Supermarket suppliers not being influenced on pricing, Food and Grocery Council says

Delivery-based supermarket Supie says it has received pushback from suppliers to up their prices. Photo / 123RF

The Food and Grocery Council says it has no evidence to support allegations large supermarkets were potentially pressuring suppliers over pricing.

This week, delivery-based supermarket Supie claimed some suppliers appeared to be putting pressure on Supie to increase food prices and suggested the two large supermarket operators were behind that.

Supie told investors by email it was making an impact on the market, but “we’re seeing the push back from this with multiple suppliers reaching out to us concerned that our prices are competitive with the duopoly (Foodstuffs and Woolworths) and demanding that we increase retail pricing, despite maintaining reasonable profit margins.”

Supie founder Sarah Balle told RNZ the approaches from suppliers came after the company implemented a more competitive pricing strategy in January.

“We’re not entirely sure why suppliers are putting pressure on us. We know there is a duopoly market in New Zealand,” she said.

“We can’t confirm that the duopoly is putting pressure on our suppliers, but for them [suppliers] to request us to increase our retail prices means that there is some pressure coming from somewhere.”

Food and Grocery Council (FGC) chief executive Raewyn Bleakley told the Herald: “No suppliers have reported to FGC any pressure on pricing from the major retailers at this time.

“This is a highly competitive market and suppliers are under pressure on many fronts, which means they have to be more mindful of what they can and cannot do,” Bleakley added.

Bleakley said FGC was “made aware of Supie’s concerns recently and responded by promptly reminding members of their obligations under the law and providing them with the Commerce Commission’s guidance on this issue”.

Balle told the Herald the company has had an uptick in suppliers asking them to increase their prices since Supie moved to an affordable pricing strategy.

Balle said the company is choosing to keep grocery prices low to combat cost of living pressures on Kiwis and has rejected the requests from suppliers to raise their prices.

She said, “We know consumers are feeling the pain in the cost of living and we want to ensure Kiwis are getting affordable and healthy food.”

“These sorts of politics in the industry make it difficult to have affordable prices for consumers,” Balle said.

She added: “The thing that stops this behaviour is healthy competition.”

Chaz Savage, a co-founder at Auckland-based delivery supermarket Teddy, said he hasn’t received any pressure from suppliers but noted the landscape is competitive.

“Everyone’s going to struggle to keep up with prices at Pak’nSave,” Savage said.

He said more work needs to go into Government efforts for innovation and competition in the grocery space.

Last month, RNZ reported on claims from the Warehouse on the supermarket duopoly of Foodstuffs and Woolworths limiting competition in fresh food and grocery retail.

Foodstuffs' New World and Pak'nSave and Woolworths-owned Countdown make up NZ's supermarket duopoly. Photo / NZME

Chief executive Nick Grayston said the company was keen to expand its grocery product lines, but it had been unable to secure a competitive wholesale arrangement with either of the two big supermarket chains, despite a recent ruling by the Commerce Commission aimed at increasing competition in the sector.

“The problem with that is the [wholesale] prices they’re able to offer so far, have not been any better than what we’re able to achieve on our own,” Grayston said.

He said the two big supermarket operators received special discounted wholesale prices from major suppliers, which they were either unable or unwilling to pass on.

He said those special trade discounts gave the duopoly better profit margins than were available to their retail competitors.

Grayston told the Herald: “The status quo is not giving New Zealand families the great value grocery options they need.

“We are committed to keeping our prices as low as possible on key grocery essentials to give New Zealanders the fair prices they need,” he said.

Balle told the Herald, “Suppliers can’t demand that retailers set a particular price. We’re wondering where this is coming from.”

She said the grocery retailer “can only assume that because we’re in a duopoly, that’s where pressure is coming from”.

Foodstuffs declined to comment while Countdown has not responded when asked for a comment.

Balle said Supie has notified the Commerce Commission about supplier requests.

A Commerce Commission spokesperson told the Herald it had not received a formal complaint about the issue.

“As we don’t have details of the alleged conduct we cannot comment as to whether the Commerce Act has been potentially breached, the spokesperson said.