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Foodstuffs co-operative can afford living wage, professor says, as union wins right to bargain for Fair Pay Agreement

Business / news
Foodstuffs co-operative can afford living wage, professor says, as union wins right to bargain for Fair Pay Agreement
Pak 'n Save worker leaning on trolley.
Pak 'n Save has seen its sales rise in both the North and South Island. (Image: supplied)

The public profit of the New Zealand-owned supermarket co-operatives is "iceberg" money and doesn't tell the full story of how much store owners earn, an economics professor says.

Foodstuffs North Island and South Island recently released their annual reports.

Foodstuffs North Island earned $44.9 million net profit, a fall from $45.3m in the previous financial year, while Foodstuffs South Island reported a $6.9m net profit after reporting losses in the two previous years.

Foodstuffs doesn’t have a corporate setup like its rival Woolworths. It is a co-operative with store owner-operators who have shares in the two limited liability companies for the two separate island retail chains.

The annual results published therefore don’t give the full picture of the co-operative members' earnings, Auckland University Emeritus Professor of Economics Tim Hazledine said.

The North Island annual report noted that its consolidated statements “cover the perimeter of the Foodstuffs North Island Group only, and do not cover the financial results of our members”.

In an emailed statement, Foodstuffs North Island said member stores' profit was determined "in the more traditional sense as retail sales less total expenses".

"The largest part of this being the cost of goods sold, which is determined by suppliers, and the next largest cost being staff wages, and rent and occupancy cost of the store."

Hazledine said these profit figures were "iceberg-type money", rather "than the real money" which was earned by the Foodstuffs store owners.

He said the public didn't really know how much store owners earned.

"Being a franchise holder in some of these stores, or a New World store, can put you on the rich list. There's a big smoking gun I think as to how much money they're actually making. I bet they can afford to pay the living wage."

And now for fair pay?

On July 12, the union representing supermarket workers, First Union, announced workers in the industry had been accepted by the Ministry of Business, Innovation and Employment (MBIE) to negotiate a Fair Pay Agreement. Fair Pay Agreements allow industry-wide setting of minimum standards including wages, holiday pay, set hours and staffing levels.

The union has long argued Foodstuffs used its co-operative structure to thwart attempts to organise at its stores.

Countdown had negotiated with the union for a number of years, and staff at the Aussie retailer are paid "around the living wage", First Union said.

"But many workers in un-unionised stores in the Foodstuffs chain, or independent supermarkets, are only being paid the minimum wage, and that has to change," the union said in a press release.

Foodstuffs spokesperson Emma Wooster said the co-operatives (North and South Island) were committed to engaging constructively with the Fair Pay process to support its local grocers, and it was working to establish appropriate bargaining parties to best represent its owner-operators through the process. The potential agreement could cover over 500 Pak ’n Save, New World, Four Square, Gilmours, On the Spot, and Raeward Fresh stores.

All were "individually owned and operated by local grocers who employed their local teams in communities across New Zealand".

"Each of our 500 owners employ their team members directly and compete locally with other retailers and businesses for talent. Being a good New Zealand employer who pays fairly and attracts and retains great people is important to our members, and we’re committed to paying our people fairly and investing in their development and futures. "

Hazledine said Countdown would be able to use Foodstuffs' "stinginess" to recruit staff.

The academic said it was disappointing Foodstuffs had "sat back on the minimum wage" for employees, but allowing the union to negotiate on their behalf for a Fair Pay Agreement was a good move.

Hazledine said he had been pleased to see Aussie multinational Woolworths agree to pay its staff the living wage.

MBIE's website showed there had been seven applications for approval for Fair Pay Agreement bargaining. Bus drivers represented by First Union were the first to gain approval to negotiate a Fair Pay Agreement.

Pak 'n Save snatches customers

The budget Pak ‘n Save brand was a strong performer for the co-operatives as its North and South Island operations reported combined net profit of more than $50 million.

Foodstuffs North Island and Foodstuffs South Island released annual reports which showed sales across the two supermarket operations hit $13.3 billion for the latest financial year. 

