Editorial: Supermarket tactics need to be checked

A customer carrying an Aldi branded basket walks through one of the company's food stores in Sydney, Australia. Photo / Brendon Thorne, Bloomberg, File

Editorial

EDITORIAL

German discount grocer Aldi's advisory this week that it had "no current plans" to set up shop in New Zealand would have disappointed many Kiwis grappling with food prices at the checkouts of supermarket duopoly Foodstuffs and Countdown.

Finance Minister Grant Robertson had raised hopes by naming Aldi, a shopper favourite in Australia, as being interested, as the Government seeks to shake up competition in the $22 billion a year supermarket sector.

Since opening in Australia in 2001 Aldi is reported to have contributed more than $30 billion to that economy and created $29.3b in shopper savings through lifting private label consumption. However, it would be naive to expect a player in the notoriously secretive and cut-throat supermarket arena to reveal even a hint of plans to the competition. So we wait and hope. An Australian grocery sector analyst told the Herald he would be "gobsmacked" if Aldi wasn't having a close look at New Zealand.

That said, the Government's stated intention to bring in a raft of regulations to support its shakeup of the duopoly has probably poured some cold water on international player interest until we see its shape and texture. Regulation and business aren't comfortable bedfellows and the Government might have been better to read the room with potential new overseas players before announcing urgent red tape was coming.

Meanwhile, Kiwis will no doubt be astonished to learn this week just how far supermarkets have gone to kill any sniff of competition in their neighbourhoods, by imposing draconian conditions in their leases with landlords that have no place in today's retail environment.

The revelations came in a Food & Grocery Council submission to a Parliamentary select committee, after the council, which represents manufacturers and suppliers in the $40b food, beverage and grocery sector, gained a copy of a current supermarket lease. The council didn't reveal which supermarket was using it, but said such the overreaching clauses to shut down other retailers were in use "all over the country".

Questions arising from the revelation include how long has this been going on, and did the Commerce Commission also obtain a lease in its market study which led to the shakeup? It's hoped so, but it's not clear from its report, which recommends prohibiting the use of restrictive covenants and exclusivity clauses in leases but doesn't give clause examples. Another question is why have these obnoxious clauses not been challenged long ago by the commission and commerce ministers?

After all, being stuck with a duopoly and grocery prices considered sky-high by international standards isn't a new, or post-inflation, experience for Kiwis.

Countdown has responded that to demonstrate its commitment to change, "we have been actively removing these types of covenants with our landlords, and not enforcing any such covenants".

That's hopeful.

While Kiwis may be premature in their disappointment with Aldi's response, they have a right to be dismayed by the behaviour that's been allowed to go unchecked so far in the supermarket sector.