The latest report by the Commerce Commission noted that food has been a significant expense for New Zealand households and that prices have been high by international standards.
Grocery prices increased more than any other common household bill between 2019 and 2023. That was primarily due to fruit and vegetables, the prices of which have softened more recently as weather effects have passed.
In 2022, New Zealand had the fourth-highest grocery spending in the OECD, and the report said that New Zealanders spent more on grocery shopping than their counterparts in Australia or the UK.
The report also said “high-low pricing”—where supermarkets offer deeper discounts on certain products at particular times—made it harder for shoppers to judge whether a deal was really good.
The commission’s report said supermarkets would blame rising costs for price rises while margins grew. Foodstuffs, in particular, consistently achieved elevated profit levels between 2019 and 2023.
Woolworths argued that the role of multinational suppliers also needed to be examined. Foodstuffs argued it had kept price increases below the rate of food price inflation in 24 of the past 27 months.
Consumers will continue to pay some of the highest prices in the world to put food on their tables.
“The industry has had two years since the Commerce Commission’s market study and new rules to put matters right. Instead, we have increased consumer prices, exploitation of suppliers, high profitability and total market dominance by the duopoly of Foodstuffs and Woolworths,” said GAG chair Sue Chetwin.
The Grocery Action Group (GAG), formed to lower grocery prices, said that the Commissioner’s report has vindicated its position that much more needs to be done to ensure consumers and suppliers do not continue to suffer from an industry that puts prices ahead of fairness.
“In the towns and cities, consumers have been suffering because suppliers are not being paid as they should, there is no incentive for innovation, and some suppliers are ignoring the New Zealand market altogether in favour of export. That’s bad for all of us.”
GAG has urged the Government to support the Commission’s call for increasing powers to ensure suppliers are treated fairly and the wholesale market operates as it should. The organisation will continue to push for more powers for the Commission to force the duopoly to sell some of its stores to rival operators.
“What will promote competition is more players acting competitively.”
Chetwin said that GAG would wholeheartedly welcome any moves by The Warehouse, Māori interests and others to set up shop, but the regulatory environment must improve before that can happen.
The report noted that Costco’s opening generated much interest, and 150,000 members had signed up by March. However, any new Costco outlets would not open quickly and could take two or three years from when one was announced. Costco could not expand to the point where it could become a third severe supermarket contender.
The Warehouse could be an option due to its network of shops, which meant it was in an excellent position to encourage shoppers to split their shopping in many cases, but it had yet to raise the capital needed to compete.
Other competitors could come from changing consumer demands and preferences, but attempts to pursue that progress with online-only retailing have failed.
Bin Inn closed five stores since March 2022, Huckleberry was placed into liquidation, and high-profile online retailer Supie failed. Reduced to Clear was expanding.
Supermarkets increased their online offerings and invested in security. Many stores had been improved, and paper price tickets had been replaced with electronic ones.
However, some customers were more interested in innovations that would lower costs, such as a food discounter business model with a narrower range of products and lower prices.
The Grocery Commissioner’s report has backed GAG’s view that consumers will continue to suffer at the checkout, and suppliers will continue to be at the mercy of two powerful operators.
