A "brilliant" example of how a third grocery retailer could bring down New Zealand food prices is now playing out at the butter chiller of a Warehouse near you, says Consumer NZ.
A 500g packet of branded Tararua butter is $4 at The Warehouse.
At Countdown, the same product is $8.30.
Okay, The Warehouse hasn't fully entered the grocery market and can't compete with the duopoly supermarkets Countdown and Foodstuffs for the full weekly food shop, and the butter is only available in store, but Consumer NZ chief executive Jon Duffy thinks the comparison proves a point.
"What a brilliant example of what a third player in the market can do.
"If this is an example of what happens when you crack open the duopoly and provide competition, bring it on."
At Countdown this week 500g of Anchor brand butter was $8.50. At rival New World, other brands of similar quantity and style butters were $7.99.
But house brand butter at both supermarket chains ranged from just $5.39 to $5.40, still eye-watering prices in a country renown for its dairy industry.
Duffy said not many people realise The Warehouse is selling dairy products, so the supermarkets "get away with a high price".
The supermarkets and dairy product makers like Fonterra inevitably fall back on the explanation of strong global prices for dairy when asked about prices at the dairy chiller. (New Zealand exports 95 per cent of its dairy production and manufacturers like Fonterra Brands NZ, maker of Anchor products, say they have to pay overseas prices for milk. Manufacturers Fonterra and Goodman Fielder dominate the retail dairy market. Tararua brand is made by Goodman Fielder.)
On top of high world prices, general inflation has added to dairy manufacturers' costs, which they say they've had to pass on.
But Duffy has a different take.
"Is it the global prices or is it the lack of competition? A lot less people know The Warehouse is doing dairy now so the supermarkets can get away with a high price.
"I point out The Warehouse is managing to do a pretty good deal and suggest people buy their butter there.
"It may be the case that suppliers have raised prices to supermarkets recently. The cost of everything is going up. I'm not a supermarket and they have confidential contracts. So I don't think it's unreasonable for supermarkets to suggest supplier costs are going up and they have to pass that on.
"But the question for me is how much of that can be absorbed in the already excessive profits the supermarkets are making and how much is right to pass onto consumers?"
The Warehouse in a written response said its $4 Tararua butter offer had been "incredibly popular". It was working hard to get access to more supply.
"Kiwi families are coming to us looking for great value on grocery and pantry essentials and we're seeing increased demand across a range of items including milk, butter, bread, Weet-Bix, oats and coffee."
The Warehouse said its breakfast basket of goods was $6 cheaper than Countdown's.
Asked about the gulf in price between house brand and branded prices for the same sized pack of butter, and whether it could be attributed to a difference in quality or processing or some other reason, Fonterra and the two supermarket companies ducked.
The two supermarket chains were also asked if they were price gouging, taking advantage of a perfect storm of economic conditions - a pandemic, supply chain issues, inflation and strong overseas prices.
Countdown in a written response referred the Herald to suppliers "like Fonterra" for an understanding of the "wider context" of dairy and butter pricing.
The company cited commercial sensitivities around some of the Herald's questions.
However it offered this comment: "There is significant pressure on the price of butter and other dairy products in New Zealand at the moment, due to record high farmgate milk prices and incredibly strong international demand for New Zealand dairy.
"This is in addition to increased production costs such as fuel, labour, fertiliser and animal feed. These pressures mean we've already received one cost increase this year on butter and this is being reflected in our on-shelf pricing.
"We have different supply agreements for different products. These differences can include the length of the agreement, the products the agreement covers and the impacts that market volatility may have on the cost of a product.
"We know that price is incredibly important to our customers and every day we look at what cost increases we can mitigate, absorb, hold or delay, to deliver the best value that we can and keep prices as low as possible. We'll continue to work hard to make food as affordable as we can, but the reality is that we can't absorb all of the cost increases we are seeing right now."
Foodstuffs, which operates New World and Pak'n Save supermarkets, said: "We don't price gouge and we know you'll appreciate our buyers are competing in a global market on dairy.
"The prices on shelf reflect significant increases in cost prices from suppliers recently."
Foodstuffs said its $5.39 on house brand Pam's 500g butter was because the product was covered by its promotional "price rollback", which returned some prices to where they were a year ago.
Fonterra Brands NZ managing director Brett Henshaw in a written response said: "Global dairy commodity prices are at record highs and these consistent price rises have led to an increase in the wholesale price FBNZ pays for the dairy inputs required to manufacture their consumer products.
"The consumer format butter category is competitive and is subject to a lot of promotional activity. This can lead to a range of different prices at different times and it is important for consumers to select products based on preferred pack size and brand and product attributes."