'Affordable' prices not passed to supermarket shoppers - supplier

Source: 1News

Smaller food suppliers are starting to feel a "greater pinch" as the supermarket duopoly continues its hold over New Zealand supermarkets, a Nelson-based artisan supplier says.

The Commerce Commission yesterday released its initial draft findings into supermarket prices, which showed that prices charged in supermarkets are much higher than they would be if there was proper competition in the sector.

The report also found that two major retailers – Woolworths New Zealand and Foodstuffs – make persistently high profits while using their market power to pay food suppliers as little as possible for their produce.

Nelson-based Yum Granola founder Sarah Hedger told Breakfast the report’s findings confirmed what she had always suspected since she started the company five years ago. 

“As that model has changed and as the power has grown, it’s really changed and affected smaller suppliers more and more,” she said.

Hedger says while smaller suppliers often remain silent to avoid being shut out of the market, she made the decision to speak out to "give a bit of a voice to the smaller producers of New Zealand and those that are feeling a greater pinch ... from the duopoly that currently exists".

She says the negotiating process “has just gotten more direct to where the margins are growing ... for the supermarkets, and that, ultimately, is affecting suppliers”.

“As a smaller supplier, there’s less room there to negotiate,” she said. “Seeing the prices go up and knowing, as a supplier, that we’re doing all we can to keep the prices affordable to the consumer but not seeing that continue on to the consumer has been really hard to watch.”

She says entering the negotiation process with supermarkets to supply their products is “quite blind” as they are not informed beforehand what other products will be sold for.

"We can’t, as a supplier, dictate what the consumer’s going to be paying – we can only dictate that they’re going to buy it from us," she said.

Hedger says while her company's products may be sold at the same cost to supermarkets nationwide, "we might see a variation between – we have seen a variation for our products – between $12 and $18, so that’s a price that we don’t have any say in".

She adds that it's “frustrating” and "exhausting" to continually defend "the price and the quality of your product over and over, to have you be compared to larger players that use cheaper ingredients".

"At the end of the day, the supermarkets do have the say on what price the consumer pays."

One of the report’s recommendations was the addition of a third player to break up the duopoly, which Hedger believes "would help bring a more level playing field where there’s less power and ultimately, more fair for the consumer and for smaller suppliers".

Yum Granola founder Sarah Hedger says smaller suppliers are entering negotiations "blind".