Goodbye land covenants, hello competition?

Urgent legislation to stop big supermarkets blocking competitors from accessing land for new stores was introduced as part of Budget 2022.

The Commerce (Grocery Sector Covenants) Amendment Bill amends the Commerce Act, banning restrictive covenants on land and exclusive covenants on leases. It also makes existing covenants unenforceable.

Supermarket companies have been accused of using covenants to stop competitors setting up around them.

The move follows recommendations from the Commerce Commission’s report on the grocery sector, which says Countdown and Foodstuffs, owner of Pak ‘n Save and NewWorld, had been using covenants to ‘‘unduly restrict retail competition’’ by limiting land use and availability.

So with Costco already opening in Auckland this year, and covenants on the way out, what other supermarkets could pop up?

Aldi

The German grocery company has more than 10,000 stores in 20 countries. One reason its prices are so low is that most of the groceries it carries are under its home brand and it also carries only the most commonly purchased grocery items in the most popular sizes.

The supermarket opened its first Australian store in 2001 in New SouthWales, shaking up the grocery sector in Australia which at the time had only two competitors, Coles and Woolworths.

By 2011, Aldi had 6.7 per cent of the market; that share grew to 12.4 per cent by 2020. It has also became one of the most trusted brands in the country – ahead of Kmart, Myer and BigW– and by 2021, it claimed to have contributed an estimated A$30.2 billion (NZ$33.3b) to the Australian economy.

Aldi has been registered with the New Zealand Companies Office since 2000 but has previously said it was not looking to launch in New Zealand any time soon.

Tesco

The British supermarket chain has more than 3400 stores across the UK and is the market leader for groceries, with amarket share of about 28%.

As well as groceries, Tesco sells clothing, and operates a bank and amobile phone company.

Its store network includes supermarkets, large-format supermarkets called Tesco Extras, small convenience stores called Tesco Express and petrol stations, similar to NewWorld and Pak ‘n Save fuel stations.

Nine of Tesco’s 173 largest stores trade for 24 hours.

Tesco also has stores in five countries across Europe and had a short stint in the United States before pulling out in 2013.

Walmart

The world’s largest retailer operates in 24 countries and has a net worth of US$428b (NZ$670b).

Similar to Costco, it stocks general merchandise while offering a full-service supermarket, including meat and poultry, bakery, deli foods, dairy products, produce and fresh seafood. Walmart has 5250 stores and employs 800,000 workers outside of the US.

It initially struggled when it launched in China as it tried to reproduce its American model overseas but it adapted to how Chinese consumers prefer to shop. For example, Chinese shoppers prefer to select their own live fish and seafood, so stores began displaying the meat uncovered and installed fish tanks, leading to higher sales.

Amazon Go

Featuring themost advanced shopping technology, Amazon Go is a chain of convenience stores in the US and the UK, operated by online retailer Amazon.

The stores have no checkouts and operate with ‘‘JustWalk Out’’ technology. It automatically detects when a product is taken from or returned to the shelves and keeps track of them in a virtual cart.

When a customer leaves the store their Amazon account is automatically charged.

As of March last year, there were 32 stores in the US, and 15 in the UK. Amazon Go is yet to launch in Australia but instead offers online grocery shopping through the Amazon website.

In March, Stuff tested whether it was cheaper to buy groceries all the way from Australia on Amazon, compared with New Zealand supermarkets. A cart of 13 items from Amazon was almost $30 cheaper compared with the same cart at Countdown.

Whole Foods Market

Also owned by Amazon, Whole Foods Market is an American supermarket chain which specifically sells products free from hydrogenated fats and artificial colours, flavours and preservatives. Amazon boughtWhole Foods in 2017 for US$13.7b.

Many stores have also employed ‘‘healthy eating specialists’’, who answer customer’s healthy eating questions and can help choose products and suggest recipes.

The chain also focuses on sustainable practices and was the first US supermarket to ban single-use plastic bags.

Lidl

Lidl is another German discount chain that operatesmore than 11,000 stores across Europe and the US.

Lidl is Aldi’s main competitor in multiple markets and operates in 31 countries.

There are generally more branded products offered compared with Aldi and Lidl distributes many low-priced gourmet foods.