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Home / New Zealand

Editorial: Supermarket profits face more counter measures

NZ Herald
6 Jul, 2022 05:00 PM3 mins to read

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2 June 2022 Select committee hearing on supermarkets blocking competitors from entering the market
Editorial

EDITORIAL

New Zealand will have a new grocery sector watchdog. So, we're saved? Not nearly.

Consumer Affairs and Commerce Minister David Clark yesterday announced the Commissioner would be specifically tasked to hold supermarkets to account.

On top of this, a new supermarket code of conduct, aimed at preventing major retailers from using their size to get better deals from their suppliers, was also released for consultation.

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But will these new moves shift prices at the self-checkouts any more than previous noises?

Clark had already tried to make it easier for supermarkets to enter the market by opening up more sites. On Budget night, Parliament passed urgent legislation to make this happen. So far, there's been little more than a shrug from German giant Aldi in response.

Up until yesterday, this was the strongest result from a Commerce Commission report, released in March, that found competition was not working at all well for consumers and recommended a suite of changes to increase competition and help improve the price, quality and range of groceries and services available to New Zealanders.

The study began at the request of the Government in November 2020 to gauge whether competition in the grocery sector was working well, and if not, what could be done to improve the situation.

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Since the release of the study, the Foodstuffs and Countdown duopoly has been sharply criticised but has hardly relented beyond pricing some products back to 2021 levels and a temporary price freeze on a limited range of essential items.

Increasingly frustrated, Consumer NZ launched a petition calling on Clark to go beyond the Commerce Commission's recommendations, to the point of regulating access to wholesale supply or setting up a state-owned wholesaler.

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There's no doubt the pain at the checkout has been getting worse. The attempt to address high food prices was given new urgency as inflation pushed grocery costs sky-high this year.

In March, food prices hit an 11-year high, up 6.8 per cent. The Herald on Sunday last week estimated the cost of a roast dinner and modest trimmings for an extended family has risen 20 per cent in the past three years from $115.31 to $138.43.

Meanwhile, annual wage inflation measured by the labour cost index (LCI) has dawdled, with an increase to 3 per cent in the March 2022 quarter, up from 2.6 per cent in the December 2021 quarter being the highest level since the March 2009 quarter.

This isn't entirely the supermarkets' fault. But, as Consumer NZ chief executive Jon Duffy points out, the sector is taking more than $1 million in excess profits from back pockets every day. That has painted a target too tempting for the minister to ignore and he says he wants that $356m per annum shared "more fairly".

The grocery watchdog will be based within the Commerce Commission and review competition in the sector annually. We will see the law to establish the Commissioner later this year, and only then will we know whether this watchdog has been given any teeth.

Even Clark doesn't seem to hold much hope, warning a "mandatory backstop" may still be necessary.

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