The Warehouse throws down cheap butter challenge

AUCKLAND: A ‘‘brilliant’’ example of how a third grocery retailer could bring down New Zealand food prices is now playing out at a Warehouse butter chiller near you, Consumer NZ says.

A 500g packet of branded Tararua butter is $4 at The Warehouse.

At Countdown, the same product is $8.30.

While The Warehouse has not fully entered the grocery market and can not compete with the duopoly supermarkets Countdown and Foodstuffs for the full weekly food shop, Consumer NZ chief executive Jon Duffy thinks the comparison proves a point.

‘‘What a brilliant example of what a third player in the market can do.’’

‘‘If this is an example of what happens when you crack open the duopoly and provide competition, bring it on.’’

At Countdown this week 500g of Anchor brand butter was $8.50. At rival New World, other brands of similar quantity and style butters were $7.99.

House brand butter at both supermarket chains ranged from just $5.39 to $5.40.

Mr Duffy said not many people realised The Warehouse was selling dairy products, so the supermarkets ‘‘get away with a high price’’.

The supermarkets and dairy product makers like Fonterra inevitably fall back on the explanation of strong global prices for dairy when asked about prices at the dairy chiller.

New Zealand exports 95% of its dairy production and manufacturers like Fonterra Brands NZ, maker of Anchor products, say they have to pay overseas prices for milk.

Manufacturers Fonterra and Goodman Fielder dominate the retail dairy market.

The Tararua brand is made by Goodman Fielder.

On top of high world prices, general inflation, dairy manufacturers say general inflation has added to their costs, which they have had to pass on.

But Mr Duffy has a different take.

‘‘Is it the global prices or is it the lack of competition?

‘‘It may be the case that suppliers have raised prices to supermarkets recently.

‘‘But . . . how much of that can be absorbed in the already excessive profits the supermarkets are making and how much is right to pass on to consumers?’’

The Warehouse in a written response said its $4 Tararua butter offer had been ‘‘incredibly popular’’. ‘‘Kiwi families are coming to us looking for great value on grocery and pantry essentials and we’re seeing increased demand across a range of items including milk, butter, bread, WeetBix, oats and coffee.’’

Asked about the gulf in price between house brand and branded prices for the same sized pack of butter, and whether it could be attributed to a difference in quality or processing or some other reason, Fonterra and the two supermarket companies ducked.

The two supermarket chains were also asked if they were price gouging, taking advantage of a perfect storm of economic conditions — a pandemic, supply chain issues, inflation and strong overseas prices.

Countdown in a written response referred The New Zea

land Herald to suppliers ‘‘like Fonterra’’ for an understanding of the ‘‘wider context’’ of dairy and butter pricing.

The company cited commercial sensitivities around some of Herald questions.

However it offered this comment: ‘‘There is significant pressure on the price of butter and other dairy products in New Zealand at the moment, due to record high farmgate milk prices and incredibly strong international demand for New Zealand dairy.

‘‘This is in addition to increased production costs such as fuel, labour, fertiliser and animal feed.

‘‘These pressures mean we’ve already received one cost increase this year on butter and this is being reflected in our onshelf pricing.

❛ how much of that can be absorbed in the already excessive profits the supermarkets are making and how much is right to pass on to consumers

‘‘We know that price is incredibly important to our customers and every day we look at what cost increases we can mitigate, absorb, hold or delay, to deliver the best value that we can and keep prices as low as possible.’’ Foodstuffs, which operates New World and Pak’n Save supermarkets, said: ‘‘We don’t price gouge and we know you’ll appreciate our buyers are competing in a global market on dairy.

‘‘The prices on shelf reflect significant increases in cost prices from suppliers recently.’’

Foodstuffs said its $5.39 on house brand Pam’s 500g butter was because the product was covered by its promotional ‘‘price rollback’’, which returned some prices to where they were a year ago.

Fonterra Brands NZ managing director Brett Henshaw in a written response said: ‘‘Global dairy commodity prices are at record highs and these consistent price rises have led to an increase in the wholesale price FBNZ pays for the dairy inputs required to manufacture their consumer products.’’