"We're all for discussion about how to improve competition and making it easy for anyone to do business and create better outcomes for New Zealand grocery customers.
Affordable and fair groceries, strong competition and a better deal at the checkout are goals we support 100 percent. The question is whether breaking up New Zealand's largest locally owned grocery co-operatives is the best way to achieve them.
National's proposal would represent one of the most significant interventions ever contemplated in New Zealand's grocery sector. Before implementing a change of this scale, New Zealanders deserve a clear understanding of the benefits, costs, risks and timeframe involved.
Customers will rightly want to know what savings they can expect, when those savings would be delivered, what the restructuring would cost, and whether the promised benefits justify the disruption involved.
Foodstuffs North Island is a co-operative of more than 320 locally owned and operated supermarkets. Those owner-operators, together, own the co-operative that provides the scale, buying ability, supply chain, distribution network and technology that help them compete.
Sometimes Foodstuffs is discussed as though it is a single supermarket company. It isn't.
The hundreds of independent grocers who make up the co-operative operate in a market that is already intensely competitive and becoming more competitive all the time.
Pak'nSave stores compete daily with New World stores. New World stores compete with other New World stores. Pak'nSave stores compete with other Pak'nSave stores. All of them compete with Woolworths and a growing range of specialist and online retailers.
Those owner-operators succeed by attracting customers, investing in their stores, supporting their communities and delivering value. The co-operative exists to give those independent businesses the scale and capability they need to compete effectively in a demanding market.
We see New Zealanders over 4 million times a week and recognise that New Zealanders are concerned about the cost of living and the affordability of groceries. We support changes that genuinely increase competition, improve efficiency and deliver lower prices at the checkout.
It's also important to keep the economics of grocery retailing in perspective. Across our co-operative, supermarkets earn around 3.6 cents in profit from every dollar spent by customers. That does not mean there is no room for value improvement, but it does mean any major intervention should be assessed carefully against the outcomes it is expected to deliver.
The MBIE report proposes allowing Foodstuffs to merge nationally while then requiring the separation of its grocery chains. The report itself suggests many of the projected benefits arise from enabling Foodstuffs to operate nationally.
That makes it important to distinguish between the benefits of national scale and the costs, complexity and disruption associated with subsequently breaking apart the chains.
If the benefits are primarily generated by creating a national Foodstuffs business, it’s worth considering whether the additional restructuring and risk is necessary to achieve those outcomes, particularly given the significant cost and uncertainty that would accompany such a process.
The proposal also creates an unusual competitive outcome. It would fundamentally restructure New Zealand's largest locally owned grocery co-operative while leaving a substantially larger Australian-owned competitor largely unaffected.
This is not simply a debate about corporate structures, but hundreds of locally owned businesses, thousands of New Zealand jobs, and a food distribution network that serves communities throughout New Zealand.
We support competition. We support change that delivers better outcomes for customers. And we support reforms that can be shown to make a meaningful difference to grocery prices.
But structural reform on this scale should be guided by evidence, not assumptions.
Before imposing significant disruption and risk on hundreds of New Zealand family-owned businesses, policymakers should be able to demonstrate that the benefits are substantial, that customers will see them within a meaningful timeframe, and that those benefits clearly outweigh the costs, risks and uncertainty involved."
by Chris Quin, Foodstuffs North Island
