Doubts move will drive down prices

AUCKLAND: An online retailer is sceptical opening up wholesale deals with the big supermarkets will lower prices, while the New Zealand Food and Grocery Council says its a significant step.

The Government announced on Wednesday supermarket chains Foodstuffs and Woolworths essentially had a year to open up wholesale supply to smaller grocery operators before they were forced to, through new rules and the powers of a grocery commissioner.

Online groceries retailer Supie founder Sarah Balle was sceptical that opening up wholesale supply would deliver lower prices.

The wholesale move did not in itself provide meaningful competition, she said.

Prices that suppliers charged retailers would still go up, because it would be more expensive for them to distribute products to small retailers compared with supplying large pallets of goods to the major retailers, she said.

The big supermarkets would also be able to sustain lower margins on the goods they sold.

‘‘That means we’ll just end up in a similar position we’re in today, which is the supermarket will always be cheaper and the local dairy will always be more expensive than them.

‘‘Meaningful competition . . . means a third or fourth or fifth player in the market.’’

Food and grocery council chief executive Katherine Rich said it was a significant step, although a shortterm solution.

‘‘If you look at all of the changes the Government has made, it all adds up to adding extra competition, which should drive lower prices,’’ Mrs Rich said yesterday.

‘‘This should only be viewed as a short to mediumterm solution to immediately help the Night ’n Days who are independent retailers who currently have to line up in Pak’nSaves to get their stock with the rest of us as shoppers.

‘‘Long term, you need an independent wholesaler, and you need a couple of other . . . supermarkets to come into the market and shake that up.’’

However, the regulatory backstop, in the form of a grocery commissioner with significant powers, sent a signal that things had to change.

‘‘The supermarkets . . . are starting to take things seriously,’’ she said.

She did not believe it would cost supermarkets more to supply independent retailers, as they had done that in the past.

Commerce and Consumer Affairs Minister Dr David Clark said the move would improve competition ‘‘and we know that competition does improve prices’’.

The Commerce Commission could step in if changes in the market were not happening, he said.

‘‘The tools we’re giving the Commerce Commission they can, if they think it’s the right thing to do, put a framework in place for range in price of goods,’’ he said.

‘‘They can suggest things like what margins should be; they can choose to say that major supermarkets should supply things at nondiscriminatory prices — so they have to supply goods at the same price no matter who they’re supplying them to.’’

Supermarkets had started with price rollbacks and freezes, but the Government aimed to address the structure of the market, he said.

Legislation would be passed early next year and the Commerce Commission would have the tools straight away.

Countdown said it was working on setting up a wholesale channel and had nearly signed up its first customer.

It had set up a new wholesale business unit and was talking with many of the more than 50 small retailers and other organisations which wanted to become customers.

Foodstuffs said it would provide wholesale access to retailers which were not members of the cooperative, and was setting up a new service to do that. — RNZ