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Dairies call for grocery duopoly’s wholesale, retail arms to be split

The nation’s dairy owners have urged the Commerce Commission to “think small”, arguing that their 4000-strong nationwide network can compete with supermarket giants if the playing field is levelled. 

The industry body representing the sector is advocating a structural separation of the supermarket duopoly’s wholesale and retail business units. At present Foodstuffs and Woolworths both operate wholesale businesses supplying dairies and service stations which some observers – and certainly the dairy owners themselves – perceive as a conflict of interest when it comes to retail grocery prices.  

In a verbal submission to the commission, which is undertaking a review of competition in the grocery retail sector, Dairy and Business Owners Group chair Sunny Kaushal said traditional diaries and service stations were located from North Cape to Bluff, “in our biggest cities and smallest towns”.

“We are the third way for cheaper groceries but were initially overlooked in the commission’s draft report,” he said.

By forcing a separation of the duopoly’s wholesale and retail divisions, wholesale and distribution centres would compete with one another for suppliers and retail shelf space, said Kaushal. 

“Whether a Pakn’Save or a dairy, lower prices will be passed onto consumers in dairies because that means more customers through our doors and with it, increased revenue.”

At present, many dairy owners – with convenient access to a Pakn’Save or Countdown supermarket – often find it cheaper to source stock from those stores than from the wholesale distribution centres. Supermarket operators often limit the volume of on-sale products per customer to discourage the practice, forcing dairy owners to pay higher prices at wholesalers.  

He said dairies do not need taxpayer money or planning policy privilege. “Instead of ‘Think Big’ we said to the Commission to ‘Think Small.’ That’s by empowering 4000-plus local businesses to deliver grocery items at lower prices. That’s good for us, it is great for consumers and it cuts unnecessary car journeys in a win for the environment.”

Kaushal says research recently completed by Nielsen for Z Energy estimated the value of the nation’s grocery market at around $19.6 billion – a little smaller than the figure from StatsNZ in the commission’s draft report. But it showed dairies and service stations holding 17.34 per cent of the total market.

“We may be small as individual businesses, but as a $3.4 billion sector, we represent a huge opportunity for lower grocery prices. Express-sized stores are massive overseas and these reduce the need for supermarket car journeys that generate huge amounts of CO2 emissions.”

A lesson from the Covid-19 pandemic is that community bubbles are best and, as a sector, dairies and service stations can provide more than essentials to local communities. 

“With our colleagues in retail butchery and greengrocers, we can breathe life back into local shopping centres. That starts with creating a fiercely competitive wholesale/distribution centre market,” Kaushal said.

  • Main image: @patrimonio via Twenty20.

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