Supermarket duopoly needs to rein in 'super profits' after huge food price rise, says minister

Food prices were 7.6 percent higher in March than the year before.
Food prices were 7.6 percent higher in March than the year before. Photo credit: Getty Images

The annual food price rise announced today confirms the need to "rein in the super profits of the supermarket duopoly", Minister of Commerce and Consumer Affairs David Clark says.

Food prices were 7.6 percent higher in March than the year before - the biggest annual increase in more than a decade.

"The March increase is above general inflation figures and highlights the role the grocery sector is playing in driving up prices," Clark said in a statement.

"Rising food prices is a global issue. Omicron, ongoing disruptions to global supply chains and Russia's invasion of Ukraine is putting pressure on prices in every country, but that is exacerbated here by the lack of competition at the checkout. And that is something we can act on.

"Today's figures confirm the findings in the Commerce Commission's grocery market study that the supermarket duopoly is making profits at the expense of everyday New Zealanders."

Released in March, the commission's report into the $22 billion supermarket sector said competition in the industry was not working well for New Zealanders.

"Even at their conservative estimate, the market study found that the major grocery retailers were earning excess profits of around $1 million a day, well above what would be expected in a workably competitive market," Clark said.

"The average return of the major grocery retailers at over 12 percent was more than double the rate of normal return for grocery retailing in New Zealand of 5.5 percent.

"No matter how you cut it, it's clear that New Zealanders are paying too much for their food and groceries."

National Party leader Christopher Luxon called on the government to rein in spending to help curb rising food prices and said it should not just rely on interest rates to control inflation.

There was a lot more the government could be doing, he said.

The figures made a mockery of the government's claim that inflation was caused by overseas factors, ACT leader David Seymour said.

Seymour said New Zealand was a food superpower producing enough food for eight-times the size of its population.

Prime Minister Jacinda Ardern said the government was exploring if it needs to go further than the recommendations of the Commerce Commission.

The government will announce its response to the Commerce Commission's supermarket sector report recommendations next month.

Commission recommendations:

  • Making more land available for new grocery stores, by changing planning laws to free up sites, banning the use of restrictive land covenants and exclusivity clauses in leases that prevent retail grocery stores from being developed, and monitoring land banking by the major grocery retailers

  • Improving access to the wholesale supply of a wide range of groceries at competitive prices, by regulating to require the major grocery retailers to fairly consider any requests they receive to supply competitors, and requiring the criteria for obtaining supply and terms and conditions of supply to be transparent

  • Monitoring strategic conduct by the major grocery retailers, such as the use of 'best price' clauses and exclusive supply agreements

Recommendations on suppliers to major retailers:

  • Introducing a mandatory code of conduct for grocery supply relationships to improve transparency and ban unfair conduct

  • Strengthening the existing law prohibiting the use of unfair terms in standard form contracts

  • Considering whether to allow collective bargaining by some suppliers

Consumer information and stimulating competition:

  • Requiring major grocery retailers to ensure promotional and pricing practices, and the terms and conditions of loyalty programmes, are easy for consumers to understand

  • Requiring grocery retailers to display unit pricing in a consistent format