Supie says Government's supermarket shakeup will make Kiwis more reliant on the duopoly

An online grocery retailer has warned the Government's plan to force the supermarket duopoly to open their wholesale arms to competitors will backfire, ultimately giving more power to the operators.  

Amid the soaring cost of living crisis and supermarket "super profits", the Government announced a crackdown on New Zealand's duopoly off the back of a damning Commerce Commission report into the $22 billion supermarket sector.

But competitive grocer Supie founder Sarah Balle said she believes the move won't make a difference but instead make us more reliant on the duopoly.

"It's just tweaking sort of things but [the] wholesale regulation that they've introduced that's really just embedding the supermarket duopoly. It makes us more reliable on the duopoly," Balle told AM co-host Melissa Chan-Green on Friday.

"Ultimately, it's not going to increase competition. That is really up to private business and consumers to really make a third and fourth player happen."

Last year, the Government announced its plans to legislate and create a regulatory backstop to force New Zealand's two main supermarket chains, Woolworths NZ and Foodstuffs, to open wholesale arms to competitors on fair terms, if they don't move first voluntarily to open access to others for goods at wholesale prices. 

Speaking to Newshub after the interview, Balle said putting a regulatory backstop on voluntary wholesale supply is in effect "giving more power to the duopoly", because New Zealand's food system becomes more reliant on the duopoly and its supply chains. 

"Suppliers also lose out when there is a duopoly market, as if they can't get their product(s) into one or both of the major supermarkets or if their products are de-ranged, then there is currently nowhere else to sell your products at scale," she said.  

"This is why it's hard to find a supplier willing to speak out about the major supermarkets - because their businesses are so reliant on the agreements with them.  Competition at both the wholesale and retail levels is incredibly important."

It comes after a group of New Zealand grocery suppliers revealed to Newshub under a condition of anonymity the major profit margins supermarkets are making. 

Forty-six different small to medium-sized suppliers which sell food to both Foodstuffs and Countdown said the supermarkets are making up to a 55 percent gross profit margin on a product. 

Supie founder Sarah Balle.
Supie founder Sarah Balle. Photo credit: AM

Balle said she believes Supie isn't getting as good deals from suppliers as the supermarket duopoly is getting, yet is still able to provide affordable groceries.

The business, which operates out of Auckland, told RNZ last week it was asked to increase its retail prices by its suppliers after it introduced competitive pricing.

"We can't confirm that the duopoly are putting pressure on our suppliers, but for them [suppliers] to request us to increase our retail prices means that there is some pressure coming from somewhere," Balle told the outlet.

The reason Supie are able to take lower margins is due to being online only as well as by taking as much of the cost out of the supply chain from the producer to consumer.

Balle acknowledged that while the major supermarkets have cost pressures such as inflation, they are a business that will cover their costs to develop wholesale supply and then add a margin before selling to independent retailers.

"They are a supermarket duopoly, they can dictate what retail prices they put into the market but they've also got to protect the shareholder profits as well that they need to maintain," Balle said.

She told Newshub independent retailers also need to cover their costs and make a margin, resulting in the price that gets charged to consumers. 

"As far as I am concerned this is incredibly inefficient and will not result in cheaper groceries across New Zealand," she said.

Supermarkets respond

Foodstuffs spokesperson Emma Wooster said in a statement to AM the cost of growing, manufacturing, importing and retailing food supplies in New Zealand is under intense inflationary pressures and it's focused on balancing what's right for its suppliers, co-ops, communities and customers.

"We pride ourselves on providing all our suppliers with a fair price and good value in exchange for retailing their product," Wooster said.

"We regularly meet with our suppliers large and small and share feedback transparently, including live forums, face-to-face meetings and surveys."

A spokesperson from Countdown said in a statement that for the last three years it has been independently ranked by its suppliers as the best grocery retailer to do business with, and suppliers with concerns are encouraged to get in touch. 

"We publicly report our gross margin as part of Woolworths Group financial reports.  The gross margin we reported in the F23 half-year profit and dividend announcement was 25.2 percent. Out of that, we have to cover our cost of doing business, which we reported was 22.3 percent and includes things like running our stores, paying our team and operating our supply chain," the spokesperson said.

"We know it’s a tough time for New Zealanders, and our absolute priority remains making sure the food on our shelves is as affordable as possible for our customers."