How political parties plan to take on New Zealand’s supermarket giants

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1. 0:06Speaker 1: Kia ora, I'm Chelsea Daniels and this is The Front Page, a daily podcast presented by the New Zealand Herald. National
2. 0:17Speaker 1: and Labor have both unveiled plans to shake up the supermarket sector. National wants to investigate splitting foodstuffs into two
3. 0:26Speaker 1: competing nationwide groups. while Labor is promising to make price gouging illegal, not just for supermarkets, but a range of
4. 0:35Speaker 1: essential goods and services. Both parties say they want to bring down the cost of living, but they're taking very different approaches to the supermarket sector, while the minor parties
5. 0:45Speaker 1: have their own, not dissimilar ideas. about how to shake up the market as well. Today on the front page, NZ Herald senior correspondent Katie Bradford is with us to
6. 0:55Speaker 1: unpack the new supermarket policies and what they tell us about how the election campaign is taking shape. So Katie,
7. 1:05Speaker 1: National and Labor have both today announced new supermarket policies.
8. 1:10Speaker 2: What's each of them proposing?
9. 1:13Speaker 3: Election campaign is definitely on. It's a cost-a-living election campaign and both National and Labour are really wanting to hammer that message home. I'll start with Labour's because they did
10. 1:23Speaker 3: actually put these out earlier. It was meant to be embargoed.
11. 1:26Speaker 3: They lifted the embargo when Nationals announced theirs. Labour is quite specific. It's around price gouging. banning price gouging, making it illegal. They say they do this in a couple
12. 1:37Speaker 3: of other countries and that it works well. So it would give the Commerce Commission and other, anyone basically, who says, hey, I can prove, I can show you that this supermarket,
13. 1:48Speaker 3: this airline, this bank, this insurance company, this petrol station, are price gouging. We're going to take legal action. We're going to fine you. We're going to stop you from doing that. I think there are a lot of questions
14. 1:58Speaker 3: there about how it would work. They're not saying, you know, so obviously lettuces are cheaper in summer, cucumbers cheaper in summer, and they're $ 5, $ 6 in winter. It's not about seasonal
15. 2:08Speaker 3: variations in prices. It's when there are sustained prices that seem too high compared to how you would get in other parts of the country or other parts of the world,
16. 2:17Speaker 3: legal action could be taken to stop it. So it's quite specific policy we haven't heard from before. In that sense,
17. 2:26Speaker 3: Nationals goes a lot further and follows on from what we've seen over the past decade with politicians talking about
18. 2:38Speaker 3: how to take on the supermarkets and stop price gouging and bring in more competition. Nationals saying if they are returned to government, if they feel they have a mandate
19. 2:47Speaker 3: after election, they will start work on a structural separation of foodstuffs, so they will split foodstuffs up, which at the moment is Foodstuffs North Island and South Island, and is Pack and Save, New World and Foursquare. They will
20. 2:59Speaker 3: split those up. You'll have Pack and Save Supermarkets on one side and New World and Foursquare on the other.
21. 3:05Speaker 3: But that will only happen if another review takes place and the Commerce Commission says, yes, we can make that happen.
22. 3:12Speaker 3: Commerce Commission normally looks at things like mergers, approves of companies merging. In this case, they'd be looking at and approving a demerger of a company, a breaking up of a company.
23. 3:22Speaker 1: And we saw that merger decision because I was like, well, haven't we gone through all of this before? But that was Comcom actually saying no to Foodstuffs, North Island and South Island merger, them going together.
24. 3:33Speaker 2: Yes, this is.
25. 3:34Speaker 3: A de-merger of those. So a couple of years ago, Foodstuffs asked if they could merge those operations. It was
26. 3:41Speaker 3: interesting timing because we had in 2022 a report, a very detailed report that Labor reported about what needs to
27. 3:50Speaker 3: change in the supermarket sector. Now, that recommended a number of things, including things like freeing up land, so removing
28. 3:56Speaker 3: covenants on land, more wholesale backing supplies, a few things, and most of that has happened. So the covenants, for instance,
29. 4:07Speaker 3: that were on land, basically some supermarkets would hold huge pieces of land. So you've got a Woolworths here, and then they'd say, oh, we're going to build another Woolworths here and have this site. It would never get built on.
