Introducing price caps on staple grocery foods has has been introduced in France and is planned in the United Kingdom, but is not a priority in New Zealand, Commerce Minister Duncan Webb says.
The cost of living crisis is putting extraordinary pressure on NZ households and food price inflation is at its highest level in 36 years. Statistics NZ's food price index rose 12.5% in the year ended April, the highest annual rate since late 1987.
NZ is not alone in experiencing rocketing food prices. Food inflation was 14.9% in France in April year-on-year, and food prices in the UK rose 19.1% for the same period, the second-highest increase in 45 years.
In March, agreement was reached in France with most major supermarket retailers to cut prices for selected staple food items.
French Finance Minister Bruno Le Maire said then that retail groups would cut prices for a wide range of foodstuffs, the choice being left to retailers’ discretion, "to the lowest possible level" until June.
The UK government is also planning a voluntary cap on the price of basic food items such as milk and bread, similar to the deal struck in France, UK media has reported.
Here, Commerce Minister Duncan Webb says his priority is addressing food-price inflation by tackling excess profits in supermarkets through the Grocery Industry Competition Bill.
He says while price caps may help address short-term affordability concerns, there can be unintended consequences including discouraging producers from supplying goods due to reduced profitability, they may stifle innovation, and lead to shortages or lower quality products in the long run.
“I am moving at pace to address the issues identified in the Commerce Commission’s market study into the grocery sector,” Webb says.
“The cost of living is top of mind for many New Zealanders. The Grocery Industry Competition Bill empowers new grocery retailers to have access to a range of wholesale groceries at reasonable prices. Once passed, the Bill will impose wholesale regulatory requirements on the major supermarkets to open a wholesale market. Improving competition in the grocery sector will contribute to lower grocery prices for consumers, better quality products, wider ranges, and better service in the long term.”
The Grocery Industry Competition Bill is currently working its way through Parliament.
It aims to improve competition in the supermarket industry and among the measures included is forcing the current big two – cooperative Foodstuffs and Aussie-owned Woolworths – to open up their wholesale networks to competitors at prices that could be set by a regulator if they don't make deals in good faith.
The Commerce Commission published a market study into the grocery sector in March 2022. It found competition was not working well.
Countdown, which is part of the Australian-owned Woolworths Group, declined to comment on price caps.
The supermarket chain says it will freeze prices on more than 100 "key grocery lines" with its Great Price for Winter Programme, which will run until 20 August.
It says milk, tinned tomatoes, mushrooms, margarine, potatoes, muesli bars and chicken will be among the products where prices won't rise.
Countdown-brand light blue milk will stay priced at $5.69 for three litres, a 400 gram tin of tomatoes will remain priced at $1.40 while a 4 kilogram bag of potatoes will be $10.
Countdown's Commercial Director for Packaged Goods, Steve Mills, says the company knows that affordability has never been more important to its customers.
"While we certainly can’t control all of the factors that are contributing to inflation, we hope that holding the prices on these key products goes some way towards helping New Zealanders this winter."
Raewyn Bleakley, Chief Executive of the New Zealand Food and Grocery Council which represents supermarket suppliers, says with escalating input prices and a tight labour market, freezing prices can cause challenges to any business, and the suppliers it represents are no different.
“Food and grocery suppliers are in a highly competitive environment and are constantly looking for efficiencies and having to balance many factors beyond their control. Setting the prices they sell their products at to retailers involves negotiation and it is entirely up to the retailers what they set the price that the products appear on the shelves at and consumers ultimately pay.”
Worryingly for the Government and Webb, food price inflation is still rising; with annual food price inflation of 12.1% in March and 12% in February.
Annual food prices rose less quickly in January, with a 10.3% increase and annual food price inflation rose 11.3% in December and 10.7% in November.
But showing how quickly food prices have moved, in August 2022 overall food inflation was 8.3% annually, a rise then that had not been seen for 13 years.
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