Progressive Enterprises lines up Woolworths

By SIMON HENDERY retail writer

Australian-owned supermarket group Progressive Enterprises is kicking the tyres of one of its two New Zealand competitors, Woolworths.

Progressive has applied for Commerce Commission approval to buy the 83-store Woolworths group, which includes the Big Fresh and Price Chopper chains, from Hong Kong-based Dairy Farm International Holdings.

The commission would not comment last night on how it was likely to view the application, but the Consumers' Institute said a reduction to two major operators would be bad news for grocery buyers.

Progressive, owned by Perth-based Foodland Associated, has about 26 per cent of the market. Woolworths holds 10 per cent.

Foodstuffs, which owns the New World, Write Price and Pak'N Save chains, is New Zealand's biggest grocery group with about 58 per cent market share.

Woolworths' owner, Dairy Farm, said last night it had not decided whether it would sell its profitable New Zealand business.

Dairy Farm group finance director, Ian Gurant, said the approach from Foodland would be considered once the Commerce Commission's stance was known.

"That approach [from Foodland] was unsolicited, unexpected and very recent. It [Woolworths] is a fine performing business ... We are not actively soliciting offers for this business."

The Commerce Commission's business competition branch director, Geoff Thorn, said that under the Commerce Act, the Commission had until June 11 to reach its decision, although an extension of the deadline was possible.

"There are no simple rules. There are no magic numbers for market share which says this will or won't go ahead. It's worked out on a case-by-case basis and we apply the principles which are listed in the business acquisition guidelines."

Progressive Enterprises managing director Ted Van Arkel refused to comment last night and Foodland executives could not be reached.

Consumers' Institute chief executive David Russell said reducing the number of supermarket operators to two would make the competitive market very fragile and could lead to higher prices.

Mr Russell said Progressive would be prepared to pay a premium for Woolworths to win greater dominance in the market.

"When you get down to two dominant supermarket [groups] in New Zealand, I think you've really got to look very closely at whether that is genuine competition or whether that is a duopoly."

While Woolworths has been a highly successful business for Dairy Farm, the company's Franklins supermarket chain in Australia has racked up big losses.

The group last month agreed to sell the 287-store chain, which is being divided up between other operators, although the sales have run into problems with Australia's Competition and Consumer Commission.