30. 4:17Speaker 3: It was just sort of stopped. competitors coming in the law was changed under labour to stop that happening um and in that 22 report they said at the time
31. 4:27Speaker 3: that a structural separation of supermarkets would be a last resort if nothing else worked national came in nicola willis has talked big a lot about supermarkets you know we've
32. 4:38Speaker 3: seen the figures of these reports saying that the supermarkets are ripping consumers off by a million dollars a day um and that this needs to change nicola willis has
33. 4:47Speaker 3: um A year or so ago, she went out and asked, basically made a call for international competitors to come and say, come on in. What's stopping you? Come tell us why
34. 4:59Speaker 3: you aren't coming into New Zealand. We've got one Costco.
35. 5:01Speaker 3: Why don't we have more? That hasn't really done anything.
36. 5:05Speaker 3: We haven't seen another competitor as such. And so she said she has then gone, she asked sense partners and economists to go and get all the analysis they can
37. 5:14Speaker 3: to say, Would it– she gave them two options. First option, split up foodstuffs and Woolworths, who are, of course, the two chains. They have 80% of the market. Second option
38. 5:25Speaker 3: was just foodstuffs. They've come back and said the structural separation of foodstuffs is the one that makes sense. So how do they.
39. 5:32Speaker 1: Say that this will strengthen competition if we have pack and save on one side and the New World and War Square?
40. 5:38Speaker 3: Well, essentially they're saying that at the moment– The research says that there is not enough competition between those foodstuffs brands, so between New World, Foursquare and Pack and Save, that
41. 5:48Speaker 3: in theory, Pack and Save and New World should be competing.
42. 5:51Speaker 3: Those are the two big players, right? They say this research says they do not compete as they should in
43. 5:57Speaker 3: the market. They basically, they're so dominant that they're not competing. Woolworths, of course, is Australian-owned, would be a lot harder to force a structural separation on that, for instance, but.
44. 6:10Speaker 3: That's where they say the issue is. There's a whole lot of issues around how suppliers are treated, how suppliers feel like they don't have any control, where the price
45. 6:20Speaker 3: markups come, etc. Those issues have tried to be tackled, have worked a little bit, haven't gone that far. So basically the government's saying this is our option of last resort.
46. 6:31Speaker 1: So National's policy isn't explicitly to separate foodstuffs. It's to give the Commerce Commission a mandate to develop a separation plan and then National would go ahead if Comcom recommends it.
47. 6:43Speaker 2: But this is something that Comcom has recommended in the past.
48. 6:46Speaker 3: Yes, yeah, and I don't know. So what Nicola Willis is saying is that we've got a really detailed plan.
49. 6:52Speaker 3: So they got this report from Sense Partners. She then got two external challenges, right, to go and have a look at it and see if Their analysis stacked up, basically.
50. 7:02Speaker 3: What she's saying is if we are to do this properly in this country, we need to make sure that we are going to do it properly and that the costs don't outweigh the benefits, for instance, and that it is actually possible to do this. I would note a
51. 7:13Speaker 3: very clear thing they're saying is that they don't want this, that we know, forced sales of supermarkets because foodstuffs supermarkets are all independently owned and operated. They're franchises, right? So they are people, often husband and wives teams, who have
52. 7:25Speaker 3: worked their way up, own a supermarket, work really hard to get this business. The government is making it really clear that they would not be then stripping those businesses from these people. The reason they want the Commerce Commission
53. 7:36Speaker 3: to look at it is they basically want to look that it is possible to actually make this happen. So the key question there is, of course, timeframes, right? So you've got, OK, National saying this is only happening if
54. 7:47Speaker 3: we get back into government and we have a mandate to do it. They're saying that in their first 100 days, they would go to the Commerce Commission and say, please go do the study. They expect the Commerce Commission study
55. 7:57Speaker 3: to take, say, six months to have a look at whether it's possible. You then need to probably have legislation come through the House. Realistically, this is not happening until the end of next term. We're still a few years
56. 8:08Speaker 3: away from this happening. Unless for any reason, foodstuffs voluntarily came out and said, OK, we get the message, we're going to do this. We saw that with telecom in
57. 8:18Speaker 3: the 90s when telecom was split. They, at the end of the day, did it voluntarily. So there is still an option on the table for foodstuffs to do that.
