Nicola Willis To Ask Fonterra About High Price Of Butter
Willis told First Up it didn't seem quite right that butter seemed to be cheaper in Australian supermarkets.
The price of a block of butter is now 120 percent higher than it was a decade ago, Stats NZ says. In the year to June it was up 46.5 percent to $8.60 for a 500g block.
At her regular meeting with the dairy co-operative on Tuesday evening she would be discussing what gets added to the cost by retail brands, including Fonterra's Anchor, and at the wholesale level.
"My frustration has been when you sometimes go on to an Australian supermarket website and see that butter appears to be cheaper there than in New Zealand, that doesn't seem quite right. So that's exactly the conversation I want to have."
"They'll have the opportunity to set out their case."
It was well understood the main driver of prices for dairy products was international demand and pricing, Willis said.
"But competition at the retail level does seem to have an effect on price, because organisations like Costco choose to have a really low price point on that product to get people in the door and the ultimate winner of all of that is the Kiwi shopper.
"So I'm talking to Fonterra about what they're seeing in terms of the supermarket pricing behaviour, what the margins are."
In May, Costco Auckland's special pricing saw queues out the door.
Federated Farmers dairy chair Karl Dean has urged retailers to lower prices quickly when costs go down, and said there was probably very little Fonterra itself could do.
"To put in it in perspective, there hasn't been any new players onto the domestic market in the last 10 years in terms of butter, other than the likes of Westgold - Westland have got their very premium product," he told Morning Report last week.
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When asked whether anything raised in the meeting would lead to lower prices, Willis said, 'All roads lead back to supermarket competition.' 'I continue to believe that is the most powerful lever the Government has on this issue. We will never be able to control global dairy prices, but we can influence the amount of competition in New Zealand's grocery sector,' Willis said. Willis said she had three main reflections on her conversation, the first was that 'the large proportion of the price of butter at the supermarket is dictated by global demand for butter'. 'There's a story to tell there: butter, which was once an unfashionable product, has gone into huge demand globally and that's reflected in the price people are willing to pay for it internationally,' she said. She had been told by Hurrell that when the global dairy price comes down, butter prices in New Zealand are expected to come down too. She added that high prices had a positive upside. 'It's worth noting that when the price is high that is hundreds of millions of dollars of export revenue coming into our country,' Willis said. The second issue raised was retailers. 'What Miles acknowledged, and what every New Zealander can see, is that supermarkets make choices about what margin they charge for butter. Now this is at the margin, it is a small proportion of the overall price that you pay, between 5% and 10% of the overall price shared between Fonterra and the retailer. 'What is clear is that different retailers make different decisions about what margins they charge,' Willis said. Willis, who once worked for Fonterra, revealed the fact she was meeting Hurrell last week. While the meeting was already scheduled, she let it be known she planned to raise the cost of butter with him. The third point raised by Hurrell was that the dairy giant was itself squeezing costs out of the system to ensure prices could be lower for shoppers. On Wednesday, she expressed regret that the significance of the meeting had spiralled out of proportion. 'I've been very surprised at the almost breathless excitement of the blow by blow of what happened in that meeting,' Willis said. It is not clear what, if anything, Fonterra could do to lower the cost of butter, given the main driver of the price Kiwis pay is the price our dairy fetches on the international commodities market. Willis praised the success of these exporters in Parliament on Wednesday, noting exporters, including dairy, are delivering an export-led economic recovery.
