Supie failure: Nicola Willis says third entrant needed to 'break up' supermarket duopoly

National Party deputy leader Nicola Willis wants a third supermarket competitor to break up the current duopoly, following the collapse of online grocer Supie.

Consumer NZ said the failure of the online supermarket was a stark example of the difficulties of establishing any competitive foothold in an industry dominated by two major supermarket chains.

Supie was set up in 2021 to introduce more competition into the grocery industry, but struggled to achieve the scale necessary to be competitive and profitable. The company went into voluntary administration on Monday after a key individual investor pulled out, leaving creditors owed about $3 million and 120 employees out of a job.

Workers were called in for a meeting to learn they had lost their jobs and would not be getting paid for their last two weeks of work or for any annual leave they are owed.

Former employee Anthony Bunce said shocked staff were in tears and needed their money in the lead-up to Christmas.

"We need it, we're desperate for it. We've got bills to pay. I know these guys are going to struggle. It's not easy to find a job in a day and we've just had no notice. We're heartbroken."

Willis said the collapse was was sad for the employees, and for Supie as a challenger in the grocery sector.

"I'm of the view we need a third entrant to break up that duopoly," she told First Up.

"If I do become the Minister of Finance in the next few weeks I will want to seek advice on how do we ensure that we do get a third entrant into this sector, and it doesn't have get the sort of failure that we saw here."

Monopoly Watch spokesperson Tex Edwards, founder of 2degrees, said the sheer market power of the two supermarket chains meant government intervention was the only way to ensure another competitor.

The government had to understand what it would take to break up the duopoly, "force the sale of approximately 100-120 supermarkets to a third player, and force sale of some of the distribution centres which is where the problem lies".

"The barriers to entry are the market power and the level of entrenchment."

Edwards told Morning Report it would take $1.1 billion in capital for a new entrant to operate in the market.

Supie was an honourable venture with with credible entrepreneurs and a sensible business case, he said.

"What was happening here was that capital providers... were looking at the business case and saying unless you can get to scale immediately, you can't bring a consumer proposition that delivers price competition - you're only competing on choice and sustainability."

PWC voluntary administrator Richard Nacey said about 400 creditors were owed about $3 million. He said the firm was turning over nearly $14m a year, but would not reveal the name of the investor who pulled out late last week.

"We've made the vast majority of staff redundant. Whether they receive the funds that are owed to them is probably too early to say, but I think there is a reasonable chance there won't be the funds available to pay them.

Founder 'grateful' for support

Supie founder Sarah Balle said she had put absolutely everything into Supie and was devastated.

She was grateful for Supie's supporters - employees, customers, suppliers and shareholders - as they fought to introduce competition in the groceries market, she said.

"I'm also grateful for the outpouring of support from the business community who have offered jobs to our team and the recruitment industry for offering their assistance too. Kiwis helping Kiwis in tough times.

"I won't be commenting further for now, as my focus is on working with the administrators on the huge legal and operational process to close the business as efficiently as possible."

Jacqui Knight was among the thousands of disappointed customers. She said she had been trumpeting Supie to her friends - impressed by the firm's minimum waste ethos, wholefoods and ethically sourced meat.

A fortnight ago she paid a $100 subscription that gave her a year's free shipping.

"I guess I'm going back to the old traditional supermarkets, Countdown or New World. We've really got to do a better job with these supermarkets. I don't think the supermarkets are fair."

Failure comes despite growth

Consumer chief executive Jon Duffy said Supie had experienced a "really tough road".

"But the really unfortunate thing about the recent news is, against the odds, the company was growing - from about 20,000 customers in April last year to 55,000 this year. That's a phenomenal achievement."

He said the new grocery commissioner should take a hard look at any anticompetitive factors that could have led up to Supie's failure.

"We had a green shoot of competition and it's been snuffed out. It's really important that the grocery commissioner is paying really careful attention to this. Because if there had been activities that led to the demise of this company that shouldn't have happened, and I have no proof of this, then the grocery commissioner should be definitely looking into those."

Grocery commissioner Pierre van Heerden had been in the job for just over three months, and had just outlined his 'top three' points on a fix-it list for the country's $25 billion supermarket sector. They included cracking down on unethical behaviour from suppliers linked to the dominant chains, and misleading or inaccurate pricing.

"It is disappointing to see any new entrant or competitor coming into the market not succeeding but I am here to try and level the playing fields to make sure that others that come into the market actually have a chance of competing."

Van Heerden told Morning Report the wholesale access regime - allowing new entrants to buy goods from current supermarkets at a competitive price - had already been implemented, and land covenants had been removed.

"I'm tasked to make sure that the Grocery Industry Competition Act is implemented effectively. I know Tex [Edwards] has got his views and those are really things that the new government will need to take a look at.

"At the moment, my focus is on the role that I've been appointed to to ensure that we do get long-term sustainabe change for Kiwi consumers."

Change would not happen overnight, he said.

"The current industry set-up has taken years to get here, so this is a long term game that we're playing."