Pierre van Heerden wants to shine a spotlight on the grocery industry as he eyes 'once-in-a-generation' opportunity for consumers

Public Policy / news

Grocery Commissioner says new act has powers and tools to keep supermarkets in check

11th Jul 23, 10:09am by Rebecca Stevenson

New Zealand’s first Grocery Commissioner says he has a once-in-a-generation opportunity to make a real difference for New Zealanders.

Former Sanitarium and Mojo Coffee executive Pierre van Heerden will take up the role of market referee for the grocery sector on July 13, this Thursday, after his appointment by Minister of Commerce and Consumer Affairs Duncan Webb.

Van Heerden said his experience was “ideally” suited to the role, which will see him take charge of monitoring and regulating the duopoly players, Foodstuffs and Countdown.

"This is a passion of mine ... It's not often that one gets a role like this where your whole working life's experience comes together. I'm a businessman. I'm not a bureaucrat. So I come with a different view."

Under new legislation, the Grocery Industry Competition Act, van Heerden gets new powers including the ability to levy fines.

The act introduced a supplier dispute resolution scheme, and requires the big two to open up their wholesale networks to competitors.

Van Heerden has had experience as a supplier to supermarkets in his role at Sanitarium, and as chair of the New Zealand Food and Grocery Council, where he represented “small, medium and large companies, right up to Fonterra”.

“That’s given me the opportunity to really get an industry-wide perspective on what is happening, what is working and what's not.”

What is not working? Competition itself, van Heerden said, pointing to the Commerce Commission’s market study.

Van Heerden said he would like to see competition increase by the end of his term, that consumers have more choice with a range of prices and a range of products on the shelves, but also a range of supermarkets to choose from.

He said improving competition was a large and longer-term project that “is not going to happen overnight”.

“We have to work on it and ensure we do whatever we can for Kiwi consumers.”

Market studies have been criticised for not going far enough, however, Commerce Commission Chairman John Small has defended the studies and the Commission’s work on them, saying the Commission needs time to show improvement.

The new Grocery Commissioner has this message for shoppers concerned about grocery prices: we are working on it.

“The Commerce Commission has got a very experienced team. I've got experience in the industry. So together, I believe we can make that once-in-a-generation change for Kiwi consumers.”

He said it was his view that there were sufficient powers in the act "to shine the spotlight on the industry".

"To date, just the mere fact that the investigation on the industry was done, has already given some change. Look at the land covenants where the supermarkets previously used that to limit competition. Those have have been withdrawn, and the supermarkets are all working towards getting those rescinded. And you look at prices even over the winter time, a lot of the supermarkets have frozen some lines in terms of pricing for the winter period. I believe that the mere fact that light is being shone on the industry, has already made a short-term change. And it's like anything in life, the things that are measured and that are focused on, those are the things that change."

Van Heerden will have a team of about a dozen staff, and his first move when he starts his new job will be to meet this team.

The Commission welcomed van Heerden’s appointment. In an emailed statement, Chairman John Small said van Heerden brought a huge amount of experience and knowledge about the grocery sector to the role.

"He is passionate about being a champion for Kiwi consumers.”

Small said the new legislation would support more retailers to enter the market and promote stronger competition with the regulated grocery retailers on price, quality, range of products and convenience.

The Grocery Industry Competition Act makes Foodstuffs North Island, Foodstuffs South Island, and Woolworths New Zealand regulated grocery retailers (RGRs).

This means they must negotiate to offer wholesale supply for potential competitors in good faith and must follow the Grocery Supply Code.

Van Heerden said the Grocery Supply Code, which the Ministry of Business, Innovation and Employment had recently closed consultation for, would help to regulate supplier-retailer relationships “a lot more”.

