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Some supermarkets threaten to “remove” vendor products from the shelves if they talk about tactics like 45 percent margins and theft billing, says a vendor industry group.
The accusations come as the government orders supermarkets to carry out a year-long market study promised by the Commerce Commission to see if New Zealanders are paying fair prices for groceries.
The study, like the fuel study completed by the commission in December last year, will check whether there is enough competition in the market, which is dominated by two large supermarket chains.
The Food and Grocery Council, which represents vendors, says it welcomes the study, but also wants a mandatory industry code of conduct to curb what it calls “egregious behavior” by criminals.
Vendors face significant costs, including billing for shoplifting, said council executive director Katherine Rich. Control.
“For your product to be available today, you have to offer supermarkets a gross margin of between 30 and 45 percent, just to have it on the shelf,” he said.
“Then there will be additional promotion costs, shelf costs, marketing costs. There will be additional claims, refunds, any opportunity to get more income from you, the list is endless.
“I think most [suppliers] they have little or no bargaining power … They are forced to be in a position to be price takers, it’s like, ‘take this into account or don’t supply us, or remove your product.’
The code proposed by the Food and Grocery Council would protect vendors from threats of products being taken off the shelves, Rich said.
“[Under the code] you have to have business reasons, instead of saying, ‘I don’t like you complaining to me, I’m going to remove your product’ or ‘If you don’t pay for this, I’m going to remove your product.’ Elimination is usually the default tactic.
“That is very, very serious because in a market structure where there are two main supermarket teams, if you are kicked off the shelf you can lose between 45 and 55% of your sales.
“For some New Zealand companies, that’s the difference between surviving or closing their factories, and that’s why I think we’ve seen so much manufacturing overseas, and we’re more reliant on imports,” Rich said.
Most relationships between supermarkets and suppliers have a culture of health, he said, but at the store level there is evidence of harassment by supermarket owners.
“Of course no one can complain out of fear of being eliminated. And that’s why if you ever try to get a grocery supplier … to discuss things, you won’t find anyone who is willing to speak up, because fear of retaliation is very genuine.
“The Commerce Commission is well aware that it is a market environment in which most suppliers do not feel free to speak out or fear retaliation.”
Rich said the Food and Grocery Council will provide anonymized scenarios based on the behavior it has seen.
“I am very confident that wholesale prices from New Zealand food and grocery manufacturers are fair and reasonable, because fat was removed from companies years ago through these negotiations.
“But margins are still high in New Zealand. In fact, some industry commentators will say that New Zealand and Australia have the most profitable supermarkets in the developed world, and that’s because they have very high margins – the difference between revenue. and the cost of goods.
“Some will say there is competition. Actually, no, there isn’t, if you think about where you get your washing powder and other grocery items.
“So when you have that privileged position of a market duopoly, you have to have additional responsibilities and responsibilities. That’s what a study will look at, and that’s what we think a code will deliver.
“We have a lot of food and grocery manufacturers that have closed operations or had to shut down or move their product overseas for development because you just can’t make a normal profit.”
Rich said New Zealand supermarkets have the most concentrated market in the world. That said, I can’t say it’s absolutely just supermarkets, because there are some factors in the New Zealand market that are important.
“We are one of the few countries in the world that puts GST on food and groceries, unlike most countries. We are at the bottom of the world and it is expensive to ship the freight here, we have the geographic size of Japan and a it markets the size of Sydney. So it’s complex, but it’s all of these things that a market study will look at. “
Australia has a code of conduct for the relationship between suppliers and supermarkets, but it is only voluntary.
Rich said he would like to see a similar code enforced here and monitored by the Commerce Commission.
“It won’t solve all problems. Stocking the grocery market is never for the faint-hearted … but it will make a difference. Overnight, he ruled out some of the most egregious behavior seen in both Australia and the UK.
“Things like forcing vendors to pay for store theft, which is entirely a retail cost, making arbitrary deductions from payments just because you can. It will return a level of professionalism to the stores that are the problem, the minority of stores “.
In one example, Rich said Control one store took inventory and charged a vendor to pay the difference between the store’s sales and what was on the shelf.
“I would say that retail theft and a bunch of other costs that are genuine retail costs should be borne by the retailer. It is unfair to keep paying the cost back to the providers for payment as a kind of arbitrary cost.
“It’s certainly a company culture that needs to change. And some store owners do a very good job, but there are some who haven’t really gotten the memo and are getting away with it.
“I always think that sunlight is the best disinfectant, which is why I have been talking openly about the kind of behavior. Because certainly when it comes to treating merchants, most of the women who go to those stores at ungodly hours to stack the shelves, they deserve to be treated better and work within a better grocery culture.
“That is what we expect as a result of this market study and hopefully it will lead to a grocery code of conduct.
“In some cases, I think they are store owners who actually behave as if this type of culture should be seen as a badge of honor. Some of it was not even acceptable last century and certainly not acceptable in 2020.”
Rich said that in many cases those operators can be described as thugs.
“There are some stores in the Auckland area where our members will not send a representative, and they will not send a merchant because they believe that the environment is harmful to their mental health. Now what does that tell them?”
Foodstuffs and Countdown were contacted for comment on these allegations, but both declined to be interviewed.
In a statement to RNZ, Foodstuffs head of corporate affairs Antoinette Laird said: “Our focus for about eighteen months has been on a customer-centric business transformation program that puts shoppers first, putting us allows us to anticipate your future needs while listening and responding to the wealth of knowledge they provide in today’s market.
“This positions us to ensure that our locally owned stores and our online offering are in good shape to deliver what New Zealanders need for the future.
“We also work in accordance with our ‘Supplier Relationship Charter’, which is our commitment to operate in a reasonable, ethical manner and with sound business guidelines. The Food Cooperative values strong and positive relationships with suppliers and considers all suppliers as important business partners.
“We are committed to working with the Commerce Commission to ensure that the study is effective for the benefit of all New Zealanders.”
A spokesperson for Countdown also offered a written statement: “We work hard every day to make food as affordable as possible for our customers. The New Zealand grocery market is very competitive and this can be seen by the wide variety. of options available to customers, including supermarkets, specialty stores, fruit and vegetable stores, butchers, meal subscription services and more.
“We welcome the opportunity to demonstrate this in an open and transparent manner, and we will cooperate fully with the Trade Commission.”