58. 8:26Speaker 3: And of course, you know, we are asking for reaction from foodstuffs, from staff. the Grocery Council and other organisations about their reaction to this. Haven't heard back from Foodstuffs
59. 8:38Speaker 3: at the time that we record this, but we have asked what their thoughts are. Key question for them is, hey, are you actually going to, would you consider at all a voluntary separation? Save the taxpayers a whole lot of money, save the Commerce Commission a whole lot of time and
60. 8:49Speaker 3: actually go do that yourself. I think I know what the answer is going to be, but I have asked that question.
61. 8:53Speaker 1: And I've asked Woolworths actually, and long listeners and viewers of this podcast will know my gripe about how much beef mince is in this country. And I did get
62. 9:02Speaker 1: a response back from Woolworths saying, I gave them the prices of beef. I can't remember the exact details now, but it's basically more expensive for the exact same product
63. 9:13Speaker 1: in New Zealand than it is Australia. And they did come back to me saying, while products in New Zealand and Australia can look the same, direct price comparisons rarely compare like for like. A major difference is that New
64. 9:24Speaker 1: Zealand applies a 15% GST to all groceries, whereas basic food items in Australia are GST exempt. And that's something
65. 9:31Speaker 1: that I was like, well, that's a 15% difference. The difference in price isn't 15%. But that's something that the UK does as well.
66. 9:42Speaker 3: Yes, and that has been talked about a lot here.
67. 9:44Speaker 3: I think we've had various election campaigns when Labour and the Greens have at times, and I think it is still a Green Party policy to remove GST off basic items.
68. 9:54Speaker 3: Labour did, I think, in the 2014 election campaign on removing it off fruit and veggies. The argument has always been that it's tricky to do it. You know, how
69. 10:05Speaker 3: do you define fruit and veggies? Is it canned peaches?
70. 10:08Speaker 3: Is it only fresh fruit and veggies? Is it frozen peas?
71. 10:11Speaker 3: What works? If you go down the Australian track, which they have always done it, they've always had GST removed off essential items Who decides what's essential? And you can have a basket of goods that are seen as the essential. But,
72. 10:23Speaker 3: you know, I mean, I lived in Australia for a few years. That's just how it works there, right? So you do notice the price difference on some goods as a result of that. New Zealand's just always seen it
73. 10:34Speaker 3: as too hard to do. And even when Labour's been in government, they've never actually done it. So even though they've campaigned on it at various times. So that is one option. In that basket of options, They have, it's
74. 10:44Speaker 3: just we haven't, that hasn't been picked out of the basket.
75. 10:49Speaker 1: Will it also be an option anyway if ACT is a coalition partner?
76. 10:54Speaker 3: Well, that's a key question. ACT have put out a statement basically saying, and that has been a key question to National, is have you not done this because ACT
77. 11:04Speaker 3: won't support it, New Zealand First support the idea, they've come out with a policy of their own, New Zealand First say this is copying, National once again copying them.
78. 11:12Speaker 1: ACT.
79. 11:13Speaker 3: has come out with a very strong statement calling these draconian regulations, that the analysis behind the proposal is weak,
80. 11:23Speaker 3: that forced restructuring could make groceries more expensive. It says National actually doesn't want to tie themselves too closely to the policy either. They're not actually proposing to break up supermarkets.
