Foodstuffs to appeal ComCom merger decision

Foodstuffs North Island chief executive Chris Quin has confirmed that the company will appeal the decision by the Commerce Commission to block its proposed merger.

Speaking on Newstalk ZB this morning, Quin said the company’s advisers had been working their way through the Commerce Commission’s reason for the decision for the last few weeks.

“The biggest concern in the document seems to be about whether suppliers would be worse off as a result of the co-op merging between the North Island and South Island,” Quin said.

“Our internal teams have the view that we passed that legal test and that the proposition we put up should have been cleared.”

Foodstuffs will appeal the decision at the High Court and expects to have officially filed its appeal by November 21.

Chief executive of Foodstuffs North Island, Chris Quin.

Quin reiterated Foodstuffs' position that the two regional co-operatives in the North and South Islands don’t compete with each other in any way.

He said that if the co-operatives were merged it would make them “incredibly more efficient”.

On the suggested impacts on suppliers that the Commerce Commission posited, Quin said he briefed hundreds of suppliers after the decision last month.

“We get a lot of conversation with them almost every day on meeting with one or other and the advantages for suppliers would be dealing with one not two,” Quin said.

“The possibility would be you could do a deal to be nationally ranged, so we see a number of advantages for suppliers.”

He believed a merger would allow Foodstuffs to make prices much more competitive, ultimately benefiting consumers.

Mary Devine, chief executive of Foodstuffs South Island, also said the merger woujld bring long-term benefits to customers and communities, citing increased efficiency and faster innovation.

“Combining our operations allows us to streamline operations, reduce overheads and better invest in new technology and services that our customers want,” Devine said.

“This isn’t just a merger - it’s an evolution to ensure we remain competitive and sustainable for the future.”

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The original decision

Now that Foodstuffs has confirmed its appeal, the process will likely be a lengthy one.

Foodstuffs North Island and Foodstuffs South Island operate some of New Zealand’s best-known supermarket banners – New World, Pak’nSave and Four Square – and while each retails only in its respective island, the companies already collaborate across various business areas, including marketing and home-brand purchasing. Their combined revenue was nearly $13 billion in the last fiscal year.

In their application to the Commerce Commission for clearance to merge, the parties essentially argued that they do not compete at either the retail or wholesale level and they would be more efficient and better equipped to drive down grocery prices as a single streamlined entity.

However, the commission was not convinced the benefits of such an arrangement would flow to customers and moreover, its main concern was that a merger would reduce the number of buyers in the “upstream market” for grocery supply from three to two – this market is currently dominated by the two Foodstuffs entities and Woolworths New Zealand.

In its decision, the commission noted that this reduction would be a structural change and would likely lessen competition in multiple acquisition and retail markets. It also emphasised that competition in the country’s highly concentrated grocery market was already weak.

Tom Raynel is a multimedia business journalist for the Herald, covering small business and retail.