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Supermarket competition not working well – commission report

not enough supermarket competition

Te Whanganui-a-Tara – The Commerce Commission says that competition is not working well for consumers in the retail grocery sector (supermarkets.

It recommends a suite of changes to increase competition and help improve the price, quality and range of groceries and services available to New Zealanders.

When New Zealand supermarkets are making more than double what the Commerce Commission considers to be a normal rate of return on capital for grocery retailing, it’s clear there is a problem with competition that needs to be fixed. 

In November 2020, the government asked the Commerce Commission to carry out a study into whether competition in the grocery sector is working well, and if not, what can be done to improve it.

As part of the study the commission looked at a range of things including: how retailers deal with their suppliers such as manufacturers, producers, farmers and growers; competition at the supplier level of the grocery market; who consumers buy groceries from and who supplies those retailers; competition between retailers when selling groceries to consumers; and what retailers charge consumers for groceries and how they decide on their prices, as well as the associated levels of service, product ranges and quality of groceries.

The commission has engaged with and gathered information from a wide range of stakeholders, including retailers, suppliers and consumers.

Information relating to the study, including the draft report, external reports we commissioned for the study, submissions, and transcripts from our consultation conference, are publicly available.

The price and quality of groceries have an impact on all of New Zealanders. Groceries are a major expense for households, with more than $22 billion spent at New Zealand supermarkets and grocery stores annually.

New Zealand has one of the most concentrated retail grocery sectors in the world. If retail competition is working, our study would expect to see grocery retailers competing to win customers based on factors such as price, quality, choice, and service.

The commission study has provided an opportunity to consider whether competition in the sector is working for the benefit of New Zealand consumers, and if not, how it could be improved.