The Commerce Commission is proposing to give grocery suppliers a leg up in their dealings with the supermarket giants.
Grocery Commissioner Pierre van Heerden 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”.
“This leads to smaller suppliers taking on costs and risks that are best managed by the retailer,” he said.
The commission is proposing to update the Grocery Supply Code to:
The commission will consider public feedback on its proposed update to the code, before releasing a final report before the end of September.
Separately, the commission is asking grocery suppliers and supermarket giants to voluntarily reduce their reliance on promotions and specials.
“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,” van Heerden said.
He said the commission would consider using regulations to force suppliers and retailers to change their behaviour if he doesn’t see meaningful progress over the next year.
Consumer New Zealand chief executive Jon Duffy wanted the commission to come down harder on the sector.
“We know New Zealanders love a special. We also know there’s not much that’s special about supermarket specials,” Duffy said.
“Everyday low prices would benefit all shoppers, so would price transparency. Right now, it’s so hard to know what’s a fair price because the prices of certain goods fluctuate so much.”
He noted criminal charges had been filed against some of the supermarkets this year.
Furthermore, Duffy said: “These problems were all identified in the Commerce Commission’s supermarket market study in 2022, and supermarkets have been on notice since then, but have not voluntarily addressed these issues.
“Given that we have had three years of inaction, we’re disappointed that the commission isn’t taking more decisive action at this time.
“This is an urgent issue, but it seems as though we’re just kicking the can down the road.”
Foodstuffs, which owns the New World and Pak’nSave supermarket chains, said it needed to review the draft report and the preliminary findings.
“Our focus continues to be on delivering value to Kiwi consumers by buying well for them, strong relationships with our suppliers, and contributing to a competitive, sustainable grocery sector,” the co-op said in a statement.
“In our view, the current Code has already effectively set the ‘rules of engagement’ with suppliers. We regularly survey our suppliers to ensure we are working as partners, listening, and constantly improving.”
Foodstuffs North Island, which has more than 2,000 suppliers, said its view was that the current Code “already effectively set the ‘rules of engagement’ with suppliers”.
“We regularly survey our suppliers to ensure we are working as partners, listening, and constantly improving.
“We take our obligations under the Code seriously. 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 it would work constructively with the commission through the submission process.
“We know New Zealanders are facing cost of living pressures and our absolute priority is delivering great products, great prices and a fantastic shopping experience for our customers as well as building a meaningful wholesale business,” de Wet said.
“If we don’t get it right with our suppliers, we can’t get it right for our customers either. There’s always room for improvement, and we’re talking to our suppliers all the time so we can keep doing better.”
Woolworths has more than 1400 local and international suppliers.
“We’re working closely with suppliers and wholesale customers to further improve and develop our wholesale business,” de Wet said.
Jenée Tibshraeny is the Herald‘s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.