Pak ‘n Save South Island reported a 10.4% increase in revenue while the North Island value outlet reported 6.8% same store revenue growth.

Foodstuffs New World brand didn’t fare as well as its budget offering. In the North Island revenue decreased by 0.5% but in the South Island New World saw revenue growth of 3.2% for the year.

In 2023 Foodstuffs North Island said it distributed $176.7m to its members which included $126m of deferred rebate voucher member funding (an increase of $4.1m), and supplier repatriate rebates of $24.8m (a decrease of $3m).

Deferred rebates are funds received by the co-operatives members "to support the capital structure of Foodstuffs North Island" and are distributed back to them after five years of being held on its balance sheet as "quasi-equity", subject to the strength of the balance sheet.

Supplier repatriate rebates are paid to Foodstuffs North Island by suppliers as part of standard trade terms and then distributed back to members subject to terms of trade being met, Foodstuffs said.

South Island members rebates totalled $262m for the year, its annual report showed.

North Island results were a mixed bag, with record growth of Foodstuffs-owned private label products which saw revenue increase 9.3% year-on-year, however, online retail revenue fell 3.4%. 

North Island chief executive Chris Quin said this was a disappointing result, which highlighted “the opportunity and urgency we have to drive a stronger customer experience in our online channels”.

The South Island annual report didn’t break out private label revenue, but did say it had launched more than 140 new products in its private label range, “providing even more affordable options for customers on shelf”.

Private labels are contentious, with concerns the duopoly retailers promote their own-brand goods above branded products. A NZ Food and Grocery Council report authored by consultancy Castalia in 2021 found private labels do more harm than good for suppliers and consumers in New Zealand’s highly concentrated grocery sector.

Hello food-price inflation

Overall, for the South Island sales rose 6.9% to $3.4b, and in the North Island sales increased 3% to $9.8b. 

Foodstuffs South Island’s financial year ended on February 28 while the North Island result is for 52 weeks for the year ended April 2. The North Island's previous result was for 53 weeks.

South Island chairman Russell McKenzie said its growth had been driven primarily by food-price inflation, but also by the return of domestic and international tourism to key markets in the second half of the year. 

Woolworths NZ reported its half-year financial result in February which showed revenue of $4.1b across its New Zealand Countdown stores, an increase of 1.3% from the previous half-year.

The company’s earnings before interest and tax (ebit) decreased by more than 39% from the previous period, coming in at $122 million.

New rules for supplier relationships

It has been a tumultuous time for Foodstuffs, with the Commerce Commission's market study released in March finding New Zealanders pay too much for food, and the industry is concentrated and dominated by Foodstuffs and Australian-owned Countdown.

Foodstuffs and Countdown's relationship with suppliers was a key issue in the Commerce Commission's market study.

Foodstuffs South Island chief executive Mary Devine said it had "invested a lot of time and effort this year into resetting the way we engage with our suppliers, partnering with them effectively and strongly to deliver the value that our shared customers need from us".

Foodstuffs North Island chairman Dean Waddell said Foodstuffs North Island had embraced the findings of the Commerce Commission’s final market study and made significant progress in the last twelve months to deliver on its commitments.

He said the co-operative had worked fast to improve pricing and promotional practices and ensure loyalty programmes were simple and easy to understand, to end the use of restrictive land covenants and exclusivity provisions in leases, develop a wholesale supply solution for non-member retailers, "and do our part to support the development of a mandatory Grocery Code of Conduct".

The South Island operator said it had actively engaged in the market study process.

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Instead of being trained to bite the miserly hand that feeds them, workers need to be educated to spread their wings. I have high paying positions with full paid training and certification available that I can't fill. Socialism is death for an economy. Say hello to even longer queues at pak n save.



Have you tried walking into your local Pak N Save and offering these desirable positions? 

Unions lobbying for higher wages is not what I'd call the type of socialism that kills an economy, otherwise our economy would have been dead in the 1970's, the decade with the largest number of industrial disputes.


I actually tried poaching two staff from the local Pak N Save in the past. Both sorta stood out as being more motivated than average.

Turns out they were both waiting to enter either the Police or Military.

