Latest news with #PierrevanHeerden
Otago Daily Times
4 hours ago
- Business
- Otago Daily Times
Slow supermarket competition progress
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.
NZ Herald
2 days ago
- Business
- NZ Herald
Time to take action over supermarket competition
The Commerce Commission completed its market study on the grocery sector in March 2022. THREE FACTS The Commerce Commission took another incremental step towards cracking down on the supermarket sector this week with its proposal to tighten up the Grocery Supply Code. Grocery Commissioner Pierre van Heerden is worried about the power imbalance between the major supermarket chains and suppliers.
Yahoo
3 days ago
- Business
- Yahoo
NZ watchdog mulls tightening grocery rules to create fairer playing field
New Zealand's competition regulator is proposing measures to create a fairer playing field between emerging grocery producers and the major supermarkets. In a two-pronged initiative, the Commerce Commission is also concerned that smaller grocery retailers face a disadvantage over their more dominant counterparts when it comes to securing competitive prices from large suppliers. The Commission presented its findings today (5 June) following a review of the Grocery Supply Code and is reaching out for feedback before it publishes its final report in September. "If the Commission doesn't see meaningful progress in 12 months, it will decide if regulations should be changed," the regulator said in a statement. Grocery Commissioner Pierre van Heerden explained: "We know the current grocery market is not serving Kiwi consumers well. The status quo lets a few major players set the rules for the rest of the industry which is negatively impacting consumers, new and expanding competitors, and small suppliers." He added: "These major players are the three main supermarkets and large national and multi-national suppliers. Their significant market share allows them to influence the settings of the market. This limits the ability for competing retailers to enter and grow in the market and often results in smaller suppliers getting an unfair deal." The draft recommendations to the Supply Code include curbing the circumstances in which supermarkets can bill suppliers for routine retail tasks, such as shelf stocking and display arrangement. Van Heerden highlighted the issue of a power disparity, saying that a "power imbalance between the major supermarkets and small suppliers creates a reluctance among suppliers to push back on supermarket demands or behaviour for fear of damaging relationships or losing access to supermarket shelves". New Zealand's grocery market is dominated by Foodstuffs and Woolworths. "The major supermarkets are the largest customers for most grocery suppliers," van Heerden said, controlling 82% of the market. The proposed modifications by the Commission would mandate supermarkets to keep records on how they are complying with the Code when undertaking "certain activities", including "negotiating promotions with suppliers and making deductions to payments without written consent". Looking into the wholesale supply of groceries, the Commission pointed out that promotional payments and rebates are generally inaccessible to newer or smaller retailers. 'A significant issue new and expanding supermarket competitors face is securing access to cost-effective groceries from large suppliers," Van Heerden said. "Competing retailers can't negotiate similar levels of support due to their weaker buying power." He also noted that the prevalent high-low pricing strategy used by New Zealand's major supermarkets is more extreme than in other countries, and a reduction in promotional dependence would result in more consistent and lower prices for consumers. 'The best option is for large suppliers and the major supermarkets to voluntarily change their behaviour. If they don't, we'll have to consider our other alternatives,' van Heerden said. "NZ watchdog mulls tightening grocery rules to create fairer playing field" was originally created and published by Just Food, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Otago Daily Times
4 days ago
- Business
- Otago Daily Times
Watchdog wants more rules for big supermarket players
Change is on the cards for the supermarket sector, as the Commerce Commission looks at ways to improve competition. It has released a draft report into the review of the Grocery Supply Code and a preliminary view into its wholesale market inquiry. The commission identified two commercial behaviours which it said reinforced the power of the major supermarkets - Foodstuffs and Woolworths - and the country's biggest grocery suppliers. Grocery Commissioner Pierre van Heerden said a key problem was the power imbalance between major retailers and small suppliers, meaning those suppliers were reluctant to push back and insist on better prices. He said small suppliers feared damaging relationships or losing access to shelves. "This leads to smaller suppliers taking on costs and risks that are best managed by the retailer." The commission has also taken issue with promotional payments in wholesale markets, where small retailers cannot compete for deals against big players. "The prices the major supermarkets pay