Suppliers have complained of being threatened by the duopoly, and forced to hold retail margins at certain levels to have their stock on shelves.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

37 Comments

by JimboJones | 11th Jul 23, 10:25am 1689027915

It sounds like good progress. However I still think the real fix would have been to force both Foodstuffs and Progressive to split into two.

by Matt_09 | 11th Jul 23, 9:10pm 1689066640

I predict zero change whatsoever apart from a nicely worded PR release every now and then.. and whilst we’re at it why the hell aren’t Sanitarium paying their fair dues! Complete sham and if he presided over that farce then good luck for the grocery sector

by Hamish | 11th Jul 23, 10:48am 1689029287

More tension between trying to get a new competitor into the market and the ensuing increase in carbon emissions with an extra fleet of trucks on the road moving grocery items between warehouse and store.

A bit like courier companies. Cutting each others throats to deliver a similar service, where you could argue that in total, courier service as a whole is inefficient with several fleets of vans going past the same letter boxes and businesses day in and day out.

by Pa1nter | 11th Jul 23, 11:33am 1689032033

Not only that but you have companies like Aramax (Fastways) who win business by always being the cheapest, while generally being universally terrible at their core function.

So we think we have competition, but really most of it's just getting what you pay for, and a layperson usually can only equate value with price.

by JimboJones | 11th Jul 23, 1:20pm 1689038449

Another example was taxi companies (I don't know if it still exists). We had a massive supply of taxis at the airport yet a high price as the driver needed to make some profit after waiting in a queue for hours to get a fare. A monopoly would have been able to do it cheaper than a highly competitive market did. Hard to know if that applies to supermarkets or not.

I get the feeling a big part of our high comparative food prices is our comprehensive GST (which I personally think should remain). The UK for example has no VAT on most food, so of course their food seems a lot cheaper.

by Harvey W | 11th Jul 23, 5:58pm 1689055110

A monopoly do something cheaper than a competitive market?...hmm I don't think so...

by Von Metternich | 11th Jul 23, 10:50am 1689029408

The ComCom is a real example of Regulatory Capture. Have they at all looked at the sheer rates of building company collapse and asked "What sort of fraud went on here?".

They seem to fastidiously nitpick things like financial loan contract details while in the same breath, completely ignore that the regulatory environment for many businesses (groceries, banking and telcos in particular) are inherently oligopolistic where there is simply no incentive to improve services or cut costs. They simply drink in the profits.

Very sceptical that these commissariat approaches to regulation work.

by HughJorgan | 11th Jul 23, 11:02am 1689030147

Agree VM. We have a Cost of Living issue largely because the ComCom is failing every New Zealander. Construction, Groceries, Petrol and Banking. The ComCom couldn't do LESS for NZ if they tried.

by Pa1nter | 11th Jul 23, 11:37am 1689032245

by Von Metternich | 11th Jul 23, 10:50am

The ComCom is a real example of Regulatory Capture. Have they at all looked at the sheer rates of building company collapse and asked "What sort of fraud went on here?"

The largest fraud is usually trading while insolvent. The problem when dealing with construction is theres often multiple parties and drawn out timeframes. A systems based solution would be having some sort of formalized escrow service for payments, but then you'd probably need to allow 5% or so to the cost of construction to deploy it.

by Final Account | 11th Jul 23, 1:15pm 1689038159

That's essentially retentions (+ bonds & continuity guarantees) though right? There's a few checks in place. Proves your point though if these still fail to mitigate failure and payment to parties owed. Though a lot of that is contractors not getting what they're owed from clients in the first place. Which goes back to the banks.

Introducing an overall insolvency prevention function you'd essentially be putting liquidator, administration & legal sectors potential revenue back in contractor directors and stakeholders pockets? Lawyers/consultants line up out the door to get their hands on a chunk of construction project budget as the numbers are often so vast they can hide their jet skies and lambos in their bills, I don't think the legal/admin sector would want to kill that golden goose.

by Pa1nter | 11th Jul 23, 1:22pm 1689038541

Retentions are often neither here nor there, the client (sometimes architect or other manager of the project) just withhold those until the conditions of the contract have been fully satisfied (usually after a defects period).

