Inside the new northern distribution centre, Māngere. Photo / supplied
New Zealand's biggest supermarket chain has released financial results for its latest year, showing how much revenue the northern and southern operations made from New World, Pak'nSave, Four Square, Liquorland, Gilmours and other stores.
But a retail analyst says not to read too much into the Foodstuffs figures as the financial statements reflect only part of the business.
Supermarket financials are in the spotlight after a recent Commerce Commission draft report found the country's two major supermarket groups were enjoying profits that were "consistently and materially above what we would expect in a workably competitive market".
Accounts out for Foodstuffs North Island and Foodstuffs South Island show combined revenue in the latest year increased to $6.9 billion, but owner/operator distributions were cut for the northern owners due to higher expenses from Covid.
Tim Morris of Coriolis Research said he believed the combined $6.9b was nowhere near the full amount the wider Foodstuffs' operations made because each individual store is owned and operated by a family or individual.
"If you want to know what Foodstuffs retail stores turn over, there's no way to get that."
The latest accounts were only for part of the business, Morris said.
The Commerce Commission says the whole grocery sector pulled in $22b of revenue in the year to December 2020. Foodstuffs and Woolworths, which operates the Countdown chain, are the two major players.
Foodstuffs North Island revenue rose from $3.5b last year to $3.7b in the year to March 30, 2021. But operating profit fell from $218m to $205m for the business which was allowed to operate throughout the lockdowns last year and this year.
That operating profit drop is due to operating expenses which rose from $553m to $596m. So the company paid lower distributions to its members, from last year's $169m to $157m this year. Profit before distribution to members dropped from $171m to $156m.
Foodstuffs South Island is a separate co-op, with 220 southern stores. Its members got more this year.
Its annual report for the year to February 28, 2021 showed revenue also up, from $3.1b to $3.2b. Net profit after tax fell from $8m last year to a $2.3m loss this year, mainly due to operating expenses rising from $274m to $306m.
Distributions to Foodstuffs South Island members were rebates, dividends and imputation credits totalling $315.7m, up $24.4m or 8.4 per cent.
"The significant rise comes from monthly rebates, up $20m due to higher sales volumes and a continued increase in the proportion supplied from our distribution centres," the annual report said.
"Despite a net trading loss of $2.3m, our total recognised income and expenses, taken to balance sheet reserves were a positive $4.3m. Abnormal expenses noted from property and investment provisions, and a tax credit due to changes in building depreciation were offset by investment revaluation gains from The Warehouse Group shares."
Some Foodstuffs business owners own the property where they trade from but mostly, the companies do.
Accounts show the value of property, plant and equipment at Foodstuffs North Island rose from last year's $1.8b to $1.9b. That is the value of supermarket stores and car parks on big landholdings, in highly-populated central suburban and city locations.
That business that owns the operations of the country's dominant food and grocery business will celebrate 100 years in 2022.
The accounts give details of the giant's financial strength in the business whose own brands include the popular household Pam's, Pam's Finest and Value goods.
The Commerce Commission has found New Zealanders pay dearly for supermarket goods.
Supermarkets could be forced to sell their wholesale businesses or some sites to boost competition after the commission warned competition in the $22b grocery sector "is not working well for consumers".
While the commission's draft market study into supermarkets did not say how much cheaper groceries should be, it said it would expect consumers to pay less if the competition was better.
"If competition was more effective, retailers would face stronger pressures to deliver the right prices, quality and range to satisfy a diverse range of consumer preferences," commission chair Anna Rawlings said.
The market could be best described as a "duopoly" with a fringe of other smaller and increasingly diverse competitors, she said. That duopoly is Foodstuffs' north and south businesses and Countdown.
A spokesperson for Foodstuffs North Island said although revenue for that co-op was up "due the privileged role Foodstuffs North Island played as an essential service through the year, the co-operative incurred a number of significant one-off costs due to Covid-19 that impacted the co-operative's operating profit and therefore distributions to members".
The revenue reported in the Foodstuffs North Island co-operative financial statements included sales between the co-operative and its member-owned stores, she said.
"Foodstuffs North Island follows the IFRS accounting standards for revenue recognition so accounts for the margin on sales that do not go directly through its distribution centre as commission [reflected in Foodstuffs North Island's gross margin]," she said.
The retail and wholesale sales that are reported in the annual report include the sales from its member-owned stores to its customers, she said.
Foodstuffs North Island, headed by Chris Quin, is locally owned, has 330 supermarkets and gets millions of shopper visits annually.
"We're a co-op so while each grocer is local, our scalable operations allow us to deliver things for our customers than others could only dream of," the business says.
In the financial year reported on, Foodstuffs North Island opened New Worlds at Hobsonville and Ormiston in Auckland.
Foodstuffs North Island's board is chaired by Dean Waddell of Tauranga's Pak'nSave Cameron Road. Directors are Brendon Jones of New World Howick, Craig McKeown of Pak'nSave Sylvia Park, Jason Witehira of Pak'nSave Albany, Karl Marryatt of Pak'nSave Kapiti, Malcolm Boyd of New World Hillcrest, Rob McGregor of Pak'nSave Papamoa, Sarah Aston of New World Milford and independents Sir Henry van der Heyden, Peter Schuyt and Jane Freeman.
The business is one of the few able to continue trading during alert level 4.
"Throughout this lockdown, our supermarkets and integrated supply chain are prepared, and our stores have good supply. We want to thank customers who have been shopping normally throughout this current lockdown and remind them their actions mean everyone has a fair chance at purchasing essential items," Foodstuffs North Island said on Friday.
Around March, Foodstuffs North Island opened a new 77,000sq m distribution centre and head office where hundreds of people work. One property expert has put the value of that new property operation at around $250m.
The company is headquartered at 35 Landing Dr in Māngere, occupying land and buildings leased for many years from Auckland Airport.
The company was registered in 1925 and was previously called Foodstuffs (Auckland), according to Companies Office records.
Today, the company has 241 shareholders and more than 90 per cent is owned by Strategic Interchange whose directors are ex-AMP property boss Murray Jordan who worked for Foodstuffs, John Street, Stuart Irons and Martin Wiseman.
The co-operative members or store grocers own around .02 per cent holdings via their own companies which have trading names not obviously often associated with the area or brand of store they own.
Stores change hands for millions. Witehira sold his New World Victoria Park this year and bought the massive Pak'nSave Albany.
How has New Zealand's oldest department store outlasted its competitors? One word: family.