suppliers are subsidised by around $5 billion in rebates, discounts, and promotional payments," van Heerden said. "Competing retailers can't negotiate similar levels of support due to their weaker buying power." The commission recommended four changes to the Grocery Supply Code, including adding a requirement that if a retailer bought groceries at a discount for a sale period, and then sold the product at a higher price after the sale period, they had to pay the difference to the supplier. It would also prohibit retaliation against suppliers exercising their rights under the code. In the wholesale market inquiry, the commission recommended two changes, including major supermarkets expanding their wholesale product range and putting in systems to pass promotional funding through to their wholesale customers, so that other retailers could access cheaper prices. It also recommended suppliers reduce their reliance on promotional funding, or allocate the funding to more retailers. The commission has sought submissions on the draft Grocery Supply Code and would consider those before a final report due by the end of September. It said changes proposed for the wholesale market would be voluntary for now, but if there was no "meaningful progress" in a year, it would decide whether it needed to change regulations. It said a final report on its wholesale supply inquiry would likely be completed in 2026. Supermarkets respond In a statement, Foodstuffs North Island said it would review the commission's draft report and recommendations, though it maintained its support for the status quo. "We support the existing intent of the code and the dispute resolution process," a Foodstuffs North Island spokesperson said. "We are open to working with the commission on ideas to lift awareness and understanding of the code, particularly among smaller suppliers who may need additional support." Foodstuffs said regularly surveyed its more than 2000 suppliers "to ensure we are working as partners, listening, and constantly improving". "Any supplier who has an issue should raise it through the appropriate channel - either with us directly or through the Commerce Commission." Woolworths New Zealand interim managing director Pieter de Wet said the company had positive relationships with its 1400 local and international suppliers. "We support the Grocery Supply Code because we feel that consistent rules hold everyone to the same high standard and help businesses of all sizes to grow and succeed," de Wet said in a statement. "We're working closely with suppliers and wholesale customers to further improve and develop our wholesale business." Woolworths New Zealand would work constructively with the commission through the submission process.
Scoop
4 days ago
- Business
- Scoop
ComCom Moves To Disrupt Power Structures In Groceries
The Commerce Commission is today spotlighting two commercial behaviours it believes are reinforcing the powerful positions of the major supermarkets and big grocery suppliers, and what's needed to address them and improve competition. 'We know the current grocery market is not serving Kiwi consumers well. The status quo lets a few major players set the rules for the rest of the industry which is negatively impacting consumers, new and expanding competitors, and small suppliers,' Grocery Commissioner Pierre van Heerden says. 'These major players are the three main supermarkets and large national and multi-national suppliers. Their significant market share allows them to influence the settings of the market. This limits the ability for competing retailers to enter and grow in the market and often results in smaller suppliers getting an unfair deal. 'The Commission has today released our draft report on our review of the Grocery Supply Code and Initial Views on our Inquiry into the Wholesale Market. These focus on two issues we believe need to be addressed to improve outcomes for consumers. Suppliers covering retailer costs 'We're proposing to simplify the Grocery Supply Code to reduce the range of payments supermarkets can charge their suppliers,' Mr van Heerden says. 'With combined purchases of over $15 billion and 82% of the New Zealand grocery market, the major supermarkets are the largest customers for most grocery suppliers. 'My concern is that the power imbalance between the major supermarkets and small suppliers creates a reluctance among suppliers to push back on supermarket demands or behaviour for fear of damaging relationships or losing access to supermarket shelves. 'This leads to smaller suppliers taking on costs and risks that are best managed by the retailer. 'The changes we're suggesting would prevent the supermarkets from charging suppliers for ordinary retailing activities such as stocking shelves and setting up displays. It would also require the supermarkets to keep records of certain activities charged to suppliers, including promotions. 'We believe that setting these rules in place will help mitigate the power imbalance and allow suppliers to be more confident market participants so they can innovate and invest in better products and more choice for consumers. Promotional payments in the wholesale market 'A significant issue new and expanding supermarket competitors face is securing access to cost-effective groceries from large suppliers. 