In its first draft report into the New Zealand grocery market, the Commerce Commission warns against the emergence of a third major retailer if conditions don't allow it to happen organically.
This morning, the Commerce Commission released their first draft report, saying that over 90% of the current market controlled by Woolworths NZ and Foodstuffs which indicates that the core problem is the market's structure.
Woolworths NZ owns SuperValue, Countdown and Fresh choice meanwhile Foodstuffs owns PAK'nSAVE and Four Square. Over 90% of the current grocery market is controlled by the two companies.
"duopoly… is not working well for consumers".
"If competition was more effective, retailers would face stronger pressures to deliver the right prices, quality and range to satisfy a diverse range of consumer preferences," Anna Rawlings the commission chair said.
According to Statistics New Zealand, food prices rose 2.8 percent in the year ended June - the quickest increase in six months - while fruit and vegetable prices increased by 10 percent.
"Our preliminary view is that the core problem is the structure of the market," The Commission Chair commented.
"In competitive terms, the major retailers, Woolworths NZ and Foodstuffs, are a duopoly, and while there is an increasingly diverse fringe of other grocery retailers, they have a limited impact on competition. This is because they are unable to compete with the major grocery retailers on price and product range in order to satisfy the widespread consumer demand for a main shop at a single store."