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Supermarket sector needs to be reined in after huge food price rise: minister

Apr 13, 2022

The annual food price rise announced today confirms the need to "rein in the super profits of the supermarket duopoly", Minister of Commerce and Consumer Affairs David Clark says.

Minister of Commerce and Consumer Affairs David Clark: there's a need to 'rein in the super profits of the supermarket duopoly'.

Food prices were 7.6 percent higher in March than the year before - the biggest annual increase in more than a decade.

"The March increase is above general inflation figures and highlights the role the grocery sector is playing in driving up prices," Clark said in a statement.

"Rising food prices is a global issue. Omicron, ongoing disruptions to global supply chains and Russia's invasion of Ukraine is putting pressure on prices in every country, but that is exacerbated here by the lack of competition at the checkout. And that is something we can act on.

"Today's figures confirm the findings in the Commerce Commission's grocery market study that the supermarket duopoly is making profits at the expense of everyday New Zealanders."

Released in March, the commission's report into the $22 billion supermarket sector said competition in the industry was not working well for New Zealanders.

"Even at their conservative estimate, the market study found that the major grocery retailers were earning excess profits of around $1 million a day, well above what would be expected in a workably competitive market," Clark said.

"The average return of the major grocery retailers at over 12 percent was more than double the rate of normal return for grocery retailing in New Zealand of 5.5 percent.

"No matter how you cut it, it's clear that New Zealanders are paying too much for their food and groceries."

The government will announce its response to the Commerce Commission's supermarket sector report recommendations next month.

Commission recommendations:

Making more land available for new grocery stores, by changing planning laws to free up sites, banning the use of restrictive land covenants and exclusivity clauses in leases that prevent retail grocery stores from being developed, and monitoring land banking by the major grocery retailers Improving access to the wholesale supply of a wide range of groceries at competitive prices, by regulating to require the major grocery retailers to fairly consider any requests they receive to supply competitors, and requiring the criteria for obtaining supply and terms and conditions of supply to be transparent Monitoring strategic conduct by the major grocery retailers, such as the use of 'best price' clauses and exclusive supply agreements

Recommendations on suppliers to major retailers:

Introducing a mandatory code of conduct for grocery supply relationships to improve transparency and ban unfair conduct Strengthening the existing law prohibiting the use of unfair terms in standard form contracts Considering whether to allow collective bargaining by some suppliers

Consumer information and stimulating competition:

Requiring major grocery retailers to ensure promotional and pricing practices, and the terms and conditions of loyalty programmes, are easy for consumers to understand Requiring grocery retailers to display unit pricing in a consistent format

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