The Commerce Commission plans to unlock more regulatory powers after its first Annual Grocery Report showed “no meaningful improvement” in competition within the sector.
Grocery commissioner Pierre van Heerden said the report paints a “concerning picture” of the country’s $25 billion grocery sector. He cited increasing retail margins, high levels of profitability, and ongoing dominance by the two major supermarket groups Foodstuffs and Woolworths.
Van Heerden stressed that growing retail margins are a red flag for the state of competition. Analysis shows that retail prices of major grocery brands have been increasing faster than the prices they pay to their suppliers, he explained.
“We want to see more competition and sustained pressure on the major supermarkets to deliver better outcomes for consumers,” the commissioner stated. “We’ve brought forward this first Annual Report, which provides us with further evidence of the need to continue to ramp up action and unlock more of our regulatory powers.”
In response to these competition concerns, ComCom recently initiated a review of the Supply Code, which took effect in September last year to address the power imbalance between suppliers and grocery retailers.
The agency will also be “moving with urgency” to improve the levels of uptake in the wholesale market and support the Minister of Commerce and Consumer Affairs’ review of the Fair Trading Act and the Commerce Act.
In addition, the commission believes three major national supermarket networks would be significantly more competitive than two. “We’ll be engaging with potential new entrants and investors to better understand their view on how we can remove remaining barriers to enable a third player to enter the market,” said van Heerden.
Foodstuffs Co-ops said in a statement that they remain committed to a competitive and fair grocery sector and have been driving progress toward these goals.
“We fully support the Commission’s vision of a grocery sector that delivers value to New Zealanders at the checkout, keeps food pricing under control, and makes sure this small market is working as well as it can for New Zealanders,” said Chris Quin, CEO of Foodstuffs North Island.
“The Foodstuffs co-ops have kept grocery prices below Stats NZ’s official rate of food price inflation for 24 of the last 27 months, based on a basket of goods comparable with Stats NZ’s basket,” Quin continued.
“The progress we’ve made – whether in keeping prices below food price inflation or expanding wholesale supply to other retailers – demonstrates our commitment to the sector’s shared objectives,” added Mary Devine, CEO of Foodstuffs South Island.
