Shoppers stuck with supermarket duopoly
New Zealand’s supermarket duopoly could be just too hard to crack for potential competitors, economist Christoph Schumacher says.
The market is dominated by Foodstuffs, which owns Pak ‘n Save and New World supermarkets, and Australian-owned Countdown.
American superstore Costco is on track to open a three-level store at Westgate next year but despite public enthusiasm for foreign supermarkets Aldi, Coles, Lidl or Kaufland to follow suit, they were not expected to arrive any time soon.
German supermarket chains Aldi and Kaufland confirmed they did not have any plans to open in New Zealand and Coles did not comment.
Schumacher, from Massey University’s school of economics and finance, said the supermarkets would only come if they thought they could break into the market.
‘‘That they haven’t speaks to the barriers of entry for new companies in terms of regulation,’’ Schumacher said.
‘‘It also speaks to the power of existing companies. If the two existing companies knew a third company was coming, they could make the life of the new company very difficult.’’
Schumacher said the decadeslong saga between Countdown owner Woolworths, and Foodstuffs over the development of Pak ‘n Save Wairau Park, Auckland, showed the lengths the supermarket companies were willing to go to block direct competition.
Significant population growth could make New Zealand a more attractive prospect for a third store but it might take the Government getting involved to change the status quo, he said.
Prime Minister Jacinda Ardern said in 2018 that she would not be surprised if the Commerce Commission
‘‘Unfortunately, it’s the customer that suffers.’’
conducted a market study into supermarkets.
In August, the Commerce Commission released the results of a fuel industry market study that found the fuel market was not as competitive as it should be.
The commission has received $6 million over four years to conduct market studies into industries where competition is believed to be a problem. A commission spokeswoman said the consumer watchdog expected the next market study will be initiated by the Government.
A spokesman for Commerce Minister Kris Faafoi said no decisions had been made yet on the commission’s next market study but a decision could be made in the next few months.
Foodstuffs has 53 per cent of the grocery market, and Countdown 32.4 per cent, according to Canstar Blue.
The situation with the supermarkets was similar to the aviation industry, Schumacher said. For a brief moment, New Zealand’s domestic travellers had Air NZ, Virgin Blue and Jetstar to chose from. But the market proved too small and Virgin retreated. ‘‘Unfortunately, it’s the customer that suffers. Life is expensive here and supermarket bills are higher than they should be,’’ he said.
Thomas Casey set up the New Zealand needs Aldi Facebook page as a protest against grocery prices.
Casey and his wife emigrated from the United Kingdom where they did their weekly shop at the local Aldi store, he said.
The family of three spent between £65 (NZ$130) and £70 a week, including beer and wine.
Casey said after moving to New Zealand seven years ago, the couple was shocked by the cost of the weekly shop.
‘‘In an era where people are supposedly more well off everybody seems to have less spare at the end of the week or month, and a massive chunk of what we earn is spent on our groceries, he said.
‘‘You only have to visit Aldi online to see how cheap their prices are in comparison to our supermarkets, and I think if more people were aware of how much less people are paying for their groceries, they’d certainly be on board for a supermarket shake-up.’’
Consumer NZ head of research Jessica Wilson said the New Zealand supermarket trade is one of the most concentrated in the world and consumers has little option about where they buy their groceries.
‘‘This degree of market concentration also increases the risk consumers will end up paying more than they should because the usual competitive pressures don’t apply,’’ Wilson said.
Another competitor entering the market would put ‘‘much needed price pressure’’ on the two incumbents, Wilson said.
‘‘Across the Tasman, the arrival of discounter Aldi proved effective in forcing the major chains there to sharpen up their prices.’’
But a Countdown spokeswoman said the food and grocery sector in New Zealand was competitive and this could be seen by the vast array of choice available for customers.
‘‘This includes smaller supermarkets and grocery stores like FreshChoice, SuperValue, Four Square, Farro and Moore Wilson’s,’’ she said.