Usually the problems derive from stretching out bills and using current works to pay for bills from previous jobs (so effectively trading insolvent), or a raft of cost over runs the builder struggles to ever re-coup.

There are also rogue agents repeatedly carrying out a fraud of incurring bills, keeping the money, shutting down and starting again. This is more likely the practice of fraud Von M is referring to. It's fairly small in the scheme of things, because contractors that don't pay bills struggle to find willing sub contractors for their Phoenix companies. Most of the problem is construction is a bit of a feast or famine game that most companies don't survive.

by J.C. | 11th Jul 23, 12:04pm 1689033860

Pierre van Heerden is superb but I doubt he will make much difference.

Aldi will not be entering the NZ market. And I'm willing to wager on it. Any takers?

by Pa1nter | 11th Jul 23, 12:06pm 1689033991

It's not a very attractive proposition to start a new supermarket chain.

Huge capital outlay, low margin due to ensuing price war, you'd need pockets to weather a decade or two before you made any surplus cash.

by JimboJones | 11th Jul 23, 12:54pm 1689036855

The Warehouse will do it to some extent. The last time they tried I seem to recall the big brands (Sanitarium may have been one of them!) wouldn't supply them as the duopoly were manipulating them, and without the big brands it would always fail.

by Pa1nter | 11th Jul 23, 1:06pm 1689037612

With the exception of a few purpose built stores, most of The Warehouse's supermarket attempts have involved merging them into an existing Warehouse store. So they're incapable of offering a full range due to the limited footprint, and I imagine many suppliers wouldn't want the encumbrance of dealing with a large client who's core business isn't groceries. They'd require more hand holding, and expect cheaper pricing.

by JimboJones | 11th Jul 23, 1:23pm 1689038602

They may start off that way, but they could evolve to much bigger food/general stores or even to having food only stores. It wont happen overnight.

by Palmtree08 | 11th Jul 23, 6:21pm 1689056506

Aldi? Do we really need another foreign corporate skimming the last of the wealth out of NZ? Support small businesses! Make the playing field level. Stop wholesalers making special deals with the monster players! We'll soon have competition when monopoly is lost!

by Pa1nter | 11th Jul 23, 6:57pm 1689058659

It's really a volume game. Why would I want to deal with 50 smaller players instead of 1 or 2 large ones.

by ngakonui gold | 11th Jul 23, 12:27pm 1689035227

Listened to him on A M this morning.Gotta say i didn't hear anything that gives me any confidence that things will change.

by DD62 | 11th Jul 23, 5:29pm 1689053393

Agree! Just another Government quango that will hoover up a bunch of taxpayer funding and achieve exactly SFA!!

by fortunr | 12th Jul 23, 8:32am 1689107557

Do not expect anything concrete coming out of this Government.

by ikimpaul | 11th Jul 23, 12:35pm 1689035722

Am i the only one that thinks nothing is going to change here.

by NoRegrets | 11th Jul 23, 12:56pm 1689037015

The quickest opportunity is to have this duopoly give up on excessive margins that they keep for themselves. They screw Suppliers but pass on very little of the benefit to Consumers.

by Pa1nter | 11th Jul 23, 1:15pm 1689038126

Supposedly they make 1% more net profit than overseas supermarkets.

People are upset about the large increase in food costs (understandibly). The problem is food got a lot more expensive to produce. So this will likely be an exercise that ends up telling us we either eat less or pay more.

by JimboJones | 11th Jul 23, 1:25pm 1689038738

Although monopolies / duopolies are often significantly less efficient too, so it can't just be measured in excess profit.

by NoRegrets | 11th Jul 23, 1:34pm 1689039252

Maybe it’s more like 10%.

