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Countdown has told the country’s market regulator that the price of groceries has fallen in real terms over the past 10 years and does not seem high compared to overseas.
Commerce and Consumer Affairs Minister David Clark last year directed the Commerce Commission to conduct a “market study” in the $ 21 billion grocery industry.
New Zealand had one of the most concentrated grocery retail markets in the world and there were signs that competition in the sector had weakened over time, Clark said.
But Countdown and rival Foodstuffs ignored the concerns in filings released by the Commerce Commission on Thursday, essentially saying all was well within the sector.
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The presentations came as the commission called on the public and supermarket vendors to respond to their concerns, giving them the opportunity to complete an anonymous survey.
Documents released in January revealed that officials had wanted 16 months to complete the study, but Clark instructed them to do so in a year.
unpack
Foodstuffs says a tendency for people to go on more regular and smaller “shopping missions” is working against bg chains.
Countdown said in its presentation that grocery food prices had “fallen in real terms” over the past 10 years, rising at an annual rate of 1.3 percent per year, which was slightly below the average inflation rate for the United States. 1.58 percent.
Its own average annual price increases had been lower, 0.7 percent, it said.
Spending on food, excluding restaurant meals and takeout, fell from 9.5 percent of people’s average household spending to 8.1 percent in 2019, he said.
The company said making comparisons abroad was difficult, but a study it commissioned using data from the Economist Intelligence Unit found that in “purchasing power parity” terms, average grocery prices in Auckland weren’t high in any country. compared to other large OECD cities.
Countdown revealed in its filing that 12 percent of its sales were now online, breaking down where each dollar spent in its supermarkets went.
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Of every dollar delivered to the checkout, 63 cents were paid to vendors, 19c was spent on costs, including personnel, 13c was paid in GST, and 2c was spent on interest costs and other taxes, with only 2.4c for the company for profit, he said.
“The New Zealand grocery retail sector is very dynamic and rapidly changing, and we consider it very important that the commission takes all of these competitors and dynamics into account to get a complete picture of how competition in this sector works. “, He said.
The main rival, Foodstuffs, was more circumspect in lifting a lid on its operations in its presentation, but it also seemed to give no ground to competition concerns, listing everyone from MyFoodBag, The Warehouse, KMart, Uber Eats and Mighty Ape, and many intermediate companies, like their competitors.
“A key trend in consumer shopping habits is that, increasingly, not all consumers engage in an entire store and instead tend to go on more frequent and smaller shopping missions,” he said.
“Convenience is likely to be a more relevant factor for smaller missions, as the ‘price, quality, range and service matrix’ at smaller retail outlets and specialty stores in many cases provides a competitive advantage. on full supermarkets, and at least what represents a strong competitive restriction. “
The supermarket study is expected to result in the commission requiring an industry code similar to Australia’s Food and Grocery Code of Conduct or the UK’s Grocery Supply Code of Practice, to protect suppliers from power. Market Report from Countdown and Foodstuffs.
Countdown indicated in its communication that it was making progress in its relationship with suppliers, posting a chart that appeared to show the proportion of suppliers who said they had a “good or excellent” relationship with the company, increasing dramatically from just over 50 percent. in 2018 to almost 80 percent last year.
Things
Countdown says that 63 cents of every dollar spent in its stores goes back to suppliers and another 32 cents is consumed for costs and GST.
But the Food and Grocery Council, which represents major food manufacturers, said in a substantial presentation that there was “significant anecdotal evidence of supplier exploitation” in the industry.
The complaints included retailers making “arbitrary deductions” from invoices and threatening to stop selling products or move them to a lower shelf as a negotiation tactic, it reported.
“The supply of groceries in New Zealand is a duopoly with a limited competitive edge,” he said.
The council urged the commission to further examine the profitability of supermarket companies, noting that Foodstuffs was made up of two cooperative groups, with independently owned stores.
“A true reflection of the profitability of grocery retailing in New Zealand can only be obtained by considering cooperatives as a whole, including each member of grocery retailing,” he said.
“That said, media reports that supermarkets are ‘worth tens of millions of dollars’ can provide a simple clue.”
Consumer NZ also encouraged the commission to continue, saying it had “great concerns about the high level of concentration in the sector and the risks this has for consumers.”
He disputed Countdown’s claim that the real price of groceries was trending downward, saying that food prices had risen faster than the general inflation rate in recent years.
“The Statistics NZ Food Price Index shows that fruit and vegetable prices increased 8.9 percent last year, while headline inflation stood at 1.4 percent,” he said.
