Opinion | The Pioneers Pushing For Change For the New Zealand Consumer

Article submitted by Hexis Quandrant (HQ). It can also be found in the Supermarket News Magazine HERE.

New Zealand has one of the most concentrated grocery retail markets in the world with its duopolistic players Foodstuffs and Woolworths owning 90% market share. As a result, New Zealand consumers pay some of the most exorbitant pricing in the world for their groceries. Even now with the NZ Commerce Commission’s Final Report on the New Zealand grocery market consumers will still pay high prices for their groceries for a long time to come. 

Not surprisingly this has got many upset.  The cry for change has been ringing loud for two decades now. They’ve been some notable voices pushing for change in the New Zealand market for years and they should be applauded.  Let’s look at four of these pioneers. 

Brief Overview of Commission’s Final Report 2022

The NZ Commerce Commission’s Final Report on the New Zealand grocery market handed down on 8th March 2022 made it clear that the current market isn’t working, and so change is needed.  To help bring about change they have recommended things like implementing an Industry Regulator and eliminating restrictive covenants that have been utilised by the duopoly to protect their local market positions. We need to remember that such changes won’t happen overnight, they will take time, so the New Zealand consumer won’t benefit from them immediately. 

The Commission’s report has been received with mixed reviews from right across the market. There has been much commentary looking at its strengths, weaknesses, and whether it’s been beneficial for New Zealand or not. Many have argued that the Commerce Commission hasn’t delivered a strong enough stance as the duopoly hasn’t been completely broken.

Voice One: Matthew Tukaki

National Māori Authority Chair Matthew Tukaki has come out arguing that the Māori have been let down by the report’s findings.  He has been pushing for change to the retail market for years now with wanting to give a voice to Māori retailers and suppliers who he believes have been mostly left out by the two big players - Foodstuffs and Woolworths. I agree that more needs to be done for Māori consumers and business. as they have clearly been at a disadvantage for years now not properly being represented in the market. The appalling treatment of Sealord being the most recent example.

However, long-term change that benefits Māori for many years to come falls outside the Commerce Commissions mandate. Any attempt to influence immediate change by the Commission would only lead to a lengthy taxpayer funded legal battle with the reigning duopoly placing further pressure on the already stretched wallets of New Zealand consumers. 

Voice Two: Katherine Rich 

NZFGC Chief Executive Katherine Rich has been a strong voice championing the rights of the New Zealand consumer for well over a decade. Sitting on various boards and positions she has had an insider view into the highly concentrated New Zealand retail market. In response to the Commission’s final report, she has come out and said, “there is still a duopoly, and ideally there needs to be two or three more sizeable players in the market for there to be genuine competition. It remains to be seen if recommendations to improve wholesale distribution and land availability will be enough to encourage new entrants”.  

Mrs Rich wants to see the entrenched culture and paradigm of such a highly concentrated retail market changed so consumers will finally have the fair prices for groceries they have been wanting for so long now. 

Voice Three: Eric Crampton

Respected NZ economist Dr. Eric Crampton has been right at the forefront of heralding change to the New Zealand grocery market for several years now. He has been a strong and vocal opponent to the duopoly and has expressed his views many times. His response to the Commission’s final report has been “The report’s most substantial recommendations focused on removing the barriers that hinder new entry. It’s about time”. 

This perfectly encapsulates what Crampton has been arguing all along: that New Zealand must be open for business. I agree wholeheartedly with Dr. Crampton’s viewpoint.  Now it seems with the final report that New Zealand being finally open for business is within reach and so is a reality not just a wish. 

Voice Four: Ernie Newman

Ernie Newman, a Waikato-based consultant, and strong opponent to the duopoly has been left disappointed with the Commission’s final stance on the market. Newman has come out saying that the duopoly “will be heaving a massive sigh of relief at the Commerce Commission’s 609-page final report on the retail grocery sector.” According to Mr Newman despite some of the changes recommended by the Commission it could have been much worse for the duopoly. Mr Newman is correct, and both Foodstuffs and Woolworths may well have popped the champagne considering the verdict, but let’s remember that the honeymoon won’t last forever. So, the duopoly eventually will lose the enormous power it’s had for years as scrutiny continues.

The above four voices are just some of the opponents advocating the need for change to the NZ market. There are many other voices of course but I’ve chosen to highlight these four. What now must happen for change to occur to the market is that the relevant people must come together and come up with a viable and scalable solution that instigates change to the market benefiting the NZ consumer once and for all.

Where to from here?

Change that benefits consumers will take time but must be initiated now. It cannot just be delayed where months and years pass without nothing happening. Momentum must occur before 2022 ends. New Zealand clearly needs less talking and more action including some of the following to take place in the next 12 months:

  • Introduce the Mandatory Grocery Code of Conduct immediately – a strong code undiluted by retailer pressure. 
  • Employ an Industry Regulator, preferably from overseas without local biases
  • Ensure wholesale access to stock at competitive prices for fringe retailers to increase grocery competition now
  • Legislate sites to be released from restrictive covenants immediately
  • The government should provide ground rules to and for potential international entrants
  • A list of international entrants should be invited to explore entry into New Zealand for development including Aldi, Coles Australia, and Dairy Farm, to less obvious options such as Amazon and Richard Branson’s Virgin Group which has created an empire out of breaking up duopolies by delivering value to consumers
  • Engage with Iwi Groups to encourage a local operator to be launched instead of international entrants
  • Incentivise new entrants to establish a wholesale supply solution to service the fringe retailers in a more meaningful way than occurs today

Remember talk becomes cheaper by the minute if what needs to be done is delayed. New Zealand needs to finally become open for business. This only happens if the talking stops and the actions commence within 12 months of the report being handed down.

The New Zealand consumer continues to suffer due to exorbitant prices for essential groceries which are becoming luxury goods to some parts of the community. More needs to be done, and it needs to be done now!

Article submitted by Hexis Quandrant (HQ).

Hexis Quadrant (HQ) are an independent consulting firm working across consumer goods and retail businesses in Australia and New Zealand. With extensive experience in sales, marketing and category, they specialise in building bespoke solutions to business-critical problems that include strategy, planning, negotiations and trading terms.

Its team is made up of industry professionals that have worked at executive level and above in a range of local and international blue-chip businesses across multiple channels and markets.