Look at the supermarket prices compared to The Warehouse, Chemist Warehouse, local Fruit and veg stores or Asian supermarkets. Perhaps as Consumers we need to put the pressure on Supermarkets by shopping around a lot more!

by Pa1nter | 11th Jul 23, 1:53pm 1689040397

Specific chains can offer select items cheaper than an 'all things to all people' business.

People can shop around but what they'd make in savings they'd lose in time and fuel.

by Harvey W | 11th Jul 23, 6:02pm 1689055333

So if they make 1% excess profit, then we could expect prices to drop 1%, not a very big difference huh? Maybe we just live in an expensive inefficient country, with a government that makes it worse it every turn

by Palmtree08 | 11th Jul 23, 6:27pm 1689056845

Interesting doco about the state of the supermarket industry in Europe. It isn't roses. The margins are pathetic.

https://www.dw.com/en/so-long-superstores/video-65225396

by HeavyG | 11th Jul 23, 1:27pm 1689038822

Any review should require the supermarkets record the amount of food they throw away. The supermarkets would rather sell less stock at a high price and reduce supply (in order to maintain the high price) by binning the rest.

The brother in law works at countdown and he says it is appalling the amount of food that is binned, especially top cut meats and fish with over half of it going into the skip bin.

by SimonRo | 11th Jul 23, 4:44pm 1689050682

Yes exactly. We cannot simply expect the supermarkets to charge less and return less profit to shareholders, we actually need to investigate how we can legislate to get food available for kiwis at lower prices with the entire supply chain still making a profit.

That might mean importing bizarre eastern-european non-perishable brands, and offering fresh foods of lower perceived quality, and definitely discounting foods before it is not longer fit for sale.

by J.C. | 11th Jul 23, 3:23pm 1689045787

Lotte, AEON, Emart have all entered the Vietnam market, even though less than 20% of grocery shopping happens in Vietnam modern trade. Lotte has been there for more than 15 years yet don't turn a profit. Long term strategic plays.

Bubble economies are not attractive.

by Poppyc | 11th Jul 23, 3:40pm 1689046854

Shinsegae exited Emart from Vietnam. I believe they have a licensing agreement in place with THACO for the name.

by mrsbrownsboy | 12th Jul 23, 7:27am 1689103657

I don't hold out much hope. Like anything we buy nowadays,we need to spend a bit of time researching and find out where the best prices are ourselves. We have found we can save a lot more that way than waiting for the government to take any action.

In addition, the cause of some of our higher prices is the high cost of distribution where groceries and goods are moved numerous times before they even get to the supermarket. And the likes of countdown distributing meat in prepackaged plastic from a central.location...in packs that are designed so that we consume much more meat than.we need. There is always too much for 2, not enough for 3 etc. And just try and buy anything at the deli counter..ask for 250 grams or whatever and they always give you more..at least 10% in most cases, and unless you keep a very close eye on them, they get away with it.

by Pa1nter | 12th Jul 23, 7:38am 1689104321

There is always too much for 2, not enough for 3 etc.

I think that's how they invented leftovers.

by Tangata_Pono | 12th Jul 23, 1:56pm 1689127005

No doubt the Commissioner can hold the supermarkets to account on Fair Trading Act breaches but there will be little he can do on the root cause of high prices - lack of competition. It is not illegal to make profits. This was always a solution arising from poor problem definition. It has to be one of the most patsy deliverables this givernment has generated in its current term.

by mills | 14th Jul 23, 11:14am 1689290043

Heveans! Not another "Commisioner"? They seem to be breeding like rabbits.

Surely we pay handsome salaries to all those MP's on the Oppositon benches, plus their staff, to hold the government of the day to account for the perceived wrongs of society.

If there are glaring problems, in this case, of excessive food prices, our Opposition MP's can actually do some real research rather than just point scoring for the benefit of being on tv in the Debating Chamber.

I think any cost benefit study would show that the system of passing the buck to a whole bunch of "commisioners", to build their bureaucracies in comfortable Wellington offices, is just an unecessary duplication of the MP's we already pay to do the job of exposing society's problems.