Foodstuffs reaffirms commitment to working with Government and supplier partners to put customers first following market study into retail grocery sector

Monday, 30 May 2022

Foodstuffs acknowledges the Government’s policy response to the Commerce Commission’s market study into the retail grocery sector and is committed to working urgently and constructively with the Government to implement it.  

Managing Director Foodstuffs NZ, Chris Quin, says Foodstuffs is embracing the challenges laid down in the final report and by the Government to improve competition to benefit consumers.

Our two co-operatives, Foodstuffs North Island and Foodstuffs South Island, are focused on delivering better value for all New Zealanders and addressing the proven issues raised through the market study. We already have a comprehensive work programme underway to achieve this, and we’re making good progress."

Foodstuffs has been actively engaged in the Market Study process, working constructively with the Commission, MBIE and actioning several initiatives that improve the shopping experience for our customers.  We have an ongoing commitment to being transparent and accountable, for instance, Foodstuffs is providing monthly updates to the Minister, and Foodstuffs North Island have been publicly reporting on progress via their Market Study Dashboard,” says Quin.

The Foodstuffs co-operatives are working constructively with MBIE towards a well-designed, mandatory Code that will give clarity to the rules of engagement with our supplier partners to ensure the industry works well for customers – and we have indicated our support for a set of principles that we believe will make a difference in providing clarity, certainty, fairness, meaningful consequences, and opportunities for redress when the Code is not honoured,” adds Quin. 

These include broad coverage, so all interactions with suppliers are covered by the Code, ‘good faith’ underpinning every interaction, certainty of contractual terms, publication of ranging and shelf allocation principles, engagement on suppliers’ requests for price increases and robust dispute resolution provisions."

We have also confirmed our support for the establishment of a specialist grocery regulator to monitor compliance with the Code and undertake effective enforcement action where appropriate. We understand that industry funding for the regulator will potentially be a part of the new regulatory framework, and we’re supportive of paying a fair proportion of the costs. We are up for change, supportive of the timeframe of an annual review advised today, and for being held accountable and look forward to operating in this new environment.

Foodstuffs supports the Government’s legislation banning the use of restrictive covenants on land and exclusive covenants on leases. Foodstuffs North Island has released restrictive covenants from 78 out of 135 titles, which means 58% of all affected titles have had covenants removed. Foodstuffs South Island is also actively in the process of removing restrictive land covenants. 

We support the Government’s request that there be an active wholesale market in New Zealand, and the request for us to participate in that market. We’re committed to being an active participant in wholesale, what is key now is understanding the demand landscape and ensuring that suppliers work with us and our wholesale customers to enable those customers to access wholesale groceries at competitive prices.” 

In addition to working quickly to implement the recommendations in the final report, as a business we’re looking at ways to deliver better value at the checkout in the face of rising inflation. We’re also working to buy well and run our business as efficiently as possible so we’re adding as little cost as possible,” says Quin.

In mid-May, Foodstuffs introduced its Price Rollback initiative, with New World, PAK’nSAVE and Four Square stores nationwide rolling back the prices on more than 110 of the most shopped grocery items to what they averaged in early 2021, in a move that it estimated would save customers over half a million dollars each week nationally.

The savings customers have already made have far exceeded Foodstuffs’ estimations, in the 1st fortnight of the Price Rollback initiative customers have saved close to $3million*.  Our data is showing that customers are using the rollback to save money on their weekly shop, in the two weeks the Price Rollback has been running, Foodstuffs customers have purchased 4.7 million products that have been rolled back to prices they were a year ago.  "

Our store owners are committed to this initiative and are meeting the cost of it in full themselves. As a result of this price rollback, our stores are selling some items below cost. We’re pleased that 80% of the rollback products are made in New Zealand by New Zealand suppliers."

“These numbers are proof that this is not a marketing stunt, and that the rollback is delivering meaningful savings for customers at the checkout at a rate well above what we committed.

Concluding on the market study, Quin says Foodstuffs will continue to work constructively with Government to implement the actions outlined in its policy response. 

The market study showed that we can do more to remove the genuine barriers to market entry that are within our control and deliver better competition and value for customers, and we are committed to being transparent and accountable for New Zealanders every day as we work to do that.