81. 11:33Speaker 3: They're just asking the Commerce Commission to look at it.
82. 11:35Speaker 3: This simply drags out uncertainty for years. ACT very strongly opposes.
83. 11:41Speaker 3: They say we need to get rid of red tape if we actually want to make groceries cheaper. So it's very hard to imagine a situation that National gets into
84. 11:49Speaker 3: government without an ACT after the election. And therefore, it's going to make it very difficult for them to get this through Cabinet. They're saying we want a mandate for this, that if the voters vote for National, that gives them
85. 12:01Speaker 3: a mandate to do it. We'd have to see what happens around the coalition table.
86. 12:12Speaker 4: We are firmly on the side of New Zealand consumers.
87. 12:15Speaker 4: A Labour government will ban price gouging for essential goods and services. We are not willing to see New Zealanders pay more for the things that they cannot avoid buying
88. 12:27Speaker 4: because big companies can dominate the market and overcharge them as a result of that.
89. 12:32Speaker 5: New Zealanders deserve a fair deal at the checkout and a grocery sector where supermarkets have to compete hard for every customer. Competition puts pressure on all businesses to sharpen
90. 12:42Speaker 5: their prices, improve service, innovate and give consumers more choice.
91. 12:47Speaker 5: And when competition is weak, consumers pay higher prices.
92. 12:53Speaker 1: So let's move on to price gouging and Labour's policy.
93. 12:58Speaker 1: So this would give the Commerce Commission a significant new enforcement job.
94. 13:02Speaker 2: Has Labour said how much that would cost or how much additional resource they'd need?
95. 13:06Speaker 3: No, and the Commerce Commission gets a lot put on them because they also have to regulate water and electricity now, right?
96. 13:12Speaker 3: There's a grocery commissioner, so that was part of what Labour did, was set up a grocery commissioner. It would give the Commerce Commission power to investigate price gouging and
97. 13:21Speaker 3: will back groups representing consumers and suppliers to do the same.
98. 13:24Speaker 3: So they're not saying it will all be on... the Commerce Commission to do this. But yes, this is a question.
99. 13:29Speaker 3: And same with nationals policy. You're both asking the Commerce Commission to take on a lot more work.
100. 13:34Speaker 1: And has Labour said as well, because I remember when the Greens came out with their initial supermarket policy, not the Kiwi Mart one, the first one before Kiwi Mart.
101. 13:42Speaker 2: We'll get to Kiwi Mart presumably in a moment.
102. 13:45Speaker 1: But they couldn't really say what would constitute fair and reasonable price.
103. 13:50Speaker 3: Well, and that's one of the questions the reporters were asking today is how do you.
104. 13:56Speaker 3: Decide what it is they're saying high sustained prices for instance if you um compared to overseas compared to other markets uh i think it's going to be a very
105. 14:07Speaker 3: hard thing to prove there will be i'm sure interesting test cases if you think about it now the commerce commission already take action against supermarkets over price gouging there
106. 14:18Speaker 3: are a couple of examples not necessarily price gouging but i've um Misleading, right? Misleading people. We see them quite often, but there's a couple of cases at the moment that are still before the courts. So Commerce Commission has commenced
107. 14:29Speaker 3: civil proceedings against Foodstuff South Island, alleging restrictions prevented independently owned pack and save stores from discounting some products below
108. 14:38Speaker 3: centrally set promotional prices. There's also another one between Foodstuff North Island and Gilmore's, who are a supplier. And we have seen quite a lot. We've seen situations where they've
109. 14:48Speaker 3: been fined. So we do see.
110. 14:50Speaker 4: It at the moment.
111. 14:50Speaker 3: It's just that Price gouging itself is not illegal. So if this was to come in, we'd probably see some really interesting test cases. No one's going to want to take the case to court unless they think they can win.
