It’s time to fix our broken supermarket industry

They argue the duopoly of Foodstuffs and Woolworths New Zealand is holding consumers and suppliers to ransom and putting a massive drag on the economy.

The two organisations have penned a joint open letter to parliament asking for significant changes with the rules governing supermarkets in New Zealand. They want the industry giants to have less power over suppliers and shoppers. According to data from Statistics NZ, the cost of the average weekly shop for a typical household is about 15–20% of a median or low-income earner’s income.

That kind of spend is proving too much for many Kiwi households according to Consumer NZ chief executive Jon Duffy.

“The general consensus is that grocery expenditure should sit between 5-15% of total household income. What we're hearing from many New Zealanders is that they're having to spend too much of their pay packet to keep themselves fed. Whatever way you slice it, the cost of groceries keeps going up and the duopoly’s profits are persistently high,” Duffy said.

Consumer NZ’s Sentiment Tracker – which asked New Zealanders to rate their most pressing issues – found concerns over the cost of groceries are weighing more heavily on mind than those about fuel, healthcare, energy, insurance and phone bills.

“With the lack of any real competition between the two supermarket chains, they’ve been able to maintain staggering profit margins which are not enjoyed anywhere else in the world,” New Zealand Food & Grocery Council chief executive Katherine Rich said.

The open letter calls for:

• A mandatory code of conduct for supermarkets to govern dealings between suppliers and supermarkets, address the power imbalance and make business relationships fairer. Similar codes are already in place in Australia and the UK.

• An increased role for the Commerce Commission including monitoring retail prices and store margins, setting consumer information standards to require unit pricing and prevent confusing pricing and promotional strategies, and limiting the adverse effects of loyalty programmes.

• Prohibiting restrictive land covenants and exclusivity covenants entered into for anticompetitive reasons, with immediate effect on existing covenants.

• The right for suppliers to bargain collectively to redress the power imbalance between suppliers and supermarkets.

• Increasing wholesale access to a wide range of groceries at competitive prices.

• If the commission isn’t satisfied that increasing wholesale access will work either now or in the future, then full enforced structural separation between wholesale and retail and/or compulsory divestment of a significant proportion of supermarkets to arm’s length third parties.

Read the full letter here (2.3 MB).