An online retailer is sceptical opening up wholesale deals with the big supermarkets will lower prices, while the Food and Grocery Council says its a significant step.
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. Photo: RNZ / Richard Tindiller
The government announced that Foodstuffs and Woolworths essentially have a year to open up wholesale supply to smaller grocery operators before they were forced to, through new rules and the powers of a Grocery Commissioner.
Online groceries retailer Supie founder Sarah Balle was sceptical that opening up wholesale supply would deliver lower prices.
Supie founder Sarah Balle. Photo: Maegan McDowell Photography / Supplied promotional image
"We are very sceptical it will actually deliver better prices at the checkout for Kiwis" - Supie founder Sarah Balle
She said the wholesale move did not in itself provide meaningful competition.
Prices that suppliers charged retailers would still go up, because it would be more expensive for them to distribute products to small retailers compared to supplying large pallets of goods to the major retailers, she said.
The big supermarkets would also be able to sustain lower margins on the goods they sell.
"That means we'll just end up in a similar position we're in today, which is the supermarket will always be cheaper and the local dairy will always be more expensive than them.
"Meaningful competition ... means a third or fourth or fifth player in the market."
Food and Grocery Council chief executive Katherine Rich said it was a significant step, though a short-term solution.
"It will drive lower prices for consumers" - Food and Grocery Council chief executive Katherine Rich
"If you look at all of the changes the government has made it all adds up to adding extra competition which which should drive lower prices," Rich told Morning Report.
"This should only be viewed as a short to medium term solution to immediately help the Night'n Days who are independent retailers who currently have to line up in Pak'nSaves to get their stock with the rest of us as shoppers.
"Long term, you need an independent wholesaler, and you need a couple of other ... supermarkets to come into the market and shake that up."
However the regulatory backstop, in the form of a Grocery Commissioner having significant powers, sent a signal that things had to change.
"The supermarkets ... are starting to take things seriously," she said.
She did not believe it would cost supermarkets more to supply independent retailers, as they had done that in the past.
"We know that competition does improve prices" - Commerce and Consumer Affairs Minister David Clark
Commerce and Consumer Affairs Minister David Clark said the move would improve competition "and we know that competition does improve prices".
The Commerce Commission could step in if changes in the market were not happening, he said.
"The tools we're giving the Commerce Commission they can, if they think it's the right thing to do, put a framework in place for range in price of goods," he said.
"They can suggest things like what margins should be, they can choose to say that major supermarkets should supply things at non-discriminatory prices - so they have to supply goods at the same price no matter who they're supplying them to.
"I don't think these will ever have to be used ... the supermarkets would be well advised to get on with the good faith expressions of interest process they've both got open now, they both say they're going to do that."
Commerce and Consumer Affairs Minister David Clark Photo: RNZ / Samuel Rillstone
Supermarkets had started with price rollbacks and freezes, but the government aimed to to address the structure of the market, he said. Legislation would be passed early next year and the Commerce Commission would have the tools straight away.
Countdown said it was working on setting up a wholesale channel and had nearly signed up its first customer.
It had set up a new wholesale business unit and was talking with many of the more than 50 small retailers and other organisations who want to become customers.
Foodstuffs said it would 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-operative," a spokesperson said.