but also to facilitate another major competitor.
There’s no reason the two supermarket giants can’t make improvements in 1 year. 2-3 years is too long for consumers to prop up their profits. No one can afford it anymore
Lots of comments and no action. This is the way governments is acting. It is not only supermarkets, it is the whole fuel market, the housing, the power, etc etc. Thank you Consumer for bringing this up
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