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Government announces supermarket pricing review

Supermarket pricing

The Government has today launched a market study into the grocery sector.

In a release issued by the Minister of Commerce and Consumer Affairs David Clark, the study is to look at whether the sector is as competitive as it could be.

“Supermarkets are an integral part of our communities and economy, so it’s important to ensure that Kiwis are getting a fair deal at the checkout,” explains Clark.

Clark says that research suggests the average Kiwi household spends roughly 17 percent of its weekly expenses on food, and this has been increasing year on year.

“Groceries are one of our most regular expenses, so we want to make sure pricing is fair. New Zealand has one of the most concentrated retail grocery markets in the world and there are indicators that competition in the sector has weakened over time.

“A market study into supermarkets will identify whether there are issues affecting competition, potentially leading to recommendations that could ensure the weekly shop is gentler on the household budget. I’m pleased the Commerce Commission will be getting this work underway.”

Some of the big supermarket chains have come out saying there already exists a healthy degree of competition in the sector. Clark says the study will test this.

Greg Harford, Chief Executive of Retail NZ welcomes the study, but does say that the industry as a whole is highly competitive, especially if looking beyond the larger supermarket chains.

“Kiwis buy food from a huge range of retail businesses, including greengrocers, butchers, farmers markets, independent and online grocery retailers, as well as cafes, restaurants and takeaway bars. It’s a competitive market and, in fact, very large volumes of food are purchased outside the major supermarkets,” Harford says.

The matters to be considered in the study will include:

  • the structure of the grocery industry at the wholesale and retail levels;
  • the nature of competition at the wholesale and retail levels of the grocery industry;
  • the pricing practices of the major grocery retailers;
  • the grocery procurement practices of the major grocery retailers; and
  • the price, quality, product range and service offerings for retail customers.

Harford also notes that it’s not simple to compare the prices of products between markets.

“There’s a number of factors that go to the price of retail goods, including the size and scale of each market, climate conditions, the costs of transport, the costs of payments, and taxes all have an impact on the end price paid by consumers. A key difference between New Zealand and many other markets is that the Government charges 15 per cent GST on the sale of all fresh fruit and vegetables here, while in other jurisdictions, these tend to be tax exempt.”

The Commerce Commission will be able to commence the study once the Terms of Reference is published in the Gazette, which is expected to happen on 19 November 2020.

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