The debate over establishing a Grocery Code of Conduct to keep supermarkets in check has been in progress for some time, but things became especially heated in the last year after major New Zealand grocery chain Foodstuffs made changes to its buying model, which was seen by many to heavily disadvantage food firms from manufacturers to suppliers.
This appears to have hastened progress on the creation of the code and calls for its mandatory implementation, which NZFGC Chief Executive Katherine Rich presented to the House of Representatives at Parliament recently.
“[NZFGC has requested that] the House of Representatives support the establishment of a mandatory Grocery Code of Conduct for supermarkets, similar to those in Australia and the United Kingdom,” Rich said via the petition.
“[This is crucial] in order to address potential abuses of market power towards food and grocery manufacturers arising from New Zealand's highly concentrated grocery retail market - We have the most highly concentrated supermarket ownership in the world with over 95% controlled by two retail teams.”
The two retail teams mentioned are Foodstuffs (New World, PAK’n SAVE, Four Square) and Progressive Enterprises (Countdown, SuperValue, FreshChoice).
“When there is that level of dominance in a market it is a good idea to have a clear baseline for acceptable business conduct [and] such a code in New Zealand would provide a clearer framework for business dealings and negotiations in the grocery sector,” she told FoodNavigator-Asia.
Rich also stressed that the Foodstuffs incident is just one reason showing that it is high time for this code to be put into place, but not the only one and there have been a ‘combination of factors’ in the past 10 years backing the establishment of this.
“[The Foodstuffs incident is] linked to this, sure, but there have actually been a combination of factors in the last decade that have driven New Zealand businesses to believe that now is the right time for a code like this one,” she said.
“The codes in Australia and the United Kingdom have made a significant difference to supplier and retailer relationships by providing a clear framework for business dealings – [and it is time for New Zealand to have the same now.”
The United Kingdom established its code in 2009, and Australia established its own in 2014.
NZFGC’s petition received 500 signatures from the local industry in less than a month after it was opened for receiving signatures in November last year. This has now been tabled in Parliament and will be allocated to a Select Committee for consideration.
New Zealand Parliament member Greg O’Connor received the petition and spoke in support of a mandatory code, saying in a formal statement that it would ‘also be good for supermarket owners, with those with good practice not being disadvantaged by the bad ones, because everyone would be working to the same rules’.
The New Zealand government is also in the midst of conducting a market study into the local supermarkets industry, looking to identify any issues regarding competition product prices and procurement.
This study has been warmly welcomed by the local industry, with Rich telling us that supermarkets’ ‘privileged market position’ is accompanied with ‘additional responsibilities and accountabilities’ on the part of these supermarkets, and the government study would help ensure consumers get a ‘fair deal’.
She also suggested suggested that the review make the effects of such concentrated market power in a community more transparent, as well as how factors like costs, deductions, deletion threats, supermarket margin expectations and more are affecting local suppliers as well as end-product prices charged to consumers.
The study is being conducted by the local Commerce of Commission, and a final report is expected by November 2021.