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Last week the Commerce Commission released a report into the retail grocery sector that recommended a suite of changes. Prompted by the report, The News took a ‘‘secret shopper’’ approach to gauge prices across supermarkets linked to the duopoly Foodstuffs and Woolworths NZ in Central Otago and the Upper Clutha.

According to the Commerce Commission, supermarkets make $430 million a year in ‘‘excess profits’’.

That adds up to about $84 per person, or $1.60 a week, and the commission’s research found convenience trumps price when most of us decide where to go on our ‘‘shopping missions’’.

Bearing that in mind, The News compiled a list of basic staple foods — prime mince (per kg), basic loose potatoes (per kg), bread (basic white toast slice loaf), milk (per litre), butter (500g), Colby cheese (per kg), and a wildcard of 1.5 litres of Coca›Cola — for a relative comparison.

With the exception of Coke, where The News opted for the ‘‘real thing’’, the price of the other items was based on house brands (where available) such as Foodstuffs’ Pams. If no house brands were in stock, the next cheapest brand in stock on the day The News visited was chosen. No sale prices were used.

The next step was to visit all 12 supermarkets linked to Foodstuffs and Woolworths across Central Otago and the Wanaka area.

In the region, Foodstuffs is the stronger player of the duopoly with nine supermarkets. Four are under its New World brand, one each in Alexandra and Cromwell and two in Wanaka, and Alexandra, Clyde, Ranfurly, Wanaka and Albert Town each have a Four Square.

Woolworths (formerly Progressive Enterprises) takes a smaller share of the market with SuperValue in Roxburgh, Countdown in Wanaka and FreshChoice in Cromwell.

Woolworths will add another to its stable in the region, the construction of a Countdown in Alexandra under way.

The News found surprising variations in prices between the items as detailed in our lists.

One thing is for sure: cheese on toast, once considered an inexpensive, easy, slap-up but hearty meal is no longer cheap.

Rising prices Grocery prices for staple foods varied widely between stores in the region. PHOTO: SHANNON THOMSON

In November 2020 the Government asked the Commerce Commission to take an independent look at the factors affecting competition in the $22 billion a year grocery industry.

Commission chairwoman Anna Rawlings said the final report concluded competition in the grocery sector was not working well for New Zealand consumers.

‘‘We have found that the intensity of competition between the major grocery retailers who dominate the market, Woolworths NZ and Foodstuffs, is muted and competitors wanting to enter or expand face significant challenges.’’

There was an increasingly diverse fringe of competitors in the sector, but they were unable to compete effectively with Woolworths NZ and Foodstuffs on price, product range and store location to offer the convenience of one› stop shopping for the many different kinds of shopping missions consumers undertook, she said.

The commission also identified that the nature of retail pricing and promotional strategies, and the major grocery retailers’ relationships with suppliers, indicated competition was not working as well as it could.

It also found New Zealand’s retail grocery prices appeared comparatively high by international standards, the profitability of major retailers also appeared high, and while consumers benefited from a range of innovations, there was scope for more.

 

Commerce Commission recommendations

  • Making more land available for new grocery stores by changing planning laws to free up sites, banning the use of restrictive land covenants and exclusivity clauses in leases that prevent retail grocery stores from being developed, and monitoring land banking by the major grocery retailers.
  • Improving access to the wholesale supply of a wide range of groceries at competitive prices by regulating to require the major grocery retailers to fairly consider any requests they receive to supply competitors, and requiring the criteria for obtaining supply and terms and conditions of supply to be transparent
  • Monitoring strategic conduct by the major grocery retailers, such as the use of ‘‘best price’’ clauses and exclusive supply agreements. The commission also identified competition was not working well for many of the businesses that supply groceries to the major grocery retailers, Ms Rawlings said.
  • Recommendations to help consumers make more informed purchasing decisions, and stimulate competition between retailers, include:
  • Requiring major grocery retailers to ensure promotional and pricing practices, and the terms and conditions of loyalty programmes, are easy for consumers to understand.
  • Requiring grocery retailers to display unit pricing in a consistent format. The final report and recommendations are now with the Government to review and consider.