Discount chain Aldi confirms it still has no plans to set up in New Zealand

Disappointing news for Kiwis hoping for cheaper prices at the supermarket - multinational discount chain Aldi still has no plans to set up in New Zealand. 

The Commerce Commission on Thursday said more competition was needed in the grocery sector, its draft report putting forward a strong argument the duopoly held by Woolworths NZ (Countdown, Fresh Choice, SuperValue) and Foodstuffs (Pak'nSave, Four Square, New World) was keeping prices high.

It made a number of recommendations to shake up the industry, saying if they didn't work the Government might need to step in and create a third major retailer, perhaps by forcing Woolworths and Foodstuffs to sell some of their outlets. 

"The only thing that would be surprising to me is if anyone was surprised," said Bodo Lang, a senior lecturer in University of Auckland business school.

"It's been long suspected that grocery prices we're paying in New Zealand Aotearoa are far too high. I think what this very thorough investigation has shown that this seems to be indeed the case. Retailer profitability is far higher than international benchmarks would suggest it should be."

Aldi opened its first store in Germany in 1913, and expanded into Australia 20 years ago. Dr Lang says since then, grocery prices in Australia have dropped about 15 to 17 percent. In 2019 the chain's low prices were even credited with keeping Australia's inflation rate low - much to the chagrin of the country's Reserve Bank, which has been trying to lift it. 

But the chain has no plans to expand on this side of the Tasman. 

"Aldi has no plans in the works to expand into New Zealand at this point in time," a spokesperson said, without saying why. 

Aldi started in Germany more than a century ago. Photo credit: Getty Images

Dr Lang said not even Aldi's arrival might not have quite the same effect in New Zealand as it did in Australia, however. 

"I think it would be unfair to say that all of the higher grocery prices in New Zealand are entirely caused by the fact we have a duopoly. There are other factors that we can do little about - for example, the fact we have a very small population which leaves us with very little economies of scale; the fact we're far away from big markets with big populations and food production. There's nothing we can do about those two.

"But we can do something about the structure of the industry and maybe even something about export pricing... of dairy or beef or lamb." 

Kiwis pay more than they might expect for meat and dairy because even though it's produced here, we're competing with markets overseas. 

"If a housewife in the middle of Oxford in the UK is prepared to pay a certain price for a cut of meat, we have to match that in New Zealand," Beef + Lamb NZ chief executive Rod Slater told RNZ earlier this month. "We are price takers, not price makers in this country."

Dr Lang said it would probably take a fourth nationwide grocery retailer to really create competition and bring down prices. Most of the smaller shops - like SuperValue and Fresh Choice - are part of the duopoly, and those that aren't are often shunned by Kiwis.

"They can go shopping at local retailers, local fruit and vegetable shops and butchers and bakeries... but that's quite a significant culture shift. 

"That's the kind of shopping behaviour we see in densely populated cities in Europe, but I think it's unlikely for us to embrace that kind of shopping here in New Zealand; people are much more convenience-oriented, we like to drive in our car in one supermarket, park outside and fill up the car. It's hard to change that mindset." 

US bulk food retailer Costco is opening a single store in west Auckland next year.