Woolworths NZ reports $202 million profit amid regulator probe

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Woolworths NZ, the owner of Countdown supermarkets, has posted an 11.2 per cent rise in net profit amid a looming probe into the price of groceries.

The New Zealand division of ASX-listed Woolworths Group reported $202 million net profit for the year to June 28, up from $182m the previous year.

Last month, Minister of Commerce and Consumer Affairs David Clark ordered the Commerce Commission to conduct a market study on supermarkets.

The probe – similar to the one the commission did on the petrol market last year – is to ensure Kiwis aren't paying too much for their groceries.

Countdown's revenues rose 7.1 per cent to $7.2 billion, up from $6.7b, according to its 2020 annual report.

The average Kiwi household spent roughly 17 per cent of their weekly expenses on food, a figure that was rising each year, Clark said.

Clark said he hoped the probe into supermarkets would have the same effect as that of the petrol industry – which resulted in petrol companies almost immediately lowering the price at the pump following the announcement of a market study.

"New Zealand has one of the most concentrated retail grocery markets in the world and there are indicators that competition in the sector has weakened over time," he said.

"Groceries are one of our most regular expenses, so we want to make sure pricing is fair."

The study means the Commerce Commission will have the power to demand information from the supermarket giants. Clark said he expected the two companies – the other being Foodstuffs – to cooperate.

Foodstuffs owns New World, Pak'n Save and Four Square.

"If issues affecting competition are identified in the study into supermarkets, the Government will consider the necessary changes to bring about better outcomes for consumers," Clark said.

Labour had promised the supermarket study during the election.

The Commerce Commission today released a paper outlining the preliminary issues it may explore.

"We expect that the issues we focus on will evolve as our understanding of the sector develops and we want feedback from consumers, suppliers and retailers to ensure we focus on the right issues," Commission Chair Anna Rawlings said.

The terms of reference, set by the Minister of Commerce and Consumer Affairs, require the Commission to consider the following matters:

• the structure of the grocery industry at the wholesale and retail levels
• the nature of competition at the wholesale and retail levels of the grocery industry
• the pricing practices of the major grocery retailers
• the grocery procurement practices of the major grocery retailers, and
• the price, quality, product range and service offerings for retail customers.

In the preliminary issues paper, the Commission has identified a range of potential issues it may explore, including:

• how intense competition is between grocery retailers
• whether features of the sector are affecting the potential for retail entry and expansion
• what impact private label products have on competition at the supplier level
• consumer purchasing behaviour, including how retailers' pricing strategies and promotional activity affect consumer purchasing behaviour
• whether any changes to the sector that may have emerged during the Covid-19 pandemic are likely to affect competition over the longer term.