We’re paying higher prices, specials are confusing and loyalty schemes aren’t delivering overly significant rewards.
Those aren’t just the musings of a frustrated supermarket shopper - but are some of the findings in the Commerce Commission’s first annual grocery report, issued on Wednesday.
Rewards schemes were only giving a return of between 0.71 percent for Flybuys and 0.75 percent for Everyday Rewards.
Between 2007 and 2019, the average weekly spend on grocery food increased 7.3 percent every three years but the latest data showed a leap of 28.9 percent.
The commission’s report said supermarkets would point to their own rising costs as the reason for price rises.
But it said margins had continued to grow - all of the major supermarkets had experienced an increase in price-cost margins, which meant that retail prices were increasing faster than the cost of the goods.
The report said supermarkets “continue to achieve higher levels of profitability than we would expect in a workably competitive market”.
It was not likely that Costco would be able to expand to the point where it could become a serious third supermarket contender, it said.
The report said the Warehouse could be an option - its network of shops meant it was in a good position to encourage shoppers to split their shopping in many cases - but it had said it had no intention of raising the capital needed to compete.
The “five things” don’t work that well as a list, but they are:
- High prices aren’t in your head
- Competition is not bringing down margins, or prices
- Other competitors aren’t finding it easy
- Innovation, but is it what we want?
- Would fines make a difference?
Split them up
Break up the vertical integration too.
That’s the more important part, as it’s the real reason the other new competitors like costco and the warehouse struggle compete…
Perhaps unsurprisingly, Seymour and the Actolytes have come out on the side of the Supermarket cartel.
https://www.rnz.co.nz/news/focusonpolitics/527289/act-pledges-pushback-on-supermarket-crackdown
Jail would make a difference.
Throwing executives into the stocks would also make a difference.
I don’t think anyone has done anything illegal. From my understanding the problem here is not dodgy companies (making profits is after all their entire point), the problem is the duopoly and the total lack of government intervention I’m breaking up or regulating the duopoly.
I think the point is that some aspects of the super markets’ executive activity should be illegal.
That there even is such an entrenched duopoly is a symptom of some activity that’s anti competitive.
Giving the benefit of the doubt, I would guess a population our size can only support a duopoly. I see this as a failure of government as we should recognise that we can’t have true competition for all market segments with a population of our size, so need to have regulations to prevent a duopoly forming.
I don’t know the answer. I don’t think I’ve seen any specific plans for how to address it, which makes me think it’s harder than it looks.
People says things like we should break up the companies, but what does that mean in practice?
I don’t buy the population size argument.
IMHO That we have independent grocers, butchers, fishmongers, etc is the proof.
Those small business are hanging on by the skin of their teeth though because the duopoly has super-saturated cities and towns with supermarkets. So much so, they have different bands to make it look like there’s fewer of each brand of supermarket.
They also abuse their dominant wholesale buyer power screwing down wholesale prices for suppliers.
So, customers are getting crap deals, suppliers are getting crap deals, and the supermarkets sit in the middle retailing and wholesaling internally to maximise profit.
Breaking the vertical (wholesale) integration would be the first step. It’s the same problem the power gen-tailers create. We want single payer leverage for things like pharmac, not for private enterprise (also see Fletchers).
The second would be a retail diaspora as such to reduce the density of a single retailer’s stores.
I get what you’re saying, but what are the specific laws you enact to break the vertical integration or reduce the density of a retailers stores?
When you buy the Woolworths Wheat Biscuits, you aren’t buying something they have produced. You’re buying the seconds of Weetbix from Sanitarium who have a contract with Woolworths to print their box design on it. It you say they aren’t allowed to do that, then Sanitarium will just put their own budget brand on it and sell it to Woolworths. It doesn’t change that the buying power of Woolworths is what makes it worth it to both parties.
For density, would you say you can’t have more than one store from a company within X km? How does that work for Mojo, Wellington’s starbucks equivalent who have dozens of stores in the CBD?
And how does that apply when New Worlds are all independently owned, run as a cooperative?
We’ve been here & done this before. Spark & Chorus exist because the government split Telecom. So i’d guess you split the production / distribution arms off both Woolworths & Foodstuff then require them to sell to anybody at the same terms. Then other retail outlets can purchase competitively and compete with the independently owned New Worlds or corporate owned Woolworths.
And if those two retail arms can get better terms from their former opposition then that could force the centralised aspects of those businesses to improve terms too. But also if the retail side can buy from anybody, then additional distribution / production companies would have additional customers to sell to as well.
All extremely hypothetical of course, and to a degree given the importance of supermarkets providing essential food services to humans I would expect any government moves to be fairly cautious and err on the status quo.
Of course, given how critical supermarkets are to the smooth functioning of our modern societies, maybe we shouldn’t leave them to the benefit of private capital and be run with a profiteering motive at all.
