Friday, July 16, 2010
Why food prices are skyhigh
Grocery insiders say the two big supermarket chains are using dodgy tactics when dealing with food producers – including pocketing discounts instead of passing them on.
They say small Kiwi companies are getting hurt as the big players negotiate aggressively.
Last week the Green Party and Horticulture New Zealand called for a supermarket code of conduct and an ombudsman to investigate prices after fruit and vegetable growers complained supermarket mark-ups were up to 500% higher than what they were paid at the gate.
Since then several producers have told the Sunday Star-Times that supermarket tactics include:
Charging producers unreasonable fees, including a 2.5% "payment term" just to be paid.
Blacklisting producers who sell to their rival.
Demanding producers advertise in the supermarket's in-store magazine, which can cost $800 a page.
Refusing to share the costs of discounts and promotions.
Keeping back a percentage of a discount offered by a producer.
Running promotions with rival producers in the same week, on the same shelf, without telling either.
Progressive Enterprises (Foodtown, Woolworths, Countdown) and Foodstuffs (Four Square, New World and Pak'nSave) represent 95% of the sector.
A supplier who would not be identified for fear of being blacklisted said suppliers were getting squeezed, while a grocery broker said it was hardest for small Kiwi start-up businesses to survive because they had no power.
"Coke can say no but small suppliers are going to say yes because otherwise they lose the listing. It's really very difficult."
Progressive and Foodstuffs would not comment, saying trading terms were confidential.
Green's food spokeswoman Sue Kedgley said the Commerce Commission should investigate.
Last year it indicated its hands were tied after similar calls sparked by an Australian study that found New Zealand prices had gone up more than 42% since 2000. The commission said its ability to look into price control issues related to monopolies, not duopolies.
Last week supermarkets denied that they marked up fruit and vegetables by up to 500%, saying they earned 4-5% in the dollar after tax and costs, but that was across all items and did not account for mark-ups on product types.
Progressives and Foodstuffs will both pass on the upcoming 2.5% GST increase to consumers.