Business Hub: Katherine Rich steps away from lobbying as new supermarket regime takes shape

Katherine Rich, chief executive of the NZ Food and Grocery Council, retires from the job after more than 13 years. Photo / Supplied

Katherine Rich began raising concerns about supermarket power in the New Zealand grocery sector over a decade ago. Back then, she says, she chose her words carefully and, metaphorically speaking, "with very much a whisper".

Over the years her voice has both strengthened and joined a chorus of others. And last year this group's objections to the country's powerful duopoly grocers - Foodstuffs and Woolworths - reached a crescendo.

In testimony and submissions to the Commerce Commission parties ranging from Consumer NZ to small grocers like start-up Supie and dairy chain Night 'n Day and industry lobbies like the Food and Grocery Council (FGC), where Rich holds the job of CEO, recounted their difficulties in country's $22b grocery market, dominated by just two retail players.

In March, the final report of the commission's market study on competition in grocery retailing provided Rich and her fellow travellers with considerable vindication. Competition, the regulator concluded, is "not working well for consumers"; "intensity of competition between the major grocery retailers is muted and does not reflect workable competition"; "the profitability of the major grocery retailers appears higher than expected under workable competition"; and, "prices appear high by international standards".

The Government responded with a slew of reforms. Taken together, and in conjunction with recent amendments to both the Commerce Act and the Fair Trading Act, the change is "huge", Rich says.

A new supermarket watchdog, in the form of a Grocery Commissioner, will police, among other measures, major retailers' wholesale supply to competitors; a code of conduct to mediate supermarket dealings with frequently smaller suppliers (FGC members); and, new rules for pricing transparency and clarity for consumers.

The moment provides what Rich calls a "natural break" following a period of intense lobbying. And after some 13 years at the helm of the FGC, she will retire from the job next month.

Perhaps in tacit recognition of the battle win, she's left her trademark string of pearls in the drawer on this September morning: "pearls are fantastic armour". Today she's paired a more delicate single diamond pendant with a silver thistle brooch, also worn when she made her maiden speech in Parliament as a National MP in 1999.

Reviewing the changes, and the long road she's trodden in pursuing them, Rich is optimistic that both New Zealand shoppers and supermarket suppliers will reap a fairer deal as a consequence.

She notes, with satisfaction, that the ComCom is already advertising five positions to bolster the new Grocery Commissioner (who'll be appointed, after legislation passes, next year).

The jobs are consequential: chief advisor, project coordinator, senior project manager, senior analyst, and implementation manager. All are in grocery regulation.

"It's clear there's going to be a team around the new commissioner, it's not going to be just one lonely little petunia in the onion patch…and I really don't think people appreciate yet how transformative that's going to be, having this group scrutinise supermarket dealings day in day out," she says.

The Government has also left the door open to making further, more radical, change. Consultants are currently working to provide David Clark, Minister of Commerce and Consumer Affairs, with analysis to illuminate the risks and rewards of forcing a break-up of the supermarkets, likely through forcing either the separation of banners and or the divestment of stores.

Rich is equivocal about whether this step is warranted. She's pleased that the Government has promised to review the state of the industry annually (rather than every three years as the ComCom recommended): "now isn't the time to take your foot off the gas".

On the other hand, she's not willing to actively push for the forced divestiture of private assets. It's a step that many of her members, private businesses themselves, consider a bridge too far.

"We've now got a lot of regulatory change coming through, and at the end of the day we do need to let it work. The point is to allow another player to step in, or to grow up, and compete," she says.

But despite what many say is the impracticability of break-up (the Government would be open to legal challenges and the outcome might do little to dent high grocery prices) the threat appears to have transformed the supermarkets' approach to public relations.

In the past 12 months both Foodstuffs (New World, Pak'nSave, Four Square) and Woolworths (Countdown, Fresh Choice) have embraced plans to cancel their land and lease covenants, which help prevent competition and to pursue a code of conduct.

New Zealand's $22 billion grocery market is dominated by two retail players. Photo / NZME

With a wide smile, Rich calls it a damacene conversion, noting that she is simply pleased by the recent enthusiasm figures like Chris Quin, CEO of Foodstuffs North Island, have found for reform.

"We were asking and asking the supermarkets for a voluntary code of conduct. For years. The last time we broached the subject with Foodstuffs was in 2018 and we were knocked back pretty decisively," she says.

It was a defeat which fuelled her determination to pursue mandatory change. Around that time she engaged competition law specialists Matthews Law and the firm supplied the FGC with a shopping list of possible law changes to "address supermarket buyer power".

They included changes to broaden the test for abuse of market power, for example, and a prohibition against "unconscionable conduct", typically to give smaller players power beyond the terms of a contract. Both amendments have now passed into law.

The list also included a legal change to allow the Commerce Commission to undertake market studies: detailed research into a particular market where there are concerns that competition is weak or distorted.

Indeed, that ball was already rolling. Started under the National-led coalition in 2016 and 2017, and passed into law by the newly minted Labour-coalition in 2018, the commission's new powers were quickly put to use: first to consider the retail fuel market, and then the grocery sector.

The ComCom's findings, and the Government's response, remains contentious in some quarters. The supermarkets contend that the regulator has exaggerated their profitability. And market-oriented groups like the New Zealand Initiative have welcomed changes like the prohibition on anti-competitive land and lease covenants (and would like to see more action in the dismantling of restrictive planning and overseas investment rules); however, they've rejected, as over-regulation, such measures as the requirement for supermarkets to wholesale to competitors.

A contingent of Rich's own FGC members - large suppliers who tend not to suffer from a power imbalance in their dealings with supermarkets - are also wary of the expanding ranks of officials and more regulation.

Rich acknowledges that it hasn't always been easy to promote the interests of such a disparate group. But it's unsurprising that, in the end, she has fought most fiercely in the corner of the smaller businesses, many of them food manufacturers, often family-owned.

Those who've watched her since her days in Parliament have been reminded of the stand she took in 2005 against then-National Party leader Don Brash; back then she refused to toe the party line on welfare reforms, siding with unemployed mothers.

Ultimately, Rich says, you have to follow what's in your heart and to know when it's time to move on.

Now, she says, is the right time for her. At the FGC, she's handing over to Raewyn Bleakley, who has considerable experience both in government and beyond, running industry associations. And this is not retirement. Rich expects to start or join another venture, a business, perhaps, working to achieve regulatory change. But in the short term she'll take a break. That'll involve an online course or two, but the work will be done against the ever changing backdrop of Stewart Island's Easy Harbour, where she owns a house.

She'll read and bake and walk, trading her pearls for a raincoat and a stout pair of boots, at least for the time being.