Supermarkets say lack of competition is not to blame for higher grocery prices in New Zealand
Filling the cart is more expensive in New Zealand than in many other OECD countries, but supermarkets say it’s not because of a lack of competition.
The Trade Commission began day four of its $ 22 billion grocery industry market research conference looking for the best way to compare prices in New Zealand with those overseas. .
However, representatives for Countdown and Foodstuffs, which operate the Pak ‘n Save, New World and Four Square stores, questioned the value of international comparisons as an indicator of competition.
Josh Gluckman, director of strategy for countdown owner Woolworths NZ, said different seasonal conditions, freight, labor and power costs and tax rates in international markets made it all precise calculations difficult.
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For this reason, competition authorities in the UK and Australia have not given them any real weight in their own analysis, he said.
âWhile it was true that food prices in New Zealand were high, it more likely reflects the fact that New Zealand is a small island on the edge of the land, small in scale and expensive overall. .
âWoolworths Group’s analysis of 7,500 matching barcode lines illustrates and demonstrates that we have to pay 10% more for the exact same product here in New Zealand.
Nera Economic Consulting chief executive James Mellsop said when the commission’s exchange rate methodology is applied to the entire economy, everything in New Zealand is expensive.
Speaking on behalf of Woolworths NZ, Mellsop said the country’s location was an obvious explanation and that while there had been consumer interest in OECD rankings, the numbers would be of little help in a competition analysis.
Foodstuffs South Island CFO Nathan Marsh agreed that New Zealand’s position “at the end of the world with a very difficult geography” made its supply chain expensive to manage.
âFor us, recovering supply chain costs on a very small volume in a distribution market is very difficult and one of the main contributors to the price increase,â said Marsh.
“Also the GST is a major contributor to our costs which is not prevalent in many other markets when you compare international prices.”
But Hexis Quadrant partner Nick Hogendijk said several European VAT (value added tax) rates were significantly higher than New Zealand’s 15% GST rate.
Standard VAT in Europe ranges from 17 percent to 27 percent. In Ireland, which has a population similar to that of New Zealand, the standard VAT is 23%.
However, its tiered system means that tax is not paid on most foods, including tea, coffee, milk, bread, butter, cheese, milk, vegetables, and meat. .
In July, the Trade Commission released a draft report on the food industry. He found that New Zealanders paid more for their groceries than foreign buyers and that supermarkets were making excess profits.
The report suggested lowering barriers for new competitors or, if that fails, creating another large grocery retailer to break the supermarket duopoly and potentially force existing retailers to sell some of their stores to make it happen.
The commission’s final report is expected to be released in March 2022.
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