Smaller retailer hopeful grocery industry ultimatum will lead to 'fair deals'

Convenience store chain Night 'n Day is pledging to pass on to customers any savings it makes through wholesale grocery deals with the two big supermarket chains.

The government has announced that Foodstuffs and Woolworths essentially have a year to open up wholesale supply to smaller grocery operators before they are forced to, through new rules and the powers of a Grocery Commissioner.

Under new rules the major grocery retailers must consider all requests for supply in good faith and if after 12 months if no substantial agreement is reached, the Grocery Commissioner can intervene and force a deal.

Night 'n Day general manager Matthew Lane told Checkpoint it would make smaller operators more competitive.

"It gives us security of supply, which is a primary component, what we haven't had in the past, but it also allows us to get products with more competitive rates, which allows us to pass those savings on to consumers rather than being absorbed by the duopoly."

Night 'n Day's goods are partially supplied by Progressive Enterprises, which operates Countdown, "but in terms of a formalised network, it's not really sufficient".

Lane said the new regulations may not lead to the same wholesale prices across the industry.

"But it is going, hey, these people are trying to grow and drive cheaper prices in the country.

"We've actually got some of the tools they need to be able to actually commit to that."

One of the goals of the plan is ensuring a fairer deal for all - but how is that actually going to be decided?

"It's subject to everyone's interpretation. There is a person being appointed to oversee that and I'm hoping there's a pretty good understanding that the majors have created a massive advantage to themselves in an effective duopoly over the last 20 years.

"Those fair deals need to let people be able to compete against them regardless of the size comparison.

Food and Grocery Council chief executive Katherine Rich said the government moves were significant.

It was an important step towards creating a more competitive environment and lowering prices for consumers, she said.

"The market for wholesale groceries has been broken for a long time, and you can see that every day when independent retailers have to line up in supermarkets to buy their stock.

"If you had a good wholesale market, they would be able to source a wide range of goods at a reasonable price."

Rich said the government had made it clear that Countdown and Foodstuffs must act in good faith, otherwise the new grocery regulator would step in.

The move was one of a series of changes that would help independent retailers source a wider range of grocery products, she said.

For its part, Night 'n Day intended to pass on the possible savings to consumers, but it was too early to tell exactly how much that would be.

"We're sort of being held to ransom with the prices that we're paying, so we can't actually compete genuinely on price," Lane said.

At a wholesaler recently, "I did a stock standard shopping basket of 20 core items and the cost of that was 40 percent more expensive than if I had gone to Countdown or I headed down to New World", he said.

"Pretty pricey, yeah."

Lane said his company had already opened up communications with the two major chains, "and it'll be a case of sort of working through the process with them".

"What's encouraging is we are getting around the table and having discussions around wholesale, which is an improvement."

The duopoly were required to meet deadlines to avoid the mandatory regime, which was certainly an incentive to cooperate, he said.

"It does give them motivation to actually push and reach desirable outcomes for both parties."

Countdown moving to set up wholesale channel

Countdown said it was working on setting up a wholesale channel and had nearly signed up its first customer.

It's also set up a new wholesale business unit and said it was talking with many of the more than 50 small retailers and other organisations who want to become customers.

The company said it was unnecessary and overly complex regulation which would not solve problems such as freight costs, bad weather and labour shortages which were driving up prices.

Foodstuffs said there wasn't another market it was aware of where access to wholesale groceries was regulated and it wanted more information about the government's proposed regulatory backstop.

It said it will provide wholesale access to retailers who weren't members of the co-operative, and was setting up a new service to do that.

But it said wholesaling groceries to non-members wasn't as simple as opening the doors of its distribution centres and letting trucks roll up.

"Providing retail-ready wholesale groceries to non-members means setting up a new service for retailers who are not integrated into our co-operatives," a Foodstuffs spokesperson said.