Suzanne Chetwin: Time for consumers to take the fight to supermarket duopoly

Suzanne Chetwin argues it’s time for a consumer-led response. Photo / File

OPINION

The greatest gift of all this Christmas for Kiwi consumers should have been reasonable prices at the supermarket.

But despite the stars of regulation never shining brighter on the supermarket duopoly of Woolworths and Foodstuffs, there was no sign at the check-out that Kiwis could break into rounds of Jingle Bells over fair pricing.

As a woman shopping at a New World in Auckland noted to me – “raspberries at $10 a punnet are too rich for me”.

The final ignominy was the Commerce Commission’s media release last week saying it had received an application from Foodstuffs to merge its North and South Island operations.

In the face of a supermarket inquiry that had found unfair pricing and a lack of competition, Foodstuff’s response is to tighten its control over pricing and supply, effectively reducing competition across the country.

It’s time for a consumer-led response.

Our Silent Night attitude has led to new levels of deafness from Woolworths, Foodstuffs and the large suppliers like Fonterra.

Even the appointment of Grocery Commissioner Pierre van Heerden, who has limited but real regulatory powers to force change, has meant little. Prices have continued their inexorable rise.

One of the commissioner’s main tools to force competition is in wholesale - smaller retailers should be given access to the duopoly firms’ wholesale chain at competitive prices.

But as Supie, the online grocer that recently fell over found, players like Fonterra aren’t taking that. Its former chief executive Sarah Balle told the grocery commissioner the international giant just refused to supply her.

And they weren’t the only huge suppliers not to.

Former Consumer New Zealand chief executive Sue Chetwin. Photo / Brett Phibbs

The Warehouse, which is dabbling in supermarket products, also found out recently how a large supplier to the duopoly giants, such as Sanitarium, can suddenly find itself unable to supply it with Weetbix. These are tough cookies used to having things go their way.

Anecdotal evidence suggests that since the 2002 merger of Foodtown with Woolworths the gross margin of supermarkets has increased from around 10 per cent of the sale to nearer 40 per cent.

Even the Commerce Commission can’t be sure. Foodstuffs’ co-operative structure and bewildering maze of individual store owners and corporate entities allows profits to be hidden away in a host of innovative ways. Australian-owned Woolworths has demonstrated recently how simply it can reallocate profit across each side of the Tasman with the effect of confusing the real profitability of its New Zealand operation.

A bunch of us with long histories in consumer and industry advocacy reckon that’s not good enough. There’s a social emergency here that needs more decisive action than has been shown so far. The issue needs to be on the Government’s “to do” list. We need solutions now.

A group led by people who understand the impact that our failed grocery distribution market has had on low- and middle-income New Zealanders should help level the playing field.

On its to-do list would be:

· Holding the grocery commissioner’s feet to the fire – he has to start using the powers he has to fine the duopoly firms when they breach the new mandatory code of conduct;

· Urging the Government to give the Commerce Commission and the grocery commissioner extended powers to bring supermarket pair into line;

· Furiously monitor the new mandatory unit pricing rules to ensure consumers can’t be confused about what something costs and whether it’s really on special;

· Work with other like-minded organisations such as Consumer NZ and Monopoly Watch to help them continue to expose egregious behaviour;

· Wherever we can expose pricing practices that are opaque or confusing, or just plain misleading;

· Working with suppliers to encourage them to speak out about dubious and unfair practices which are bad for them and consumers;

· Seeking out innovative ways to secure new players in the market.

By capturing control of our food supply chain, the duopoly supermarkets have endangered a generation of innovative grocery suppliers. New producers have precious little chance of national distribution.

Meanwhile, shelf space that once held the offerings of a tantalising array of new local products on their first step towards international markets, are now filled with enough Coca Cola to put out a bushfire.

In short, one of our most essential services has been captured by a duopoly.

So, the new action group couldn’t arrive at a better time. We’ll make more announcements in the New Year. Our aim is to stop the supermarket duopoly from being the grinch who stole Christmas – next year.

Suzanne Chetwin is a board director, lawyer, consumer advocate, former Consumer NZ CEO and journalist.