Labour say they will act immediately on a Commerce Commission report on the retail grocery sector with National suggesting more must be done to address what they call a “cost of living crisis”.
The report into the grocery sector has concluded that competition in the industry was not currently working well for New Zealanders.
“We have found that the intensity of competition between the major grocery retailers who dominate the market, Woolworths NZ and Foodstuffs, is muted and competitors wanting to enter or expand face significant challenges,” says Commission Chair Anna Rawlings.
Foodstuffs own the New World, PaknSave, and Four Square brands whilst Woolworths operate Countdown, Fresh Choice and Super Value - between them operating around 80 per cent of the market.
A growing fringe of competitors could not compete on price, product range or store location, found the report.
Several recommendations have been made, including making more land available for grocery stores, improving access to wholesale supply and monitoring strategic conduct of the major retailers.
Commerce and Consumer Affairs Minister David Clark says it is clear that the sector is not currently working for New Zealanders and that action will be swift on making adjustments.
“I know there is a desire to see us act swiftly on this too, and I want New Zealanders to know this will be the case,” says Clark.
“From today, we will immediately progress work to address the Commission’s recommendations.”
Looking into a Code of Conduct between retailers and suppliers, a dedicated regulator and land covenant barriers are of immediate concern, he says.
“When New Zealand supermarkets are making more than double what the Commerce Commission considers to be a normal rate of return on capital for grocery retailing, it’s clear there is a problem with competition that needs to be fixed,” says Clark.
“New Zealanders are paying more at the checkout than most. Out of 38 OECD countries we’re the fifth highest in terms of grocery prices. This report makes a serious case for change when it comes to competition in the sector, so kiwis don’t have to pay so much for the basics.”
National’s Commerce and Consumer Affairs spokesperson Andrew Bayly says whilst the recommendations are a step in the right direction more must be done across the board by Labour to address the “cost of living crisis” across the country.
“Kiwis are going backwards under Labour because wages aren’t keeping up with rampant inflation,” says Bayly.
“The cost of living crisis is sending the cost of basics like food, petrol and housing through the roof. Inflation is at a 30 year high and the average Kiwi family is worse off than they were 12 months ago.
“The Government needs to explain how they will arrest the cost of living crisis in Budget 2022 – and they should start by making the tax adjustments National proposed on the weekend.”
Consumer NZ chief executive Jon Duffy says the recommendations should go further on a regulation front and is calling on Labour to take swift action.
“Food has become unaffordable for many consumers,” says Duffy.
“In January 2021, our research showed six out of 10 consumers were worried about the price of groceries. By February 2022, this had risen to 98 per cent.
“It is times like this that we need competitive markets producing good outcomes for consumers. The problems highlighted in the Commission’s report demonstrate strong regulatory intervention is required, and we will be looking to Minister Clark to address the problems in the sector as he considers the Commission’s recommendations.”
Other recommendations from the Commission include a mandatory code of conduct for supply relationships, strengthening laws on prohibition of unfair terms in standard form contracts, consideration to collective bargaining, ensuring promotions and pricing are easy for customers to understand and requiring retailers to display pricing consistently.