112. 15:02Speaker 1: Or kind of see how, so Australia's just brought in similar price gouging laws.
113. 15:07Speaker 2: I think they went into effect in July. So they're pretty fresh over the test.
114. 15:11Speaker 3: Yes, so they've looked at Canada, the UK, Australia, when they've developed this policy. They clearly saw it as a vote winner in Australia and other countries and thought, Let's give it a go. I think some would argue that
115. 15:21Speaker 3: actually anything that you can do to increase competition and bring prices down is a good thing, right? And so that is what we've seen over the past few years when we've seen both National and Labour take these really
116. 15:33Speaker 3: hard stands against supermarkets is really strong language used about the fact that they think supermarkets are ripping customers off.
117. 15:41Speaker 3: And they've made all these incremental changes. policy changes, they've never been willing to do this big bang of the structural separation. And Labour, interestingly, would not commit to that
118. 15:52Speaker 3: today either. I think that's quite crucial. They wanted to talk about their price gouging policy only. They said, I think Chris Hipkins' word was, this is another review of a review of a review and it's not going to
119. 16:01Speaker 3: bring prices down for anyone right now. And that will be key, really, is that we have to see the
120. 16:11Speaker 3: Commerce Commission actually agree to do it. I think what's been really important is that we have seen these incremental changes over the years. A lot of people, the argument is actually there isn't actually one silver bullet. We've got
121. 16:22Speaker 3: to do all these other things to get it in the way.
122. 16:25Speaker 1: So we've got national policy that's echoing New Zealand First's and their announcement says the best case scenario would actually be a new competitor entering the market, which is Axe Position.
123. 16:35Speaker 1: Then you've got Labour's anti-price gouging policy, which is in line with what the Greens are campaigning on.
124. 16:41Speaker 2: Is this a sign of just the major parties showing.
125. 16:44Speaker 1: you know, kind of staking out common ground with their likely coalition partners at this point?
126. 16:49Speaker 3: I think they just all recognise that this is a huge issue. Interesting on that, will this bring another competitor in the market? Because that's been the key question. You need someone who can actually come into the New Zealand market.
127. 16:59Speaker 3: We're a really small country, remember. We pay really high grocery prices compared to the rest of the world and that's been one of the key findings in all these reports we've seen. Why hasn't a competitor come in? You know, why have they not been able to? One of the
128. 17:10Speaker 3: questions to the government, to Nicola Willis today was, well, Won't this stop potential competitors coming in because they will be– they'll think, oh, wait, so if a government can just come in and force a structural separation, why would we
129. 17:22Speaker 3: take a risk on this market, right? Nicola Willis' argument is the opposite, actually. They say, well, they'll be able to see there is room for competition, so come on in. Again,
130. 17:33Speaker 3: that's a kind of a wait and see, see if it works. Yeah.
131. 17:37Speaker 1: If we do look at other overseas examples, though, I mean– In terms of increasing competition, I saw Australia, it's worked.
132. 17:45Speaker 1: We've got consumer research from Choice consistently showing that an Audi grocery basket is roughly 25% to 30% cheaper than
133. 17:53Speaker 1: an identical or comparable Staples kind of grocery market at Coles and Woolworths. So why aren't they more focused on increasing that competition? Or do they think they are?
