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Consumer NZ, grocery suppliers call for action on grocery duopoly

Supermarket shopper
Countdown sales grew steadily in the first quarter.

Consumer NZ and the New Zealand Food & Grocery Council are calling for a major shake-up of the supermarket industry, as the Commerce Commission investigates the impact of the current duopoly on Kiwis.

“We are not always allies. But we both agree the excessive concentration of market power in our supermarket sector has become a massive drag on our economy,” the alliance said in a joint letter to parliament.

Katherine Rich, chief executive of New Zealand Food & Grocery Council, said the lack of real competition between the two supermarket giants – Foodstuffs, and Woolworths Australia-owned Countdown – allows them to maintain “staggering profit margins which are not enjoyed anywhere else in the world”.

Both organisations demand changes with the rules governing supermarkets in the country, where the industry giants should have less power over suppliers and shoppers.

These changes include a mandatory code of conduct for supermarkets, and an increased role for the Commerce Commission in monitoring prices.

A key proposal – which appears to be gaining traction in submissions to the commission – is prohibiting restrictive land covenants and exclusivity covenants entered into for anti-competitive reasons, in which the two companies land bank for future store developments to restrict other companies from opening supermarkets on the site. A fifth measure was to allow suppliers to collectively bargain and an increase in wholesale access.

According to Statistics NZ, the average cost of a weekly shop for a typical household is between 15-20 per cent of a median or low-income earner’s income.

“The general consensus is that grocery expenditure should sit between 5-15 per cent of total household income,” said Jon Duffy, chief executive of Consumer NZ. “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.”

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