The Commerce Commission’s draft report into supermarket competition is a chance for growers to reset its relationship with retailers, food industry leaders say.
It could be the springboard for a fairer and more transparent partnership, Food and Grocery Council chief executive Katherine Rich and former Horticulture New Zealand chief executive Mike Chapman told growers and industry representatives at Horticulture NZ’s annual conference at Mystery Creek.
The wide-ranging report recommended creating a code of conduct between suppliers and the supermarkets to restore the power imbalance tipped in favour of supermarkets when it came to bargaining, which both Rich and Chapman supported.
Chapman says the report’s findings are not about apportioning blame and it was unfortunate retailers had been cast as villains in media coverage of the report.
“This isn’t about villains and good guys. This is about how we move forward to create a system that is fair and share margins fairly,” Chapman said.
The Government initiated the report because it believed people pay too much for their groceries. However, he says some growers may feel that consumers do not pay enough for the produce.
If a new partnership could be created between retailer, distributor and supplier, it would create greater transparency so consumers understood how produce was priced.
“It’s saying, ‘Can we do better business to ensure local industry flourishes and that we can manufacture and derive normal profits?’” he said.
Rich says if suppliers already had good relationships with supermarkets – and many do – that will continue; all the code of conduct will do is provide a few more rules and greater transparency.
A code of conduct does not just change laws, but it also changes behaviours.
“It’s the opportunity to lift everyone’s game and have a few more rules,” Rich said.
She says the code should cover bullying, coercive behaviour by supermarkets, including supermarkets’ demanding payments from suppliers for shelf space, waste or unwanted promotions.
“To go back to the theme of the last 20 years, it’s the shift of cost backwards to suppliers, it’s the shift of risk backwards and the margins go the other way,” she said.
It should also include making payments to suppliers made to be fair, timely and reasonable. She implored growers to work with them to determine what the code could look like.
“The commission’s put up some pretty broad principles, but it’s up to us as suppliers with the next submission process to furnish them with ideas,” she said.
South Auckland grower Howe Young says the report was the one and only chance for growers to get a code of conduct in place and make change for the better.
Since he started in the industry in 1966, Young says he had seen growers’ rights “trampled in the mud” with previous attempts to get a code of conduct in place rejected.
Young claimed his company was blacklisted for five years by one of the supermarkets after he spoke out about growers’ rights being eroded.
“I’ve waited 50 years for this day to see something like this come up and I think every grower in this room should be making a submission to the Commerce Commission. It doesn’t matter if it’s good, bad, whatever; tell them your experiences and the pressure you have come under,” Young said.
Chapman says he was surprised by the commission’s suggestion of collective bargaining by suppliers separate to a code of conduct.
He was interested in growers’ views of this and wanted feedback from them before the deadline of the next submission process at the end of August.
“This idea of having a special exemption for suppliers to collectively bargain with supermarkets or distributors is a very interesting concept and one that I think we should explore just a little bit more,” Chapman said.
He questioned the commission’s suggestion of changes or breaking up to the supermarket’s duopoly.
“New Zealand is a small country. It’s a long country and the concept of having more than two retailers selling groceries may not be practical,” he said.
If that was the case, it might be better to focus on making the existing system work better.
He also questioned the commission’s suggestion of breaking up retailers’ wholesale arm from its retail business.
“That would not work in our view, because you would be taking away the ability to service the market as efficiently as they do,” he said.
