Led by recently-retired New Zealand Food and Grocery Council (NZFGC) Chief Executive Katherine Rich, the industry declared victory when its 12-year-long efforts culminated in the local Commerce Commission announcing that local grocery competition was indeed ‘not working well for consumers’, and the government commencing work on a mandatory Grocery Code of Conduct.
Despite receiving pushback from the main players in the duopoly namely Foodstuffs and Countdown/Woolworths, New Zealand Minister of Commerce and Consumer Affairs David Clark has now implemented another significant step towards the establishment of this code by announcing a new Grocery Industry Competition Bill in parliament on November 21.
“Earlier this year, I called on the duopoly to lock in good-faith wholesale arrangements on their own terms or risk facing regulatory intervention – [They have] now been given plenty of warning [and] if they fail to adequately open up their wholesale market voluntarily, government will make it happen,” Clark said via a formal statement.
“The Grocery Industry Competition Bill will legally establish a Grocery Commissioner at the Commerce Commission, to referee the sector. The Commission will play a key role in administering the Bill once it is passed and will have access to a hefty range of enforcement and monitoring tools.
“The Bill will also enable collective bargaining and implement a Grocery Supply Code to protect suppliers from unfair contract terms. This will be especially important for the small local and artisan brands vying for shelf space.”
Clark stressed that this bill is expected to ‘trigger an unprecedented shake-up of the grocery sector’, with consumers as the main concern.
“The Commerce Commission found New Zealand supermarkets earn NZ$1mn (US$612,665) a day in excess profits because of a lack of competition. As the global cost of living crisis continues to put pressure on families, this Bill is one way the government can tackle the root causes,” he said.
The bill is being introduced ‘under urgency’, so it will be open to feedback for four months and is expected to be enforced in mid-2023. It is currently at the ‘first reading’ stage, and can be viewed online here.
Unsurprisingly this bill has received a very warm welcome from the local food and grocery sector, with newly-appointed NZFGC Chief Executive Raewyn Bleakley highlighting this as a solid step towards positive change for the industry.
“These proposals [are warmly welcomed by industry] and consumers as further concrete steps towards helping reduce pain at the checkout and ensuring better choice of products,” she told FoodNavigator-Asia.
“Addressing wholesale offerings to competitors on commercial terms, with a backup of additional regulation if those terms compromise competition in the market, is very significant - This is a complex area and we welcome measures that will get more competition into the market.
“[We would like to see] another significant retailer entering the market and a host of smaller ones [equipped to be] able to compete more effectively with the big retailers.”
Bleakley also stressed that legislative governance such as this bill is very important at this stage as previous initiatives involving voluntary participation and discussion had been less effective especially when it came to the wholesale sector, which greatly affects smaller retailers.
“In the past, the big supermarkets have declined requests from some independent retailers seeking wholesale supply - We are aware steps are being taken now ahead of this bill being introduced and look forward to seeing this change as a result,” she said.
“The message from the government that if this isn’t done voluntarily it there will be regulatory intervention was emphasised [and] these measures will work hand-in-hand with the power the bill aims to give [the] Grocery Commissioner to impose additional regulation to require wholesale supply on certain terms, including price and range.
“That’s on top of a range of other enforcement and monitoring tools the Commissioner will have, including keeping a close eye on how the Government’s reforms are being implemented, and making recommendations if they aren’t.”
Code of conduct at last
The NZFGC has been a strong proponent of having a local Grocery Code of Conduct under Rich’s leadership, and now Bleakley will have some very big shoes to fill in the journey to actualising the creation of this code, aimed at protecting the industry from unfair retailer influence.
“What we’ll be looking for in the detail of the bill is that [details of the Grocery Code of Conduct] that prevents retailers from using unfair negotiating power to force suppliers to accept unfavourable terms of supply,” she said.
“[These could] involve preventing them taking on costs and risks that are better addressed by the major grocery retailers, extend protections against the use of unfair contract terms, and enable certain suppliers to collectively negotiate terms and conditions of supply with the major retailers.”