Draft:Supermarkets in New Zealand
Sources:[1]
The New Zealand supermarket industry currently operates as a duopoly, run by Foodstuffs and Woolworths,[2] who together have a 90% market share.
Overview
[edit]The grocery sector is valued at $25 billion as of 2024[update].[3] It is characterised as a duopoly, operated by Foodstuffs (who run supermarkets Pak'nSave, New World and Four Square) and Woolworths.[2][4] Together, they have 90% market share.[5] They have vertically integrated into wholesale, for example by owning fishing fleets.[2] Each of these companies have own brands. Most of Foodstuffs' own brands are sold under Pams, and the rest is under Budget; Woolworths sells multiple brands such as Homebrand and Macro Wholefoods.[6]
History
[edit]Supermarkets first appeared in New Zealand in the 1920s, starting with the Four Square brand. The first self-service Four Square opened in 1948. The first Foodtown supermarket was opened in 1958, and the first Pak'nSave opened in 1985.[7]
Duopoly
[edit]In the 1980s and 1990s many mergers and acquisitions consolidated the industry until it became a duopoly run by Foodstuffs and Woolworths. The last of these supermarkets was Foodtown, which was bought by Progressive Enterprises in the 2000s, now known as Woolworths.[2]
In 2020 the New Zealand public became increasingly concerned with the price of groceries, which spurred the Commerce Commission to study the market's competition. The study looked at whether the market was competitive enough, and if not, what could be done to improve it. The study found that the market was not competitive enough, and if it was more competitive, supermarkets would improve prices, quality and range.[2] It also found that supermarkets earn $430 million per year or $1 million per day in excess profits between 2015 and 2019, which was due to a 12.9% return on capital which would drop by $430 million if it became 5.5%.[4][8] The Commission recommended creating a grocery regulator and a dispute resolution scheme, and did not recommend a breakup of Foodstuffs or Woolworths.[8]
In June 2022, the Commerce (Grocery Sector Covenants) Amendment Bill was passed which prevents supermarkets from setting lease agreements that block competitors from opening shop in the surrounding area.[9][10]
In June 2023 the Grocery Industry Competition Bill had its final reading which was made to increase competition and efficiency in the sector. One such method was establishing a Grocery Commissioner,[4] whose job is to "level the playing field and hold the sector to account". The first commissioner is Pierre van Heerden, who was appointed in July.[11] In September, the government established the Grocery Code of Conduct, which includes that contracts must be in plain English, that supermarkets must pay suppliers on time, and that they must operate "in good faith". Fines for not complying can be the higher value of 3% turnover or $3 million, or a fine of $200,000 to individuals. The Code of Conduct is enforced by the Grocery Commission.[12]
In January 2024 the Grocery Commission started investigating if the pricing and promotional strategies of Woolworths and Foodstuffs comply with the Fair Trading Act. This follows complaints made by Consumer NZ about the supermarkets and the Act in August 2023.[13][14] In February the Grocery Commissioner launched a whistleblower tool which allows suppliers to anonymously complain about anti-competitive practices. The tool was made anonymous to prevent any retaliation.[15]
Attempts to break the duopoly
[edit]In 2022 The Warehouse Group said that they were "seriously considering" selling more groceries, which it already sold a limited selection of.[16] In 2023 it increased its grocery offerings.[17]
2degrees founder and Monopoly Watch Spokesman Tex Edwards said in 2023 that creating a new competitor would cost at least $1.1 billion.[18][5] Edwards advocates for the breakup of the supermarkets.[5]
References
[edit]- ^ Muru-Lanning, Charlotte (21 June 2023). "The not-so-basic story behind our supermarket own brands". The Spinoff. Retrieved 13 August 2024.
- ^ a b c d e "Shopping for change: Busting the supermarket duopoly". RNZ. 15 July 2022. Retrieved 17 December 2023.
- ^ "Whistleblower tool for suppliers to 'lift the lid' on supermarket practices". 1News. Retrieved 8 February 2024.
- ^ a b c Shaw, Aimee (21 June 2023). "New law to encourage competition, drive down grocery prices coming". Stuff. Retrieved 17 December 2023.
- ^ a b c Rawhiti-Connell, Anna (31 October 2023). "Fast fall for grocery start up Supie as grocery tsar reveals priorities". The Spinoff. Retrieved 6 February 2024.
- ^ "Supermarket store-brands". Consumer NZ. Retrieved 17 December 2023.
- ^ Clayton, Rachel (5 September 2017). "How supermarkets have changed from the days of one brand of coffee". Stuff. Retrieved 17 December 2023.
- ^ a b Pullar, Tom (8 March 2022). "$430 million a year in excess profits but no supermarket split". www.stuff.co.nz. Retrieved 3 February 2024.
- ^ "Legislation banning supermarkets from blocking competitors passes final stage". RNZ. 28 June 2022. Retrieved 17 December 2023.
- ^ "New law paves way for greater supermarket competition | Beehive.govt.nz". www.beehive.govt.nz. Retrieved 17 December 2023.
- ^ "Govt appoints Grocery Commissioner to 'hold sector to account'". 1 News. Retrieved 17 December 2023.
- ^ "Govt launches 'Grocery Code of Conduct' for supermarkets". 1 News. Retrieved 17 December 2023.
- ^ "Woolworths, Foodstuffs under investigation by Commerce Commission". 1 News. Retrieved 3 February 2024.
- ^ "Commerce Commission to investigate supermarket duopoly: Woolworths, Foodstuffs". NZ Herald. 22 January 2024. Retrieved 3 February 2024.
- ^ "Whistleblower tool for suppliers to 'lift the lid' on supermarket practices". 1News. Retrieved 8 February 2024.
- ^ "The Warehouse considers its grocery options after duopoly comes under fire". The New Zealand Herald. 13 May 2022. Retrieved 4 February 2024.
- ^ Sowman-Lund, Stewart (31 October 2023). "New Zealanders need 'more competition' in grocery sector, says Warehouse CEO". The Spinoff. Retrieved 4 February 2024.
- ^ "Supie failure shows need to 'break up' Woolworths, Foodstuffs dominance - critic". The New Zealand Herald. 30 October 2023. Retrieved 6 February 2024.