Summary

  • COVID-19 has derailed the shipments of the products entering the country, which could lead to a shortage of few products in supermarkets.
  • The government is set out to find reasons; big supermarket chains to go under investigation.
  • There are claims that the few supermarket players are threatening the product suppliers to not participate in the investigation.

As the country navigates through COVID-19 outbreak, New Zealand is now facing another big problem. This time it is about the shortage of food supply nationally. Food and Grocery Council chief executive Katherine Rich has warned the country that there could be a disturbance in the food supply over the next six months, especially during the Christmas holiday season.

The re-elected Labour government has promised to launch an investigation into supermarket pricing to see whether people are paying extra to buy groceries. The inquiry will be on similar lines to the Commerce Commission, which studied the supply of petrol and diesel for land transportation.

On the one hand, Consumer NZ chief executive Jon Duffy welcomed the announcement of a year-long market study, but some supermarkets, on the other hand, are not entirely pleased about it. A supplier industry group said that few of them are threatening to disconnect the work with the suppliers of the products if they speak up about the tactics supermarkets apply such as 45 per cent margins and billing for thefts etc.

Good Read: Global Shipping Industry Woes Amid COVID-19: Glance at Napier Port, Port of Tauranga

What stirred the Supply chain Hornet nest?

Food and Grocery Council chief executive Katherine Rich said that the industrial action ports in Australia faced congestion after the COVID-19 related restrictions were implemented. She raised concern and stated that the Council is deeply concerned.  However, the country will unlikely to face a complete shortage of whole product lines.

Rich believes that only a few brands would not be available on the shelves. New Zealand local ports also face the tyranny of distance. Usually, the local ports are considered a low-value route for shipping companies. But now the shipping companies were bypassing New Zealand.

Another reason could be the degree of competition in the big supermarket sector. The study will find out if there’s healthy competition in the market or not. Consumer Affairs and Commerce Minister David Clark said that they want to see if this is the reason for supply issues the country is facing.

Also Read: Deja Vu -Shortage of Essentials as Customers Rush to Stock Up

Supermarket chains to come under the lens

The market study will find out if the Kiwis are shelling out more money to buy groceries in supermarkets. Two leading supermarket chains dominate the supermarket sector. Companies such as Countdown, and Foodstuffs, which owns the New World and Pak ‘n Save supermarket chains will possibly go through the scrutiny.

Consumer NZ will study supermarket contracts with product suppliers, along with pricing practices. The private label brands which give high returns to the stores will also be reviewed. Most importantly. The team will investigate the variety of price promotions supermarkets offers. Consumer NZ believes that they have solid grounds to question the authenticity of the discounts offered by stores.

Another aspect is the margins, to get the product on supermarket shelves, product suppliers pay a gross margin between 30 per cent and 45 per cent. They also bear the additional cost to promote their products, merchandising cost etc. All these claims will be examined in the detailed investigation.

Interesting Read: Needle on Grocery and Tobacco Sectors: NZ’s health review report invites industry backlash

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

 

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