Foodstuffs defends prices, competition
Supermarket group Foodstuffs North Island has hit back at claims that food prices are too expensive, on the eve of a conference that could pave the way for an overhaul of the $22 billion groceries industry.
Foodstuffs North Island, which manages New World and Pak ’n Save franchises, said that out of every dollar spent on groceries at its stores, the cooperative and its store owners earned a combined after-tax profit of 4 cents. On average, 68c went on payments to suppliers, 15c on wages and other costs, and 13c on GST, it said.
Those figures would suggest that Foodstuffs and its stores would make a profit of about $10 from the average family’s weekly shopping bill.
The Commerce Commission is carrying out a market study into the groceries industry, and will begin a conference today to consult on measures it may recommend to increase competition.
The watchdog concluded in a draft report in July that supermarkets were making excess profits. It signalled that it could require Countdown and Foodstuffs to sell some of their stores and open up their distribution centres to rivals in order to help a third operator enter the market.
2degrees founder Tex Edwards is involved in a bid by a group of challengers called Northelia to set up a third supermarket chain if the commission follows through thoroughly on those suggestions.
Foodstuffs NZ chief executive Chris Quin said grocery prices in New Zealand were 21st in the OECD – below the middle of the pack – if prices were adjusted for the purchasing power of the New Zealand dollar versus other currencies.
Competition was strong, prices were fair by international standards, and consumers would not benefit from ‘‘significant regulatory interventions’’, he said.
‘‘Supermarkets don’t just compete with supermarkets – we compete with a full range of retailers,’’ he said.
The commission chose not to use the ‘‘purchasing power parity’’ measure referred to by Foodstuffs, and instead favoured a simple currency conversion to compare prices, on the basis that the cost of groceries was largely determined by international factors.
Foodstuffs disputed this, saying that most supermarket costs, including labour and land costs, were shaped by local market conditions. ‘‘A high-income country like New Zealand is likely to have higher costs for these products and services than lower-income countries. This will likely bias prices upwards when using a market exchange rate.’’
‘‘Supermarkets . . . compete with a full range of retailers.’’ Chris Quin Foodstuffs NZ chief executive