Supermarket competition hearings: New operator would provoke 'violent' reaction

A would-be supermarket operator expects a violent and vigorous reaction from the two major chains to any new significant new entrant to the sector. Photo / RNZ / Claire Eastham-Farrelly

By RNZ

A would-be supermarket operator expects a violent and vigorous reaction from the two major chains to any new significant new entrant to the sector.

Tex Edwards of Northelia has told the Commerce Commission's hearings into competition in the sector that a third major chain would need significant scale to be competitive.

He estimated it would need a 15 per cent market share, with up to 150 shops in major centres and a capital investment of $3.5 billion.

Edwards said a new chain could expect operating losses for its first three or four years.

Other small scale operators Supie and Night N'Day also told the hearing other constraints to getting scale included access to wholesale suppliers for a wide range of goods at fair prices.

They also highlighted the difficulty in getting capital for expansion and, where necessary, suitable sites for physical stores.

The two major chains, Woolworths and Foodstuffs, continue to say there are plenty of small operators successfully competing with them and suggest new types of trading such as online also offer opportunities.

The chains agreed they would be open to undertakings not to have restrictions on properties that could be potential supermarkets.

Free market think tank New Zealand Initiative suggested the Commerce Commission needed to get involved to prevent local authority district schemes from stymying competition, as well as giving some partial exemption from overseas investment rules to make it easier for foreign entrants to get started.