Allan Barber sees many ironies in the current calls to nationalise or divest part of the New Zealand-owned supermarket duopoly, and he is frustrated with the overall lack of logic

There are few things more dispiriting than observing the antics of the politicians who want to govern us for the next three years. By now you probably realise that I am a grumpy old cynic who has no faith in the ability of any political party to tackle and solve the multiple issues that face us, including those caused by global problems we cannot control.

The closer we come to an election, the more chaotic and irrational the behaviour of our would-be leaders. The latest candidate for policy madness is the unseemly race to bring about change in the country’s grocery retail and wholesale sector with the laudable purpose of making food more affordable.

There are several ironies here. 

The first one that strikes me is the fact the Commerce Commission (ComCom) facilitated the Foodstuffs/Woolworths duopoly 25 years ago when it approved the acquisition of Woolworths New Zealand from Hong Kong’s Dairy Farm International subsidiary Foodland NZ by Progressive Enterprises which owned Foodtown and Countdown. 

This was subsequently overturned following an objection by Foodstuffs, but the Judicial Committee of the Privy Council cleared the merger less than a year later. In 2005 the ComCom approved the sale of that business to Woolworths Australia which initially named all the stores Countdown before changing them all to Woolworths.

So the very duopoly the politicians would like to break up was actually approved by the ComCom in the first place.

The second irony is that the ComCom declined the application to merge Foodstuffs North Island and Foodstuffs South Island because it believed this would bring about greater concentration of power. National now wants Foodstuffs to merge its wholesale operations to service the proposed separate chains of Pak ‘n Save and New World/Four Square.

The third irony is the role of the Grocery Commissioner which was established by the last Labour Government in 2023. 

His key responsibilities include monitoring and regulating grocery retailers and suppliers, investigating restrictive practices, enforcing unit pricing regulations, protecting suppliers and conducting inquiries and reviews, including the Wholesale Supply Inquiry and Grocery Supply Code Review, to identify areas for improvement in market competition.

The Grocery Commissioner operates within the ComCom, the body responsible for approving mergers and takeovers as well as pursuing and prosecuting anti-competitive behaviour. Labour’s policy to introduce legislation to prosecute price gouging (whatever that is) is further admission neither the ComCom nor the Grocery Commissioner has done the job required of them.

Clearly none of the main political parties except ACT has any confidence in the organisation established specifically to oversee and adjudicate market behaviour or in the individual appointed to do all the things they think should be done. 

The fourth irony is National’s proposal to get the ComCom to carry out a review into splitting Foodstuffs into two national grocery chains to decide whether it makes financial sense. It was Rob Muldoon’s National government 50 years ago that taunted Labour with its Dancing Cossacks advertising campaign likening Labour’s compulsory superannuation policy to communism.

National clearly has no qualms about introducing a potential policy that could also be said to be akin to that of a communist state. Sharon Murdoch’s recent cartoon in the Sunday Star Times neatly makes that comparison.

The Greens have also flirted with communism with their mad idea to force Woolworths and Foodstuffs to shed 120 stores which would then become a government owned supermarket chain. They don’t seem to have given much thought to the logistical challenge of setting up a wholesale and distribution business to service this new, presumably loss-making, enterprise nor to the question of compelling private owners to dispose of their hard-won and successful stores.

Apart from the slightly dubious contention by the ComCom supermarkets in New Zealand were making excess profits of $1 million a day none of the parties has yet justified why they think supermarkets are making unjustified profits.

Admittedly New Zealand supermarkets appear to earn a higher return on capital than in Australia, but not unrealistically so. The Australian experience with discount chain Aldi suggests prices drop slightly in the immediate vicinity of an Aldi store, but not further away, while it’s worth remembering a discounter normally offers a much narrower range.

The main problem in New Zealand may not be that our supermarkets charge too much, but some people on low incomes earn too little. We have gradually become a low-wage economy, at least for some parts of the population, while benefits cannot cover everything people have come to regard as their entitlement.

Instead of blaming and threatening a well-run, profitable part of the economy, inspired by a media frenzy, our next government should develop policies that encourage better performance and productivity. Hopefully it will also ensure we don’t go backwards on agricultural policies while remaining mindful of the challenges of climate change.