New Zealand supermarket reform: latest report card

by | Jul 13, 2022 | News

Foodstuffs North Island has reported back this week on work underway to meet government demands for a more competitive supermarket sector.

Foodstuffs North Island (FSNI) has released a second quarterly update against a dashboard it has created to track progress on commitments made for implementing Commerce Commission recommendations from the retail grocery market study.

“When the Commerce Commission released its final report on 8 March, we agreed with the Commission that those recommendations were both proportionate and would make a meaningful difference for consumers. We committed to being transparent and accountable for implementing the recommendations and are moving at pace to do that”, says FSNI Chief Executive Chris Quin. “In April, the co-op launched the reporting dashboard to track progress against the recommendations, and committed to publicly reporting on a quarterly basis. 

FSNI reports it has removed restrictive land covenants from all the land titles it owns. Such covenants are considered by the Commerce Commission and The New Zealand Food & Grocery Council as substantially reducing competition in the grocery market. FSNI is also increasing the proportion of grocery products displayed with unit pricing information, enabling customers make accurate price comparisons either online and on shelf.

FSNI has also been asked by the Government to further develop their wholesale supply offer for retailers who are not members of the co-operative. 

Work is well underway on wholesale supply for non-member retailers, says Quin. “Non-member retailers can now express interest in becoming wholesale customers and we’ve already received over 40 enquiries. The first step of making this work is understanding the customer need from these retailers who aren’t co-op members. We have conversations underway with those that have expressed interest and are engaging to establish their business needs so we can design a solution for them.

“On Code of Conduct, we have been working constructively with MBIE in recent weeks towards a Grocery Code of Conduct for the industry and have indicated support for a set of principles that we believe will provide clarity, certainty, fairness, meaningful consequences, and opportunities for redress when the Code is not honoured. We also support the Commerce Commission’s recommendation that a specialist grocery regulator be established with appropriate powers and resources to monitor compliance with the Code and undertake effective enforcement action where appropriate.

“On unit pricing, work is progressing at pace to increase the proportion of our products showing unit pricing which will help our customers make accurate price comparisons online and on shelf. We’ve recently completed Phase 1 which means the majority of eligible in-store products are now displaying unit prices. We’re on track to deliver Phase 2 by end of 2022 with various initiatives underway to make unit pricing more accessible for our customers.

“On land covenants, we made the commitment in August last year to end the use of restrictive land covenants and exclusivity provisions in leases, and immediately started a process to remove all existing such clauses. While that process is underway no covenant or exclusivity provision has or will be enforced. We have now released restrictive covenants from all titles we own. The remaining covenants are registered on land we no longer own and we are approaching the owner of each parcel of land to remove these. Where we do not have the agreement of land owners to remove these, the Commerce (Grocery Sector Covenants) Amendment Bill removes that requirement so we welcome it to expedite this process.

Quin goes on to say:

The Commerce Commission was clear in its final report that supermarket returns in New Zealand were similar to those of other international grocery retailers in highly competitive markets like the UK, America and Europe. External factors driving this year’s food price inflation are not related to structural issues within the supermarket industry in New Zealand and shouldn’t be conflated with the Government’s policy response to the market study.

“We are addressing the immediate cost of living pressures for our customers by keeping costs under control within the 19 cents of every retail dollar on the supermarket shelf we’re responsible for.

“Food prices are at record highs globally, but we’ve managed to keep our food price increases below food price inflation levels. In May, food price inflation was at 6.8% and average cost price increases to Foodstuffs from suppliers was 6.9%, while retail prices to Foodstuffs’ customers on the same products increased 4.7% – meaning FSNI held prices at 2.1% less than inflation. Our Price Rollback initiative immediately reduced prices more than on 110 everyday items to 2021 levels, saving Kiwis more than $1 million per week on their groceries. It’s another way that we’ve been able to deliver value for customers in recent months, particularly in the face of rising inflation and increasing pressure on household budgets.

PAK’nSAVE has been recognised as New Zealand’s leading company for Fairness and one of country’s top 5 performing companies in the 2022 Kantar Corporate Reputation Index.

“Its top spot placing as Fairness Leaders is another nod to the great work PAK’nSAVE is doing to ensure it delivers NZ’s lowest prices to its customers every day and follows its win as NZ’s Most Trusted Supermarket in the 2022 Reader’s Digest Trusted Brands survey. New World also delivered a world class corporate reputation score in the index ranking at 14 out of 50. The Kantar Corporate Reputation Index measures excellence on four key platforms: leadership/success, responsibility, trust, and fairness (pricing).

“Our work to implement the Commission’s recommendations and being accountable for that is one way we can keep earning the trust of our customers.

“Our focus remains on implementing the recommendations that will deliver genuine change for the industry and ultimately benefit consumers. We will continue to provide quarterly public updates via our dashboard to show our measurable progress in responding to the Commission’s recommendations.”

The dashboard is available on the Foodstuffs North Island website.

 

 

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