Watch out supermarkets – the new Grocery Commissioner has a ‘fix-it’ list!
While it’s not always easy to connect the dots between the work regulators do behind the scenes in Wellington and the average Kiwi’s day-to-day life, it feels a little more personal when it comes to our supermarket bills. And, with grocery food prices up 10.7% in the year to September – almost double the overall inflation rate of 5.6% - many of us will have second-guessed the contents of our trollies recently.
It’s not just inflation, though. The prices Kiwis pay at the supermarket have always been infamously high compared to our mates across the ditch and in even bigger markets further afield. Meanwhile, two highly profitable players dominate the supermarket scene in New Zealand.
Coincidence? Our competition watchdog, the Commerce Commission, doesn’t think so. In its 2022 market study into the grocery sector the Commerce Commission found that competition wasn’t working well for consumers. Now, 100 days into his role as our first Grocery Commission, Pierre van Heerden has revealed the ‘Top 3’ on his current fix-it list for the country’s $25 billion supermarket sector.
1. Accurate pricing – a consumer right
One of Mr van Heerden’s priorities is clear and accurate pricing, so that Kiwi consumers pay the correct amount at the checkout and are not misled. He says that, so far this year, supermarkets have been the most-complained-about sector to the Commerce Commission, with pricing issues being a common reason.
“Consumers are entitled to accurate and clear pricing, and to trust that what is advertised is what they pay,” Mr van Heerden said.
“The current level of pricing errors that Kiwi consumers are raising with the Commission is far too high and points to a real problem.”
Mr van Heerden noted that even if pricing errors only affected a very small proportion of total sales, the total overcharge paid by consumers could conceivably run to tens of millions of dollars every year.
“The errors that we are seeing through the complaints to the Commission likely only represent the tip of the iceberg.”
“Getting pricing right is the cornerstone of good business practice. It doesn’t need to be complicated, and we expect all businesses, including supermarkets, to have the processes in place to avoid mistakes.”
Mr van Heerden said the Commission is exploring various ways to improve the situation, including enforcement options under the Fair Trading Act, and looking at initiatives overseas that could work here.
2. Suppliers supporting competition
Another priority at the top of the Grocery Commissioner’s fix-it list is to address undesirable behaviour from some suppliers that could hurt new and emerging retailers, consumer choice and prices consumers pay.
“Suppliers play a vital role in the grocery sector, and there are many trusted and iconic brands in New Zealand who have considerable influence. [They] have a responsibility to co-operate with the grocery regime and play fair in the system. Consumers expect this of them, as their brands are built on consumer trust,” Mr van Heerden said.
“Regulated grocery retailers (RGRs) are now required to sell wholesale groceries to retail competitors, enabling alternative retailers to access more products at better prices, and better compete in the sector – whether that be using wholesalers or purchasing direct from the supplier.”
Mr van Heerden was aware that a number of influential suppliers appear to be opting out of the RGRs’ wholesale offers and insisting on supplying direct to smaller retailers but at much higher prices, which is having a negative impact on retail competition.
“I will be keeping an eye on this behaviour and exploring possible options for action,” he said.
3. Level playing field for new entrants
The Grocery Commissioner would also like to see improving market conditions to help create more opportunities for new entrants in the sector to set up in New Zealand – critical to increasing competition in the market.
Mr van Heerden said while there have been encouraging moves by the major supermarket operators to lift land covenants, the Commission was watching closely to make sure all existing prohibited covenants have been removed and no new ones created.
Time will tell
Ultimately, the new Grocery Industry Competition Act and its overseer, the Grocery Commissioner, aim to bring more competition and transparency to the sector for the long-term benefit of Kiwi consumers. It might be some time before we feel the impact on our wallets, in other words.
In the meantime, if you’re feeling the pinch from higher bills at the supermarket till it could be worth creating a weekly or monthly budget if you don’t already have one. Knowing exactly where your money is going can help you spot ways to save and gives you a better sense of agency over your spending.
If you don’t know where to start, check out our free Buckets of Money for Retirement planning guide. It includes budget worksheets that will help you get on top of your finances whatever stage of life you’re at.
Vanessa is Head of Communications at Lifetime Retirement Income. She’s an experienced investment writer, having spent more than a decade writing about financial markets in the global fund management industry.
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