We’ve been here & done this before. Spark & Chorus exist because the government split Telecom. So i’d guess you split the production / distribution arms off both Woolworths & Foodstuff then require them to sell to anybody at the same terms.
Ah sorry, I was mixing things up. Requiring production, distribution, and retail to be separate sounds like a good starting point.
All extremely hypothetical of course, and to a degree given the importance of supermarkets providing essential food services to humans I would expect any government moves to be fairly cautious and err on the status quo.
I think you’re right, the government would step carefully, but I’d guess the only reason for this is because the supermarkets will try to sway public opinion. Move too slowly, and you’ll have a change of government that may reverse it all.
Of course, given how critical supermarkets are to the smooth functioning of our modern societies, maybe we shouldn’t leave them to the benefit of private capital and be run with a profiteering motive at all.
That definitely sounds like a mature society but I don’t think we are mature enough to head that way, considering the slide back towards companies running prisons and education.
For everyone that has the time and flexibility, cut Supermarkets out of your life as much as you can.
- Meat - find a local butcher, you’ll usually get better quality for about the same price and can usually get exactly how much you want, need, rather than prepackaged.
- Veg - find a local greengrocer, you’ll usually get visually lower quality but much cheaper and often a greater variety of things (yes, there’s more than 2 types of potato).
- Seafood - fishmongers will have a greater variety, and it’ll probably be fresher, might be about the same price
- For dry goods - this is where it starts to get harder, and i’ll have to break things down more:
-
- Asian grocery stores will cover you well for rice, noodles, and all the usual sauces etc - often cheaper than the Supermarket, always with far more varieties. You might be surprised at the sorts of things they’ll stock in their canned & frozen sections too.
-
- Mediterranean grocery stores can get you things like flour, pasta, olives etc, but you’ll find some stuff can be way cheaper, other stuff way more expensive.
-
- Bulk dry goods can be found at places like Bin Inn if you have one near you.
-
- Wholesale/Commercial - pretty common now for Gilmours, Starfoods etc to be open to normal public shoppers as well.
If i’m organised and plan ahead I can substitute my time and a bit of driving for the convenience of the Supermarket and usually save money doing so. Most of the time the Supermarket is basically just the bread, cleaning products & toilet paper shop.
100% this. A supermarket’s value offering is actually convenience not price.
This might be a big city thing. In my town the cost of bulk rice for example is always cheaper at Pak n Save (which does 5kg bags) than in either Bin Inn or the Asian supermarkets. Same with meat versus butchers.
Veg is hit and miss everywhere but green veges are sometimes cheapest at some of the Asian places, though to be fair it’s not usually the same veges.
When I lived in Aucks and Wellington we shopped more like you describe, but frustratingly it just doesn’t work like that here. Might also be that I have way less money now and am always after the cheapest things.
I’m in a smaller city, so could just be luck with the stores I have available. But also i’m thinking of the balance between price & quality too I guess. Definitely the bigger your urban area the more options will be available though. The Supermarket chains have over the years put local greengrocers and butcheries out of business in the smaller areas.
This is a big town thing.
Small town don’t have the range of shops. But we still have a few.
We get a lot of our fresh food from a weekend market.
Most of the time the Supermarket is basically just the bread, cleaning products & toilet paper shop.
If your Warehouse has a grocery section (not sure if all do), then you’ll likely find all those things there.
Oh that’s a good point, the local Warehouse is right next door to a Mitre 10 though, so could be dangerous if I accidentally walk down the wrong aisle.
Actually speaking of - Mitre10 have a good range of the usual cleaning stuff too.
Yes, we normally buy (clothes) washing powder from Mitre 10, as you can buy it in bigger boxes.
I’ve been going to the Lower Hutt Riverbank market for some time but found out it wasn’t much cheaper than PnS and quality was also lower. Also tried some veg shops but prices were similar. We buy meat online, which is wild meat, and thus better for the environment: https://www.premiumgame.co.nz/
We do go to Gilmours for things like frozen fruit / veggies and nuts. It’s not cheaper for everything though.
Yeah I didn’t include Farmers Markets in my initial summary as they’re not available everywhere and up here (HB Farmers Market) can be hit & miss on whether the value is better than other options. What you do get is the variety of produce types that just aren’t in Supermarkets - eg in tomato season one of our local growers has probably 6-10 different varieties of tomato on sale.
Essentially it all comes down to time & flexibility, for instance I know that my local greengrocers has great variety on some things, but tomatoes they pretty much only ever stock roma or the standard hot house style up until the end of summer when they’ll have canning tomatoes. But, if I had time and really wanted the variety I could go to the farmer’s market for that, though it wouldn’t be cheaper.
For me (DINK) I have the privilege of being able to prioritise buying variety when I choose to as well - which i’m well aware is not something most people can do where prioritising energy & nutrition is much more of a factor.
