The New Zealand Food & Grocery Council welcomes the Commerce Commission’s final report on its market study into the grocery sector.
“We are delighted with the outcome – this is a victory for suppliers in terms of fairness, competition, and common sense,” says Chief Executive Katherine Rich.
“The Commission’s report delivers on all we brought to their attention, and more. The findings and recommendations confirm what we have been saying for years – competition in the market is not working well, stifling innovation, consumer choice, and genuine competition, and creating an environment where suppliers are treated unfairly.
“But there is still a duopoly, and ideally there needs to be two or three more sizeable players in the market for there to be genuine competition. It remains to be seen if recommendations to improve wholesale distribution and land availability will be enough to encourage new entrants.
“The Commission makes it clear the market is not working. There is muted competition between the two main companies, which are taking much-higher-than-normal profits.
“It also accurately reflects the reality faced by suppliers from the imbalance of power in negotiations on issues such as price, promotions, and discounts. The sunlight from additional regular scrutiny will make a difference. Already the supermarkets have made concessions not on the table prior to the market study.
“The Commission has affirmed its position that competition is not working well for many suppliers, and that the duopoly over the past two decades has pushed excess costs, risks, and uncertainty onto suppliers, with fears of delisting if they do not agree to their terms.
“Changes recommended today will not solve everything but will significantly move the dial. That was always our ambition. The Commission’s report is a ringing endorsement of the Food & Grocery Council’s stance.
“The Commission has delved deeply into all the market and competition issues concerning consumers, retailers, and suppliers, and left no stone unturned to come to this accurate reflection of the grocery market and the issues in it.
“Suppliers are particularly delighted with the recommendation to introduce a mandatory Code of Conduct and a dedicated Grocery Sector Regulator, who would have the power to monitor, seek information, and resolve disputes.
“The recommendation that the Regulator monitors our industry’s issues and regularly reports to the public and the Government is a powerful mechanism to encourage better behaviour by supermarkets. So too is the introduction of the good-faith principle and the prohibition of certain contract clauses and demands on suppliers.
“Everyone benefits from a flourishing food industry where suppliers have a genuine chance to negotiate and receive fair terms, and which ultimately benefits consumers in terms of innovation and range.
“It’s been 12 years since we first pushed for a Code of Conduct, and we are now closer to having this vital tool.
“We thank the Commission for their robust and thorough analysis. This whole study process has been fair, and everyone has had an opportunity to participate fully and be heard.
“The big question now is the Government’s response to the report. We hope there will be cross-party support in the Parliament to put this report into action,” says Rich.
