Grocery Market Study Report Shows Big Problems

The New Zealand Food & Grocery Council welcomes the Commerce Commission’s draft report on its market study into the grocery sector.

“This is a most thorough report that delves very deeply into all the market and competition issues concerning consumers, retailers and suppliers,” said Chief Executive Katherine Rich.

“The Commission has left no stone unturned and has compiled a meticulous and accurate reflection of the grocery market.

“The report shows there are big problems in the market, and consumers would get better prices, wider ranges, and better quality if there was increased competition.

“It accurately reflects the reality faced by many suppliers of food and grocery products to the two supermarket chains around the imbalance of power in negotiations on issues such as price, promotions, and discounts.

“The Commission’s finding that competition in the wholesale purchasing of groceries is not working well for many suppliers, and that being reliant on just two major retailers has allowed the retailers to push excess costs, risks, and uncertainty onto suppliers, with fears of delisting if they do not agree to their terms, vindicates the Food & Grocery Council’s stance.

“It also identifies the lack of competition is having a negative effect on the range of products available, the innovation open to manufacturers, and investment in the industry.

“We are heartened by the Commission pointing to two options to strengthen supplier bargaining power: a mandatory industry Code of Conduct and allowing suppliers to bargain collectively.

“We were particularly pleased the Commission concluded it would be beneficial to introduce of a mandatory code of conduct to strengthen bargaining power and prevent current conduct which reduces the ability and incentive of suppliers to invest and innovate.

“This is exactly what is needed to give suppliers something closer to a level playing field when it comes to negotiations.

“The Food & Grocery Council has been advocating strongly for these for some years, and we currently have a petition before a Parliament Select Committee calling for a mandatory code of conduct.

“Everyone benefits from a flourishing food industry where suppliers have a genuine chance to negotiate and receive fair terms, and which ultimately benefits consumers in terms of innovation and range.

“The Food & Grocery Council looks forward to working constructively with the Commission’s process and making progress on the next phase of its study.”