Foodstuff's Pak'nSave is the Far North's only major supermarket in the region. Photo / Myjanne Jensen
A report released by the Commerce Commission on Tuesday has once again highlighted the need for stiffer supermarket competition in the Far North.
The final report into the national $22 billion retail grocery sector found Foodstuffs and Countdown were making excessive profits and exerting too much control over the industry at the expense of consumers and small food retailers and manufacturers.
Recent Consumer NZ research found three out of four shoppers (84 per cent) removed items from their weekly shop because of cost, highlighting how widespread cost concerns were across the county.
The research also found the majority of New Zealanders (89 per cent) substituted grocery items because of price and 37 per cent could not afford to buy fruit and vegetables for themselves and their families.
In November 2020, the Government asked the commission to take an independent look at the factors affecting competition in the industry.
Commission chairwoman Anna Rawlings said the final report concluded competition in the grocery sector was not working well for New Zealand consumers.
"We have found that the intensity of competition between the major grocery retailers who dominate the market, Woolworths NZ and Foodstuffs, is muted and competitors wanting to enter or expand face significant challenges," Rawlings said.
"While there is an increasingly diverse fringe of other competitors in the sector, they are unable to compete effectively with Woolworths NZ and Foodstuffs on price, product range, and store location to offer the convenience of one-stop shopping for the many different kinds of shopping missions that consumers undertake."
In the Far North, Foodstuff's Pak'nSave is the only large food retailer in Kaitaia, servicing thousands of people from the town centre and surrounds.
The only other independent food retailer in the area is Te Rarawa owned Bell's Produce, along with a range of FourSquare shops scattered throughout the region.
As a result, there have long been calls for another supermarket chain to be brought in to help balance the stronghold the retailer has on the area.
Former Minister for Regional Economic Development Shane Jones has been vocal about his thoughts on the supermarket duopoly for many years now and believes this most recent report will do little to improve the situation.
"The Comm Commission has failed abysmally in my opinion, so much so, that the next review undertaken should be conducted into the ineptitude of the Commerce Commission," Jones said.
"In 2014 I led a crusade into the modern monopolistic practice of the supermarket industry and while this report may please suppliers, it will change nothing in terms of competitiveness.
"As a result, the supermarket industry will continue to laugh all the way to the bank."
Jones said what was desperately needed was a break up of the monopoly and quality space for competitors to emerge and flourish.
He said in the absence of competition, it was the 'punters' who paid the price.
"We only have one major supermarket in Kaikohe, in Kaitaia, two in Kerikeri, one in Paihia and several in Whangārei," Jones said.
"We desperately need competition and in the example of only one operator, there has to be full and transparent discloser, because at the moment they have all the power.
"We as consumers are treated as peasants and this will not change until more robust decisions are made by this government.
"Helen Clark broke up Telecom but this Government isn't willing to make any hard decisions unless it has something to do with Covid-19 lockdowns."
Tuesday's report came with a number of recommendations including easing zoning restrictions to make it legal to build supermarkets in more places, removing restrictive covenants that hinder supermarket development in prime sites, and ensuring the Overseas Investment Act and the Sale and Supply of Alcohol Act did not unduly impede on entry and expansion.
The commission also identified the nature of retail pricing and promotional strategies, and the major grocery retailers' relationships with suppliers, indicated competition was not working as well as it could.
In addition, it highlighted that New Zealand's retail grocery prices appeared comparatively high by international standards, profitability of major retailers also appeared high, and while consumers benefit from a range of innovations, there was scope for more.
The Northland Age requested comment for the Far North situation, but Foodstuffs instead responded to the report more broadly.
Foodstuffs North Island (FSNI) chief executive Chris Quin said it was an important moment for the industry and for New Zealand consumers.
"We acknowledge that competition can work better for New Zealand customers. As a result, we accept that the sector does need to change and we are committed to our role in doing that," Quin said.
"We need time to now consider the final report in detail, but from our initial review, we are committed to working with the Government in supporting the implementation of the recommendations in the final report."
Consumer NZ, while welcoming of the Commerce Commission's findings, was disappointed the recommendations didn't go further.
The consumer organisation has been calling for 10 fixes to the grocery sector, including a mandatory code of conduct, a supermarket commissioner, a ban on restrictive land covenants and mandatory unit pricing – all of which the Commerce Commission has recommended in its final report.
But according to Consumer NZ chief executive Jon Duffy, the recommendations relied on the supermarkets to do the right thing.
"While we're happy to see the spotlight put on the supermarket sector, we are concerned that if the spotlight is removed, supermarkets will revert to the practices that brought about the need for this market study in the first place," Duffy said.
"Change is likely to be slow and consumers are not going to see lower prices at the checkout any time soon."
Duffy said the pandemic had exacerbated problems and many consumers were struggling to put food on the table.
"Food has become unaffordable for many consumers. In January 2021, our research showed six out of 10 consumers were worried about the price of groceries," he said.
"By February 2022, this had risen to 98 per cent. It is times like this that we need competitive markets producing good outcomes for consumers."
The final report and recommendations are now with the Government to review and consider.
An executive summary, the full draft report and infographics on the findings and recommendations are available on the commission's website.