Shane Jones, David Clark and now Finance and Economic Growth Minister Nicola Willis have all talked tough about the lack of competition in the grocery sector.
It is almost three years since the final report from the Commerce Commission’s damning grocery market study but as the first annual report from the Grocery Commissioner showed last September, little had changed.
The big supermarket chains Foodstuffs (North and South Island) and Woolworths NZ were still making large profits. Pressure to free up their wholesaling operations to offer reasonable prices to small operators had not worked.
When Ms Willis announced last week she was seeking to bolster supermarket competition to deliver a better deal for shoppers, jaded consumers could be forgiven for rolling their eyes.
Was it any coincidence the "putting the supermarkets on notice" mantra appeared around the same time Stats NZ revealed food prices in January rose the largest for a single month in two and a-half years?
Not a good look for the National Party which campaigned on "rebuilding the economy to reduce the cost of living".
Ms Willis believes the optimal solution to shoppers’ woes would be to increase competition with a third entrant to the market. She has indicated there have been expressions of interest from overseas, but she could not give further details, citing commercial considerations.
There was also some interest from local businesses about consolidating to create a supermarket chain. Crucialwas getting access to a supply chain for the food products and Ms Willis was sure there were New Zealand players who could do that.
She may be right about a third player being the best solution, but it is likely to be the hardest to achieve.
She says additional steps could include cracking down on predatory pricing, ensuring all competitors have fair access to products, assisting new entrants to access suitable land and properties for development and assisting them to attract international capital.
It is hard to understand why more has not been done already, given the amount of scrutiny of the sector.
While Ms Willis boldly states she knows the supermarkets are going to "come at me and I’m up for that", we wonder how concerned the supermarkets might be. She has made it clear she is not keen to act quickly on other proposals such as forcing the existing players to sell off parts of their businesses or give up land banked property to a new entity.
The 2degrees founder and Monopoly Watch spokesman Tex Edwards, who helped split up the mobile network duopoly in New Zealand, will not be alone in thinking breaking up of the current industry leaders will be necessary.
Advice he had received suggested it would take 20 years to build a portfolio of stores half as good as the incumbents’. He estimated the minimum capital required would be around $2 billion to have enough clout to get existing chains to lower their prices.
It will be mid-year before the Commerce Commission’s report into the wholesale market is due. Ms Willis says she is open to whatever might be recommended. However, she has already referred to advice about the risks and benefits of a retail/wholesale split.
Whether one of her coalition partners, Act New Zealand, would have any enthusiasm for enforcing major changes to wholesaling is doubtful. Previously, leader David Seymour has said the way to increase competition was to cut back "thickets of regulation" dissuading new entrants, whether in overseas investment, resource management or labour laws.
New Zealand First’s coalition agreement requires the government to "explore options to strengthen the powers of the Grocery Commissioner, to improve competitiveness, and to address the lack of a third entrant to remove the market power of a duopoly".
What that might mean in practice is not clear. It remains to be seen if any difference among the coalition partners might end up being an excuse for doing nothing much.
