Suppliers take hit for store discounts, says author

By Amelia Wade

NZ's two big supermarket chains use their power to write the rules, says writer

Mr Winters spent up to 18 months interviewing industry heads and researching the book. Photo / Dean Purcell
Mr Winters spent up to 18 months interviewing industry heads and researching the book. Photo / Dean Purcell

A discount special at a supermarket isn't all it seems.

You might think there's a two-for-one deal on tuna because the store overbought some stock, the items were about to go off and the sale means the chain will make less profit.

But a new book claims New Zealand's two dominant supermarket chains, Progressive Enterprises and Foodstuffs New Zealand, can dictate to their suppliers that one week they want a special on a particular item. Supermarkets' profits aren't affected.

John Winters, author of Checkout: Revealing how and why New Zealand's supermarkets operate the way they do, said a supplier was expected to support any promotion the store wanted to do because the power was with the retailers.

"Their attitude is: 'We own the real estate, we own the shelving, you can't survive unless you have the products on our shelves so therefore you need us to sell your product so therefore we have the power'."

Mr Winters spent up to 18 months interviewing industry heads and researching the book. He was previously managing editor of Retail Today, a monthly publication on the supermarket industry. He later became the "supermarket sleuth" on Simon Dallow's show on the then Viva radio station, which is now EasyMix.

He said that in the 1980s the power was with the suppliers, who decided what went in stores, in what condition and at what price.

But then the retailers in New Zealand decided they'd had enough of being "told what to do" so they looked to Australia for new competitive suppliers.

This eventually broke the power balance and turned it on its head which is still the situation today.

"I sat in a meeting at Progressive (with a supplier) once and they said, 'Right, week thirty-two, we want to do a special promotion and we need your support'. And if I'm a supplier and I don't support them that week, then I will get a black mark and the next time I go to them with something, they won't do it.

"So I, as a supplier, have to play ball - they are the masters, they hold the power."

Both supermarket chains disagreed, saying they had good relationships with their suppliers.

Foodstuffs New Zealand spokeswoman Antoinette Shallue, said promotional programmes or discounts on products were driven by suppliers, not the supermarkets.

"Suppliers advise and recommend to the supermarkets what products they would like to promote - this is normally driven by customer demand and varies depending on the time of year or occasion."

Suppliers negotiated price points with the supermarkets to achieve their agreed volume objective, she said.

A Countdown spokeswoman said New Zealanders were price savvy, so it was essential that the chain partnered with its suppliers to not only build sales and brand, but also to get the best price for customers.

Mr Winters said the price factor was another reason discount specials were vital - they get people through the door.

"There are far more specials here than there are in Australia. New Zealand runs on specials."

People couldn't afford to be brand-loyal because our prices were so much higher than other international markets because two supermarkets dominated the market.

Mr Winters said the country's growing Asian population could support a different type of grocer - the Tai Ping Trading Company stores which sell food at cheaper prices as they import it.

He also thinks budget supermarket Aldi might venture to New Zealand, having cracked Australia.

"But again we probably don't have the population for another chain to have an impact because Progressive and Foodstuffs are so ingrained."

- NZ Herald

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