Germany-based Aldi has a large presence in Europe, the US and Australia. Photo / Getty Images
The Government canvassed two international grocery giants as part of its supermarket shake-up, and sought their views on what regulatory change would ease their expansion into New Zealand.
In April, Minister for Commerce and Consumer Affairs David Clark spoke to representatives of both American multinational retailer Costco (already preparing to open in New Zealand) and German discount grocer Aldi.
This week Aldi said it has "no current plans" to expand into the country, despite Acting Prime Minister Grant Robertson's contention that the company is interested in entering the market.
In an interview with RNZ on Tuesday, Robertson named Aldi as one of "a number" of international players considering a foray into New Zealand in light of the Government's plan to shake up the current supermarket duopoly.
Speaking on behalf of Aldi, Micaela Corr of Ogilvy PR, confirmed the retailer's position, and declined to elaborate on a conversation representatives of the company had with Clark.
Robertson's comments match remarks made by Clark in April, when he told NewstalkZB that he'd spoken to "a number" of international grocery players not operating in New Zealand in an effort to discover what might induce them to set up shop.
A response to questions put to Clark's office under the Official Information Act (OIA) suggests that the Minister solicited the views of just two such players.
"I contacted two international grocery players (namely Costco and Aldi), both of which accepted the invitation," Clark said.
Costco is currently planning to open its first store in Auckland's Westgate in August, and has resource consent for a large-format store in Selwyn, Christchurch. Germany-based Aldi has a large presence in Europe, the US and Australia.
Briefing notes supplied to Clark by the Ministry of Business Innovation and Employment (MBIE) suggest he held a 30-minute Zoom call with Costco on April 7, and that he spoke to Aldi representatives on April 13.
The notes were redacted and in the case of Aldi only an excerpt was provided.
Talking points suggested that Clark ask Aldi representatives their views on the Commerce Commission's report on competition in the New Zealand grocery sector, whether the company had "thought about entering the New Zealand market", and what factors were limiting such an expansion.
The briefing for Clark's conversation with Costco provided similar questions. It noted that Costco "has not indicated it wishes to discuss any specific matters and has not provided your office with an agenda."
The Herald OIA also requested all notes and summaries of the conversations the Minister had with international grocers, including follow-up communications such as emails. None were identified.
On May 30, the Government announced a series of steps aimed at increasing competition in the grocery sector. Among the most salient is a mandatory code of conduct to govern dealings between the country's duopoly supermarkets (Foodstuffs and Woolworths) and their suppliers, and a measure, as yet without details, to force changes to wholesaling whereby incumbent supermarkets would be forced to sell goods to competitors. Both measures will be overseen by a dedicated regulator.
Gary Mortimer, an expert in supermarket retailing and a professor at the Queensland University of Technology, said New Zealand is a "reasonable next port of call for Aldi" which likes to target markets which are underserved by competition.
Aldi is popular in Australia, where it has more than 570 stores and employs some 13,500 people. It claims to save families who switch to its supermarket $2400 a year.
However, Mortimer said the company is more likely to be put off than pleased by the changes the Government has announced for grocery wholesale.
"Aldi is likely to see complicated wholesaling rules as a barrier to entry," Mortimer said.
The company sources its apparel and general merchandising goods globally. And the majority of its products are purchased through contract manufacturing and sold under the company's own private labels.
"It won't be interested in purchasing wholesale from local New Zealand competitors," he said.
Moreover, Mortimer said Aldi may be wary of being ensnared by the requirement to wholesale to competitors, should it pursue a New Zealand expansion.
It's currently unclear which supermarkets will be subject to a regulated mandate to supply competitors, now or in the future.
An MBIE spokeswoman said officials are "working on options" for such a mandate, "including the process and 'trigger' for designating certain retailers to provide supply under the regulatory wholesale access regime".
"I expect more information to be available in the coming months," she said.
Planned reforms that Aldi and other prospective new entrants are likely to welcome include: a prohibition on land covenants, which incumbent supermarkets have used to keep prospective competitors away from their turf, and government planning-law reform to ease the passage of building plans.
The Government's outlined effort to boost competition in the grocery market responds to a report by the Commerce Commission which found that competition in the duopoly-dominated sector is weak, and prices are among the highest in the OECD.
The insipid state of competition is currently exacerbated by a hefty rise in prices; inflation is currently running at a 30-year high, and stats NZ reported that grocery prices rose 6.4 per cent in the year to March.
In last month's budget, the Government announced a $350 cost-of-living payment to a swath of middle-income earners to ease the bite of higher prices.
And in measures aimed at wooing sour public opinion, Woolworths (Countdown and Fresh Choice) announced a temporary price freeze on 500 items and Foodstuffs (Pak'nSave, New World and Four Square) said it would cut the price of more than 100 grocery items by 10 per cent.
The idea of ringing around international players to canvass their views on entering the NZ market likely originated with Eric Crampton, chief economist at the think-tank the New Zealand Initiative.
Last year, Crampton playfully suggested the Commerce Commission draw up a list of international grocery players and write them "a nice letter" telling them the country has dismantled its regulatory barriers to entry and is open for business.
Crampton's list was more exhaustive than Clark's and included: Aldi, Lidl, Kroger, Sobeys, Loblaw, Trader Joe's and Whole Foods.
National's consumer affairs spokesman Andrew Bayly said any additional competition in the grocery market was "desirable" and measures that ensured that happened were to be welcomed.
Regarding Clark's actions, Bayly said the only issue was ensuring he had done it properly and complied with Cabinet Manual.
"Even if he did hold appropriate conversations with potential competitors, we're still concerned that the proposed changes are only window-dressing and won't lead to substantial change for New Zealand families experiencing a cost-of-living crisis."
Bayly said just changing the covenant arrangements was unlikely to lead to significant change.
Asked yesterday why he hasn't solicited international grocers' views more widely, Clark said he is "very focused on creating the conditions for competition to flourish."
"I know there are iwi groups who are looking at the opportunity, The Warehouse is considering what its next steps are, and it would be great if we see other smaller players expand in the market."
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