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New Zealand food industry backs move to mandate wholesale negotiations for grocers

The New Zealand retail grocery sector was determined by Commerce Commission New Zealand last year to be a duopoly with a fringe of other competitors, [dominated] by Foodstuffs and Woolworths NZ’s (Countdown’s) supermarket chains’​,

This conclusion led to the government committing to implementing significant changes to change this situation.

In its latest step, the local Ministry of Commerce and Consumer Affairs has announced what it deems an ‘unprecedented shake-up’​ of the grocery sector, mandating the two major supermarkets to provide their competitors with fair access to their products on wholesale terms.

“The Commerce Commission has found that New Zealand supermarkets earn NZ$1mn daily in excess profits because of a lack of competition – These new regulatory measures will deliver a more competitive wholesale grocery market,” ​Commerce and Consumer Affairs Minister David Clark said via a formal statement.

“Alongside retail stores, supermarkets also have behind-the-scenes wholesale operations [and this change] will ultimately require the duopoly to open these up to would-be competitors.

“Under these changes the existing duopoly will be required to negotiate wholesale offerings to their competitors on commercial terms – however if those prices are not what we would expect in a competitive wholesale market the new Grocery Commissioner will be able to impose additional regulation to force fairer prices.”

The hope is that these changes will give a boost to smaller retailers and new market entrants and enable these to source more groceries at better prices than before, such that these cost benefits can be passed on to consumers.

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