Anti-poverty campaigners and vegetable growers are calling on New Zealand’s supermarket duopoly to drop their margins on healthy foods including fruit and vegetables.
On Wednesday Statistics NZ released the Food Price Index, which showed food prices increased by 12.1% in May when compared with May 2022.
Fruit and vegetable prices increased by 18.4% annually in May, after recording a more than 22% rise in annual prices in April. Meat, poultry, and fish prices increased by 11.7%. Grocery food prices increased by 12.7% in May compared to the same month in 2022, and rose by 14% annually in April.
New Zealand’s produce industry has been hammered by poor weather and disease has been affecting some crops, such as tomatoes, pushing prices up and keeping them high.
Horticulture New Zealand communications manager Andrew Bristol said growers faced ongoing challenging conditions, and a discussion with the big two supermarket operators - Foodstuffs and Countdown - about their margins on fresh produce “would be a good one”.
“Have they considered reducing their margins given the pressure consumers are under?”
A 2019 report by the New Zealand Institute of Economic Research investigating how much NZ farmers earn as a share of domestic retail prices for their products, found farmers got about 20% of the retail price paid at the supermarket between 2008 and 2019.
Competition campaigner Tex Edwards, who founded disrupter mobile firm 2degrees, has said that Countdown (part of the giant Woolworths Group) was expected to raise its margins from 4.4% to 5.3% over the next three years, which he said was only possible in a low-competition environment.
Emeritus professor of nutrition at the Auckland University of Technology and anti-poverty campaigner, Elaine Rush, agreed with Bristol.
She said it was important people had affordable, nutritious food and “we need everyone in the food system to play a role in making sure that we feed our population as well as they should be fed”.
Rush said there was still huge demand at food banks, and there was “more strain coming” on households, with rising accommodation costs, increasing fuel prices, and the end of cheaper public transport at the end of June.
“If the duopoly [Foodstuffs and Countdown/Woolworths] could do more, that would be really wonderful.”
Rush said supermarkets could also use specials and deals to highlight cheaper nutritional foods for consumers, for example in the prized end-of-aisle spots where companies can pay to have their products promoted.
“What about putting combinations like tinned tomatoes and tinned beans there, and how to make a soup that would be nutritious and really satisfying, with a dash of chilli sauce or something.”
Governments in France, the United Kingdom and Hungary are taking action to halt the rise in food prices, with caps on the price of staple foods. France recently announced a deal with food producers to cut prices on hundreds of items by up to 10% in July, with the threat of financial sanctions and being named and shamed publicly.
New Zealand is not considering similar plans, Commerce Minister Duncan Webb said.
Foodstuffs and Countdown stay mum
Foodstuffs and Countdown did not answer requests for comment on whether they had considered dropping margins on fresh produce.
Foodstuffs put out a press release on Wednesday after the Stats NZ result.
Managing director Chris Quin said in its statement that customers were cutting back on fresh fruit, veggies and meat.
However, he said global indicators pointed to some of the main drivers of food price inflation peaking. International cost pressures were on an overall downward trend, “but New Zealand wages and weather were still fuelling cost increases”.
“This could see the cost of imported goods start to moderate ahead of a slowdown in cost increases on domestically produced grocery items."
The Commerce Commission undertook a market study into the industry and found competition was not working well, and said supermarkets were earning "excess profits". How this was calculated was disputed by the industry.
Cooperative Foodstuffs front-footed the issue, commissioning consultancy firm Infometrics to analyse data from its North and South Island operations to show how much its suppliers were increasing their costs to it.
Suppliers have told media they are at the mercy of the duopoly, forced to accept their terms.
In April, a group of small to medium-sized suppliers who sell food to both Foodstuffs and Countdown said supermarkets were making up to a 55% gross profit margin on their products.
Challenger grocery operator Supie has also said suppliers had asked for it to raise its prices, "concerned that our prices are competitive with the duopoly".
Countdown/Woolworths and Foodstuffs hold an estimated 90% of the market.
The Government has introduced new legislation aimed at improving competition in the supermarket industry, including forcing the duopoly of Foodstuffs and Woolworths/Countdown to open up their wholesale networks.
The appointment of a grocery commissioner to oversee competition in the industry, similar to the telecommunications commissioner, is expected soon.
15 Comments
Suppliers have told media they are at the mercy of the duopoly, forced to accept their terms.
I agree that the supermarket duopoly will have some cut throat policies and contracts, but I'd love to see more growers forming cooperatives and opening their own stores. A lot of people already go to farmers markets but the scale just isn't there that could be achieved with a larger outlet for fruit and veg stalls, and consumers would love to give money directly to the growers as opposed to the monstrosities that are the supermarket duopoly chains.
I don't understand why councils do not open up some council land in good central locations - a underused car park or such like - and allow any market gardener, butcher, baker etc free access to sell from the back of a flat bed truck.
Lots of land is provided free to the public - roads, parks etc. Why not for the sale of fresh products because it also has a social good component?
This proposal would give the scale, competition, and ease of access that a 'free market' in fresh products would require.
As you say Interesting1234 a cooperative of small to medium fresh produce businesses should be interested in managing an initiative like that.
The problem is that fruit and veg are cheaper at the smaller grocery chains like fruit world but people will still go to either countdown or new world despite the countries' hatred on the duopoly. We don't import much fruit, despite there being a big oversupply in some fruit we cannot grow from Australia (avocados in off season is a perfect example of this when you hear they are $12 ea in new world but $2.49 for a bag in Australia lol). The 'food too expensive wool worth big evil company' rhetoric isn't flying when we just screw ourselves on policies like this.
or if you are a big player then you are immune from govt intervention,not just supermarkets,banks and insurance,oil companies.didnt the commerce commission establish thet the duopoly was making a million a day in excess profit last year? and that wasnt enough to trigger a response.
What do you expect with a gutless government and toothless ComCom that let them takeover other competition in the first place.
NZ is so good at shooting itself in the foot.
Breakup the duopoly and break up the vertical integration.
We need 6-7 market players with equal market share for perfect competition.
Same for the UK. Thete is plenty of competition, and lower prices for everything, including nz produced items and milk, meat and eggs. Also, it's notable that the small local grocers aren't that different in price to the supermarkets. That in nz, that isn't the case is further evidence of duopoly control of the supply chain to me.
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