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Grocery duopoly accused of milking excess profits from consumers

(Source: Bigstock.)

Consumer NZ has accused New Zealand’s grocery duopoly of taking more than $1 million a day in excess profits from consumers.  

The claim is not related to the inflationary pressures driven by the war in Ukraine or the impact of Covid-19 on the supply chain which the supermarkets say are straining margins at present. Rather, Consumer’s concern is about the lack of competition in the wholesale market which it says is stopping prospective competitors from setting up shop. 

The legislatively-protected lobby has launched a petition asking Commerce and Consumer Affairs Minister David Clark “to put consumers first” and take action to regulate access to wholesale supply or set up a state-owned wholesaler. 

“Every day the supermarkets are taking more than $1 million in excess profits from our collective back pockets,” said Consumer NZ CEO Jon Duffy. “These profits are twice what they should be. We need more competition to drive down prices and give New Zealanders a fairer price at the checkout.” 

The lobby group said the lack of reliable access to wholesale groceries – given that the duopoly controls the wholesale market as well as the vast majority of the retailer market – means no one is going to start up a competing supermarket chain. 

“The Commerce Commission has recommended the supermarkets consider supplying other retailers. We think this is unrealistic to expect from an entrenched duopoly used to calling the shots. That is why we’re launching a petition.”

Duffy said Consumer recognises food prices are going up for a variety of reasons – from the pandemic, to inflation, to the impact of the war in Ukraine on wheat prices. “We’re not disputing this, but excess profits on top of already high food prices are a slap in the face for households struggling to put food on the table.”

Foodstuffs, Countdown respond to inflation pressure

Meanwhile, on Wednesday Foodstuffs said it would cut the price of more than 100 core grocery items by an average of 10 per cent at its Pak’N’Save, New World and Four Square stores from next Monday. Prices of items including meat, butter, cheese, vegetables and nappies – mostly sold under the company’s own-brand labels – would be rolled back to the price they averaged between January and April last year, and remain at that level until August 14. 

Foodstuffs NZ MD Chris Quin was adamant the reductions are not a marketing stunt. 

“It’s a real saving for our customers and a real cost to our business, as a result of this price rollback our stores will be selling some items below cost,” he said in a statement. “Other promotions will continue over this time.

“These are  extraordinary times and kiwis must be able to afford the everyday items they need in their weekly shop over the next few months.  As locally owned co-operatives we have a responsibility to step up, and our store owners are committed to this initiative.”

Last Friday, Countdown said it would freeze the prices of around 500 grocery items during the coming winter. 

MD Spencer Sonn said that during the past 10 months, the company had received around 1000 cost increase requests from its suppliers, more than double the number received during the same period last year. The average increase requested was just over 9 per cent and as a result of suppliers’ own costs of raw products, fuel, fertiliser, grains and import costs increasing.

“There are so many factors impacting food prices at the moment and every week we’re working with suppliers to help offset cost increases as much as possible so that our customers aren’t impacted. But the reality is that we are all impacted by the current environment,” said Sonn.

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