Slow supermarket competition progress

Otago Daily Times

7 hours ago

Reading reports of Grocery Commissioner Pierre van Heerden's concerns last week about the supermarket giants was like hearing the message there is an unexpected item in the bagging area at the self-checkout.
Frustrating noise which is all too familiar.
Shoppers would have lost track of how many years it is since they read/heard about the unfair tactics employed by the giant supermarkets when dealing with suppliers, the difficulty of small players such as dairies getting access to wholesale goods at reasonable prices, and the question of whether special prices are really what they seem.
Those still struggling to pay at the checkout could be forgiven for asking if much has changed since the final report on the market study of the grocery sector from the Commerce Commission more than three years ago.
Whatever has occurred in the aftermath of that has not had the trickle-down effect of reducing shoppers' weekly spending or doing enough to alter the behaviour of the three big players, Woolworths, Foodstuffs North Island, and Foodstuffs South Island.
Last year the grocery commissioner was scathing about the lack of progress towards improving competition and, as well as a review of the Grocery Supply Code, which was introduced in September 2023, he decided to take another look at the wholesaling behaviour of the giant companies.
Mr van Heerden has reported back on both questions. In his draft review of the code, he proposes strengthening it to stop retailers insisting smaller suppliers take on costs and risks best managed by the retailers themselves. This would include not allowing retailers to charge suppliers for stocking shelves or for goods that deteriorate and become unfit for sale while in the supermarkets' control.
The commissioner is worried the power imbalance between the two groups "creates a reluctance among suppliers to push back on supermarket demands or behaviour for fear of damaging relationships or losing access to supermarket shelves".
Among his proposed changes is prohibiting retailers from retaliating against suppliers who exercise their rights under the code.
The type of behaviour he is still grappling with should have been sorted out long before now. Suppliers have been complaining about bullying take-it-or-leave-it deals for years.
On the wholesaling question, one of the changes Mr van Heerden wants is for the major supermarkets to expand their wholesale product range and pass promotional funding through to their wholesale customers so other retailers can access lower prices.
Again, this is a problem flagged years ago, and we wonder why he is allowing the big three another 12 months to voluntarily sort it out before he moves to seek regulatory change.
This year, there has also been much enthusiasm from Economic Growth Minister Nicola Willis about attracting a new major player to provide much-needed competition and ultimately force prices down for shoppers.
But it is still difficult not to be sceptical about the chance of her efforts succeeding without some direct intervention by the government which might include such measures as carving off existing brands owned by the giants into separate businesses, splitting wholesale and retail provision of groceries, or other divestment options.
If her party was of a mind to head down any sort of interventionist path it would likely have the support of coalition partner New Zealand First, which has railed against the supermarket giants' stranglehold.
In its coalition agreement it requires the government to "explore options to strengthen the powers of the Grocery Commissioner, to improve competitiveness, and to address the lack of a third entrant to remove the market power of a duopoly".
However, newly minted deputy prime minister and leader of Act New Zealand David Seymour, who voted against the introduction of a grocery commissioner, would be more difficult to persuade.
His previously expressed view is that the way to increase competition is to cut back "thickets of regulation" dissuading new entrants, whether in overseas investment, resource management or labour laws.
In such a political climate, the sort of change which could push prices down and mean something to the hapless shopper still seems millions of barcode scans away.