Smaller grocery retailers warn supermarket duopoly will continue until there's an independent wholesaler

"You don't want to do anything that entrenches the duopoly further."
"You don't want to do anything that entrenches the duopoly further." Photo credit: Image - Getty Images


Smaller grocery retailers welcome a 'step in the right direction' on supermarket changes, but say the duopoly will dominate until there's an independent wholesaler.

The government has promised a clampdown on the supermarket sector, including having Foodstuffs and Woolworths open up their wholesale arms to would-be competitors at a fair price, and to face a mandatory regime if they do not.

Acting Prime Minister Grant Robertson said legislation on banning land banking was already introduced, legislation for a number other the measures would be introduced towards the second part of the year, and wholesale pricing measures would be operating by the end of the year.

He was confident plans to shake up the supermarket sector would increase competition.

"We've got interest from a number of other players", he said, noting German discount supermarket Aldi as one of the "players in the Australian market that people can take a look at".

The Warehouse was already stocking more grocery products, while smaller companies in New Zealand may have more confidence to expand, Robertson said.

However the founder of an online supermarket believes opening up wholesale access via existing suppliers would make the food industry become even more reliant on the duopoly.

"That means that in theory all food should be supplied through them and their supply chains," Supie founder Sarah Balle said.

"The duopoly is a business, so when we talk about wholesale supply we're saying that they're selling to other retailers, effectively another sales channel that will return a profit to the duopoly and that they become the middleman for food supply, whether you're a consumer or a retailer."

Despite the government's pledge to ensure a fair wholesale price, the duopoly would need to cover costs and add a margin, and other retailers would have do the same, she said.

Wholesalers need to be independent "so that we truly have an alternative in New Zealand outside of the duopoly," she said.

It was unlikely Supie, which delivered to over 20,000 people across Tāmaki Makaurau, would buy from the new wholesale system, Balle said, because of nervousness over how large retailers had treated suppliers in the past. "We've built up really positive and fair relationships with our suppliers."

For Night 'n Day, a Dunedin-based convenience store network with over 50 franchise stores across the country, it was a step in the right direction in promoting competition.

"When you're working with a competitor and they can cut off the supply at any point in time, having some sort of backstop there would be very advantageous," general manager Matthew Lane said.

The company gets its supplies through the Countdown owner Woolworths, and while the changes would take time they would allow cheaper prices to be passed on to the independents, Lane said.

Asking supermarkets to open up wholesale should be viewed as a short-term solution while an independent wholesaler established, Food and Grocery Council chief executive Katherine Rich said.

"You don't want to do anything that entrenches the duopoly further," said Rich, whose council represents businesses that trade with the supermarkets.

The big gain for independent grocery retailers would be the ability to buy at a competitive price, she said.

"What's happened for the independent retailers ... is that due to the wholesale market being completely broken they've had to line up to the supermarket with everybody else for their stock. Now if they were doing that they were never going to be competitive. That's why your dairies are so expensive."

Foodstuffs and Woolworths have issued statements promising to work constructively with the government to meet its expectations.

'Pragmatic start'

Measures, including curbing land banking, sent a message that New Zealand was open to grocery competitors, Rich said.

"Independent retailers and other chains have often looked at New Zealand and view it as closed because you have an entrenched duopoly and it was always very difficult to get sites.

"I think what the government's announced is a pragmatic start to improving competition."

ACT's David Seymour argues more regulation would discourage competition, and the government should focus on real barriers such as the country's strict foreign investment rules. "We should be asking ourselves what are the barriers to entry that have stopped the Aldis of the world from entering the marketplace."

Aldi set up shop in Australia in 2001 and has helped to drive down prices since. But it took years to build its presence - more than a decade for it to become the country's third biggest player.

US retail giant Costco is set to open a single store in West Auckland later this year.

However, Rich said the new entrant to watch was New Zealand company The Warehouse, which was going back to old-fashioned grocery promotions.

The suite of changes comes as Labour sinks in the polls and red hot inflation drives a cost of living crisis. The latest 1News Kantar poll puts Labour just out of reach of the Beehive - down 2 points - and unable to cobble together the seats it needs to govern.