134. 18:04Speaker 3: Well, they have. They've tried. I think that's the problem is they have tried. I don't think you can accuse National or Labour of not trying. And the supermarkets, I mean, they hear what the politicians are saying. They have a
135. 18:16Speaker 3: very strong lobby group. They, as Nicola Willis said today, the lobbying from supermarkets to politicians is pretty strong. And
136. 18:27Speaker 3: the supermarkets are hearing what the politicians are saying. But still, you could argue, and what these reports say, is that nothing is changing. We are still paying in New Zealand
137. 18:37Speaker 3: far higher prices than for our groceries than other parts of the world. So we've had Costco come in. We've had, we have a lot of Asian grocers, you know, locally
138. 18:47Speaker 3: there are options in certain places. There's night and day, which have helped in parts of the country. So we see small pockets of competition. I think in West Auckland, you've got the situation where you've got a Costco and
139. 18:57Speaker 3: you've also got, they do petrol. So it helps with bringing petrol prices down, which is another area of competition that the governments have looked at. And so that doesn't
140. 19:07Speaker 3: help on a, on a nationwide basis, it doesn't help regionally rural where you've got really limited options in some parts of the country. So, you know, in Auckland, for instance,
141. 19:17Speaker 3: in theory, you could drive between a New World and a Woolworths if you think someone's got a better special on that day. Not everyone's in that position to do that. But, but, It's a lot harder in areas with a lot less competition.
142. 19:29Speaker 3: And Costco is great, I think. You know, people who live out there and you want to buy in bulk, that helps bring the prices down. It doesn't necessarily help with bringing prices down on a daily basis for people.
143. 19:40Speaker 1: Oh, I've got nowhere near enough room for 100 toilet rolls in my bathroom.
144. 19:45Speaker 3: If you are a large family and then you're in that position or you're catering a party or you're doing you know, I think Costco's really helped with people and you need more Costco's. I don't think anyone says that
145. 19:54Speaker 3: we shouldn't. But the clear signal has been from international competitors.
146. 19:59Speaker 3: You know, the government has spoken to the likes of Audi and other supermarket chains and said, come on in, what's stopping you from doing it? And it hasn't happened.
147. 20:07Speaker 1: Right.
148. 20:07Speaker 2: I said that we'd get to KiwiMart.
149. 20:09Speaker 1: Now, that's probably one thing that all of the other political parties agree on, that they really don't want one.
150. 20:16Speaker 2: Explain that to me.
151. 20:17Speaker 3: So the Greens want to build their own supermarket. They have a government-controlled supermarket, basically. I think Chris Luxon called it lunatic policy today, something along those lines. I've got
152. 20:26Speaker 3: those in my notes somewhere. It's another policy that's not going to happen. White Labour's not going to do it. Again, though, it's about positioning themselves. Some people like the idea, but
153. 20:36Speaker 3: it's about positioning and saying to the supermarkets, we want to take you on, we want to do something. A lot of it is about the messaging they're trying to send out there to it. But if you're a supermarket chain,
154. 20:48Speaker 3: you've had successive governments now for many years saying, we want you to stop, we want you to bring down prices, and we don't seem to see large-scale change.
155. 20:57Speaker 1: Are we seeing all of these policies come out now from every party because it's really good in a political and election year, it's a political move.
156. 21:08Speaker 2: To paint the supermarket as the bad guy.
157. 21:11Speaker 4: Of course.
158. 21:11Speaker 1: We've been in government for three years. Labor say, you know, we remember when we were in government, prices were really hard as well. It's actually not us, it's them.
159. 21:20Speaker 3: And there is a lot of room, despite their sniping at each other, there's actually a lot of room where they agree on this, National and Labour in particular. And
160. 21:31Speaker 3: this is all right now. We are definitely now in an election campaign. I mean, National's message today was vote for us if you want this to happen. Labour is saying the same thing, right? This is just what we're going to see. We're going to see that sniping. New
161. 21:42Speaker 3: Zealand First is accusing, I think they called them copynats.
162. 21:47Speaker 3: and then act coming out against it. You know, this is just what we will continue to see over the next two months. So brace yourselves, Kiwis.
163. 21:56Speaker 2: Thanks for joining us, Katie.
164. 21:57Speaker 3: Thank you for having me. That's it for this episode of The Front Page.
165. 22:04Speaker 1: You can read more about today's stories and extensive news coverage at nzherald.co.nz. The Front Page is hosted and produced
166. 22:13Speaker 1: by me, Chelsea Daniels. Kane Dickey is our studio operator, Richard Martin, our producer and editor, and our executive producer is Jane Yee.
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