Supermarkets called 'too powerful'

NICK KRAUSE
Last updated 08:57 14/09/2012

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One of New Zealand's two dominant supermarket chains - Foodstuffs New Zealand - is about to force suppliers to pay a 3 per cent "promotions rebate" on products they sell in its supermarkets.

Foodstuffs Wellington - which has the Pak'n Save, New World and Four Square brands throughout the lower North Island - sent letters to all its suppliers in the recent weeks informing them of the rebate from October 1 this year.

The chain's two other regional co-operatives, which are run separately in Auckland and the South Island, have so far not followed the move.

Former Green Party MP and Wellington City councillor Sue Kedgley, a campaigner for safe and healthy food, learned of the rebate from a supplier but would not divulge who.

Suppliers were afraid to be identified for fear of retaliation, including having their supply contracts suspended, she said.

“What really concerns me is that supermarkets can just unilaterally (apply) . . . rebates, effectively delivering a 3 per cent [margin] cut to their suppliers,” Kedgley said.

“It just shows the incredible power that supermarkets have and how helpless suppliers are in the face of supermarket demands because there's such a concentration of power in our supermarkets in New Zealand.”

Just two supermarket chains control about 95 per cent of our grocery retail sector. Foodstuffs Wellington Co-operative confirmed it was changing the way suppliers paid for their promotional space within its supermarkets.

Spokeswoman Antoinette Shallue said it simply planned to replace the charges suppliers already pay for promotional activities, including advertising space in the mailers, media advertisements, special in-store promotions and a host of other marketing support activities.

“This cost has always been in place to support the various product promotions suppliers undertake with our New World, Pak'n Save and Four Square stores across the lower North Island," she said.

“The 3 per cent rebate of invoice is in line with what is already being paid.”

The Foodstuffs Wellington rate was lower than the 6 per cent applied by “other retailers in the supermarket sector”, she claimed.

“We acknowledge this change will require some adjustment in terms of how suppliers currently apply their trade spend with our support centre,” Shallue said.

“However the change allows Foodstuffs Wellington to craft promotions that are consistent with our category and banner strategies and gives all suppliers an equal opportunity.”

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Katherine Rich, chief executive of the New Zealand Food & Grocery Council, said she couldn't comment on the changes while the industry organisation was in discussions with Foodstuffs Wellington “putting the cases of our members”.

No suppliers contacted replied by deadline.

Foodstuff's main rival, Progressive Enterprises, said it worked “very differently” with suppliers to its Countdown stores.

“Our approach in terms of working with our suppliers is a very collaborative one on promotions,” Progressive's Luke Schepen said.

Progressive, a subsidiary of Australian Woolworths, conducts an annual “health check” with its suppliers.

“I can't go into commercial terms of the way in which we actually work. Suffice to say we work very differently to that,” he said. There were no blanket charges.

- © Fairfax NZ News

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