Post-Cabinet press conference with Grant Robertson, joined by David Clark with the Government’s response to Commerce Commission supermarket inquiry
Who's who in grocery land, who owns our supermarkets, why is the sector the Government's focus and what about that duopoly?
Groceries are an essential purchase and a major expense for most of us.
In the year to September 2021, we spent more than $22 billion at supermarkets and grocerystores in this country.
In the year to June 2019, food was the second largest expense for us, with an average spend of $234/week.
The high level of concentration in the sector, potential competition concerns and the prices consumers pay for their groceries were reasons cited by the Government to call in the Commerce Commission to delve deep.
It delivered its finding in March, saying competition was not working well for us.
"The major grocery retailers, Woolworths NZ and Foodstuffs, operate as a duopoly with a fringe of other competing grocery retailers. Competition between the major grocery retailers is a key driver of the prices, quality, range and services offered to New Zealanders," the commission found.
Now, action is planned and already anti-competitive land covenants are being banned and talk from Finance Minister Grant Robertson is of the potential for giant supermarket conglomerate Aldi to come here.
The Government says it is acting on a lack of competition in the supermarket sector and warned it to change "at pace" or face regulation.
Commerce and Consumer Affairs Minister David Clark this week revealed the Government's response to the commission's market study.
The commission estimated Countdown and Foodstuffs were making excess profits of about $430 million a year - more than $1m/day.
As the political battle over the cost of living crisis has raged on, the Government said that it reserved to go further than the commission's recommendations if it saw the need.
Here are the big guns of our food world and some of the smaller businesses.
Foodstuffs North Island, Foodstuffs South Island
• A co-operative based business, owned by the many grocer-members who operate the stores. Each grocer is local but large-scalable operations give a massive edge. • Brands include New World, Pak'nSave, Four Square, Gilmours, Liquorland.
There are more than 400 Foodstuffs stores nationwide operating under the New World, Pak'nSave and Four Square banners, as well as Raeward Fresh and On the Spot stores in the South Island.
The major grocery retailers also have integrated wholesale functions, but largely only supply themselves and their franchisees. They own and operate central distribution centres which supply their retail stores throughout the country, the Commerce Commission noted.
Foodstuffs North Island calls itself Foodies, has 330 stores, headquartered at Auckland Airport in new purpose-built premises with New Zealand's largest warehouse next door.
"After 54 years at Roma Rd in Mt Roskill, we've moved over 1000 of our support centre team to The Landing Business Park at Auckland Airport, Tō mātou wāhi – "Our place to stand tall"," Foodstuffs says.
Foodstuffs North Island's new headquarters at Māngere. Photo / supplied
"Foodstuffs North Island Transport operates a fleet of more than 300 trucks, servicing Kaikohe in the far North, to our stores in New Zealand's capital, Wellington, and everywhere in between."
The co-op also owns Leigh Fisheries which it bought in 2019.
Foodstuffs North Island made $3.7b sales in the year to March 28, 2021, up on the 2020 sales of $3.5b. Gross profit rose from $773m to $801m.
Countdown
• A corporate model, owned by ASX-listed Woolworths. • Brands include Countdown, Fresh Choice, Super Value, Woolworths.
Woolworths New Zealand is owned by the much larger Australian-headquartered Woolworths Group and is also the franchisor of the Super Value and FreshChoice supermarkets, which represents more than 69 stores, also part of the Woolworths Group.
Countdown, owned by Woolworths. Photo / Hayden Woodward
ASX-listed Woolworths Group says it employs 210,000 people here and in Australia, serves 27.8m customers each week on both sides of the Tasman, has 19.7m online visits a week and had a group net profit after tax of A$1.9b in the latest year.
Woolworths NZ operates and supplies more than 180 Countdown stores throughout New Zealand. It also owns Wholesale Distributors, which is the franchisor to 71 locally owned and operated SuperValue and FreshChoice stores, which mainly operate in smaller centres.
Costco
• A membership model (costs $60/person annually to join to be able to purchase fuel or goods).
An American-headquartered business which sells food as well as many other electronic, sports, clothing and homeware items.
Costco will open its first New Zealand store at Westgate, on Auckland's north-west fringe. The store won't open till this winter, either at the end of August or the start of July.
Costco will bring its massive Kirkland brand to New Zealand and many other new brands.
Costco warehouse under construction in April. Photo / Michael Craig
Costco's business model aims to bring the best quality at the most cost-effective price. Only one store is not enough to shake up the sector - but Costco is planning stores in Christchurch and Wellington. It also has a fuel outlet which is undercutting others.
Again, it's only one.
Farro Fresh
Farro Fresh is a boutique upmarket offering with six stores: Grey Lynn, Mt Eden, Epsom, Mt Wellington, Mairangi Bay and Ōrākei.
While it doesn't have enough scale to challenge the large outfits, expansion is under way with further stores planned, possibly further south too.
Farro Fresh employs around 300 staff and was founded in 2006 by Janene and James Draper who had the desire to create stores to showcase the best and finest New Zealand food.
A new store is planned to open at Smales Farm, Takapuna.
Farro Fresh has raised an undisclosed amount of capital through a private investment partner which it plans to use to open its seventh supermarket next year.
Farro announced to the Herald last month it had completed a capital raise with Waterman Capital to accelerate the company's growth. It would not say how much cash was raised but it is understood to be a multi-million dollar sum.
Aldi - not yet
German-headquartered Aldi isn't in New Zealand yet, but has been long talked about as potentially coming.
Popular in Australia, Aldi has more than 570 stores across the ditch that employ about 13,500 people. It claims to save families who switch to its supermarket $2400 a year.
A "Bring Aldi to New Zealand" Facebook page has around 1500 members and regular posts calling for the giant to open here.
