Fast track to waiting

Today the current NZ government announced changes it plans to make to speed up supermarket construction based on results of their official RFI (Request For Information) to the supermarket industry. The government wants to entice new retailers to increase competition in the supermarket industry. There’s still a very long way to go.

Nicola Willis’ announcement for the government is basically just another “things we’re going to do later” sort of thing, and not yet any concrete action. However, it’s nevertheless a little bit of progress. As usual, “the devil’s in the details”, but supermarkets do need an easier and faster path to build new stores, especially (or maybe only?) when that increases competition, because competition is the entire goal. So, the government plans to create a “fast track” to make it quicker and easier to bui;d supermarkets by allowing them to get consent to build faster (one year rather than 18 months), and to also allow them to use standard plans to speed up approvals and building permits.

Competition has already proven itself: When Costco opened in Auckland, it drove down prices among competitors in the area—and there were also news stories of people driving six hours to buy butter at Costco for people in their communities because the price, at the time, was about half of what the two existing supermarket chains were charging. Right now, there’s no real competition in most of the country, with the existing two supermarket chains being the only option.

Costco said not long after their store opened that they planned to expand in New Zealand, and clearly that would be a very good thing for families. However, that will do little for single person households (mine) or retired people (me again) who can’t use supersized packages of food. We need competition in the supermarket industry that includes “normal size” supermarkets, too.

Willis talked about existing companies wanting to expand, and I hope that happens, too, because in an ideal world competition should be an “all of the above” situation, not a “this or that” one. However, it matters which companies want to expand. New Zealand has a number of small grocery retailing companies, including specialists, like for meat, fruits/vegetables, or for different communities (especially South Asian and East Asian). Would limited retailers really help much when we need more general supermarkets? Also some of the existing smaller companies may be foreign-owned, for all we know, and that could be its own issue.

We know that inviting in foreign corporations will obviously result in profits being shipped overseas, but it may also make New Zealand more vulnerable to international supply chain disruptions that the existing duopoly has somewhat less exposure to because they both rely heavily on producers in New Zealand and Australia. Over-reliance on foreign (in this case meaning not “Australasian”) companies could create a whole bunch of new problems. Personally, I don’t have confidence that NZ’s current Rightwing government will put the national interest ahead of foreign corporations, but I’d be delighted for them to prove my scepticism wrong.

I also noticed that Willis said there was no participation in the RFI from Aldi or Lidl, both of whom have expanded internationally. Aldi is established in Australia (Lidl isn’t there), so one would’ve thought it’d be an easy add-on for Aldi. Why didn’t Willis’ team reach out to the companies individually when they didn’t participate in the RFI? They both would have insights into what a foreign company might need to be tempted to enter the NZ market. After all, there were no promises of anything to any companies—it was just an RFI.

Things being what they are, the most optimistic view, perhaps, is that new supermarkets from either new foreign entrants or expansion of smaller existing operators are probably three years away, maybe longer. In the meantime, we’ll have to continue paying higher prices than people in Australia or the UK. Overall, food prices in New Zealand are around 3% higher than the average paid in the OECD. That, too, won’t change any time soon.

All of which is why the government’s announcement today is good, but just another (very) small step on a journey that’s still hundreds of metaphorical kilometres from its end. We need competition to drive down supermarket prices, but, at the moment, getting that is still a very long way off, despite today’s announcement.