It's a bit tricky how this article on the home page looks to focus on hidden profits, but the punchline on this page is actually about living wage.


I think the issue is whether or not supermarkets are being disingenuous.  "We can't afford to pay the living wage".  Hiding profits is how you would create the illusion there's not enough money.  

Understand the business owners are taking the risks, which is why they enjoy the rewards.  But at what point does paying people a shrinking share of productive output, while taking a bigger share of their living expenses need to be looked at and addressed?  

I guess it's a free market and all, but as a consumer would you be happy to see your grocery bill increase considerably just to line the pockets of supermarket owners?  


I guess at the point they unionise and walk out of your store and close it is one


Yes, Painter, it is all about Hazletine's usual crocodile tears on behalf of the enslaved classes, no doubt written in his comfy academic chambers. He is such a predictable leftie.

And what will be the result of this latest round of union activity, a one size fits all where the small superette in Ekatahuna is forced to pay his staff Auckland wages?

I have no doubt that the whole food chain involving growers, pickers, packhouses, wholesalers, transporters, and retailers is complex and inevitably there will unfairness on some measure.  However, I doubt the employees in the retail end are unduly put upon on in these recent times of a tight employment market. And it is quite debatable whether the complexity of the sector is best handled by the admitedly rough justice of the (relatively) free market, versus the bureaucracy and proven idiocy of the State.

I have been a grower of fruit for over 40 years. When we started citrus was retailing for about $2kg and now about $4kg. On compound interest that is about an increase of nearly 2% pa. Compare that with the good Professor's salary.

There is a high degree of competition in the sector, much more than just the 2 big retailers. Shop around, and employees have plenty of opportunity to improve their lot without resorting to State backed standover tactics.


No, trying to persuade to move looks desparate. I was just about old enough to see what was going on in the 1970s, society was breaking down from the edges, took 15 years to get back to full employment and alot of struggle for the vulnerable.


Hazledine said these profit figures were "iceberg-type money", rather "than the real money" which was earned by the Foodstuffs store owners.

He said the public didn't really know how much store owners earned.

If this academic thinks there's additional operating income or windfalls being undeclared, could they not share how they think that's occuring.

- rebates (although ultimately declared as income)?

- appreciation of the land the store sits on?

- some other method?

I imagine many supermarket owners are rich, because we have fewer supermarkets per consumer than many places so their turnover is pretty high.


Say I own a supermarket, I get my rebates from Foodstuffs.  What's stopping local suppliers from striking a deal.  Charge me $5 for an item, RRP $5.50.  I sell 5k of them, I get a $2 per item rebate at EOY.  $10k.  "Which bank account would you like that in sir?

All my packing slips show $5, all my sales show $5.50.  I'm happy to be audited, hell you can look at my store's bank statements.  No you can't look at my personal bank statements.  


Ehhh, I don't think that'd be common in that configuration. These are larger entities who are less likely to pull such an obvious swifty.

Sometimes 'rebates' may come in a form that's not directly money, trips, cars, goods etc. 

Maybe the rebate gets given in free produce? But then that'd still be declared as profit when sold.


It's quite common in the civil infrastructure game for example, winning tenderers frequently select their materials supplier based on rebates.  

The most frequent rebate comes in the form of a box of $100 prezzie cards dropped on the desk, but it can also be a bank account where a quick phone call to the sales rep results in a 65 inch tv being dropped off that afternoon.  This is all above and beyond the Rugby World Cup tickets and trips to the Indy 500 etc.    

I can't speak for the Supermarket industry, and you may be right.  But it's very easy to hide true profits if a supplier/supermarket really wanted to.    


Many will own their buildings in a seperate company and be paying over market rent. 


That sounds at odds with the Foodstuffs corporate model which owns pretty much all the land under its stores.


Well, exactly. Earnings are somewhat meaningless when rent is to a related party. 


Why would supermarket owners accept overpaying on commercial leases?

Seems like something that couldn't possibly happen in a cooperative structure.


Clearly the "iceberg" thing fooled a several common taters in the last few days.

They couldn't get the the co-ops profit did not include the profits of the individual store owners.  Which if you know any can be vast