'The prices the major supermarkets pay suppliers are subsidised by around $5 billion in rebates, discounts, and promotional payments. Competing retailers can't negotiate similar levels of support due to their weaker buying power. 'The majority of these payments go to supermarkets in exchange for products being 'on special'. 'Consumers lose out because prices jump around more. This can mean the average price is more expensive and it's harder for consumers to assess the value of products. 'The major supermarkets use high low pricing much more than supermarkets in other countries. Large suppliers and the major supermarkets need to reduce their reliance on promotions and specials so that prices can be lower and more stable. This would benefit consumers because pricing would be more straight-forward, and new competitors would put competitive pressure on existing supermarkets to deliver on price without the high-low price distraction. 'With less promotional funding we'd expect suppliers to factor that saving into the price they charge retailers, which retailers would then pass onto consumers in the form of more stable and lower everyday prices. 'The best option is for large suppliers and the major supermarkets to voluntarily change their behaviour. If they don't, we'll have to consider our other alternatives,' Mr van Heerden says. Background The Commission has responsibilities to monitor and regulate the grocery sector under the Grocery Industry Competition Act 2023 (GICA). Our work focuses on the following areas to improve competition and efficiency in the grocery sector: Creating pricing and promotional transparency for consumers Setting rules around supplier treatment Enabling wholesale access for new and expanding competitors Ongoing monitoring of the state of competition in the grocery sector and whether it is delivering benefits for New Zealanders over time Taking action to address non-compliance under GICA, the Fair Trading Act, and the Commerce Act where necessary Grocery Supply Code The Commission is seeking submissions on the draft Grocery Supply Code and will consider those before we issue our final report before the end of September 2025. The mandatory Grocery Supply Code was introduced under the Grocery Industry Competition Act to ensure negotiations between major supermarkets and their suppliers are fair and transparent. The Commission started a review of the Supply Code to make sure it was operating as intended and suppliers had confidence to innovate and invest in more choice for consumers. The Commission's draft is informed by submissions on the Request for Views published in August 2024, the results of the Grocery Supplier Survey, and information from the Commission's Anonymous Reporting Tool. The Commission is proposing the following changes to the code Restricting the range of situations where retailers can charge suppliers. Retailers would no longer be able to charge suppliers for stocking the shelves or for groceries that become unfit for sale while in the retailer's effective control. Requiring regulated grocery retailers to keep records about how they are complying with the Code when undertaking certain activities. These activities include negotiating promotions with suppliers and making deductions to payments without written consent. Adding a requirement that if a retailer has bought groceries at a promotional price for a sale period and then sells that product at a higher price after that sales period, they pay the difference to the supplier. Prohibiting retaliation against suppliers that exercise their rights under the Code. The review has also identified some priority areas to develop guidance to support fair conduct and other areas to consider over the longer term. Wholesale Supply Inquiry The Commission has released preliminary findings in relation to the current Wholesale Supply Inquiry. The wholesale access regime was introduced under the Grocery Industry Competition Act (GICA) to address a key barrier to entry and expansion in the retail grocery market in New Zealand. The Commission started an inquiry into the Wholesale Supply of groceries after the first Annual Grocery Report found the wholesale access regime was not working as intended and is unlikely to substantially improve competition or benefit New Zealand consumers in its current form. The Commission has recommended the following changes: The major supermarkets expand their wholesale product range and implement systems to pass promotional funding through to their wholesale customers so other retailers can access lower prices Suppliers reduce their reliance on promotional funding or allocate the funding across more retailers. At this time the Commission believes these changes are best achieved through voluntary action from large suppliers and major supermarkets as they are well placed to do so efficiently. If the Commission doesn't see meaningful progress in 12 months, it will decide if regulations should be changed. The Commission will consider submissions on the preliminary findings and will gather further information to make decisions on whether changes are needed. A final report on the wholesale supply inquiry will likely be completed in 2026.
