Countdown leads defence in study
Countdown has told the market watchdog the price of groceries has fallen in real terms over the past 10 years.
The Commerce Commission is conducting a market study into the $21 billion groceries industry.
Countdown and rival Foodstuffs brushed off concerns at a lack of competition in filings released by the Commerce Commission yesterday. The submissions were lodged as the commission appealed to the public and supermarket suppliers to front up with their concerns, with the opportunity to complete an anonymous survey.
Countdown said in its submission that grocery food prices had ‘‘fallen in real terms’’ over the past 10 years, rising at an annual rate of 1.3 per cent a year, which was sightly below the average rate of inflation of 1.58 per cent.
Its own average annual price rises had been lower, at 0.7 per cent, it said.
Spending on food – ignoring restaurant meals and takeaways – had fallen from 9.5 per cent of people’s average household expenditure to 8.1 per cent in 2019, it said.
The company said making comparisons with overseas grocery markets was hard but a study it commissioned using Economist Intelligence Unit data concluded that in ‘‘purchasing power parity’’ terms, average grocery prices in Auckland were not high compared with other large OECD (Organisation for Economic Co-operation and Development) cities.
Countdown revealed 12 per cent of its sales were now made online and broke down where each dollar spent at its supermarkets went. Out of each dollar handed over at the till, 63 cents was paid to suppliers, 19c was consumed by costs including staff costs, 13c was paid in GST and 2c went on interest costs and other taxes, with only 2.4c going to the company in profit, it said.
Major rival Foodstuffs was more circumspect about its operations in its submission but also appeared to give no ground to competition concerns, listing everyone from Myfoodbag, The Warehouse, Kmart, Uber Eats and Mighty Ape – and many businesses in between – as its competitors.
‘‘A key trend in consumer shopping habits is that increasingly, not all consumers engage in a full shop, and instead tend to do more frequent, smaller shopping missions,’’ it said.
‘‘Convenience is likely to be a more relevant factor for the smallermissions, with the ‘price, quality, range and service matrix’ at smaller retail outlets and specialist stores in many cases providing a competitive advantage over full supermarkets, and at the very least representing a strong competitive constraint.’’
The supermarket study is widely expected to result in an industry code similar to Australia’s or Britain’s to protect suppliers from the market power of Countdown and Foodstuffs.
The Food and Grocery Council, which represents major food manufacturers, submitted there was ‘‘significant anecdotal evidence of exploitation of suppliers’’.
‘‘Grocery supply in New Zealand is a duopoly with a limited competitive fringe,’’ it said.
Consumer NZ disputed that the real price of groceries was trending down, saying food prices had been rising faster than the rate of general inflation over the past few years.