If we want more grocery competition, don't overlook more cooperation

New Zealand has repeatedly used cooperation to overcome the challenges of distance, scarcity, supply chains and scale. If we want more competition, we should be asking not only how existing markets might be restructured, but how we can enable more New Zealanders to cooperate, own and compete.

Cooperative Business New Zealand supports stronger and more effective competition in New Zealand’s grocery sector. Consumers should benefit from greater choice, competitive prices and innovation, while producers and suppliers should have fair opportunities to reach the market.

There is no question that grocery competition deserves scrutiny. What concerns us is that some of the solutions now being discussed risk overlooking why cooperative structures exist in the first place, and what could be lost by dismantling them.

New Zealand’s economic story is often explained through a No. 8 wire lens. Distance, scarcity and limited scale forced us to be resourceful, and resourcefulness became innovation. It is a story we have become very good at telling, particularly when positioning New Zealand businesses internationally.

But there is another response to many of those same constraints that features far less often in our national story. New Zealanders also cooperated.

Farmers and growers cooperated to process products and reach markets they could not reach alone. Independent retailers and service providers cooperated to buy more effectively, build distribution networks and invest in infrastructure. Across our economy, cooperation has allowed independently owned New Zealand businesses to share procurement, logistics, technology and other capabilities and achieve the scale needed to compete with much larger corporate and multinational enterprises.

That history is particularly relevant to the grocery debate.

Foodstuffs is not one conventional supermarket company. Its cooperative structure enables independently owned retail businesses to pool purchasing power, distribution, technology, infrastructure and investment. Those shared systems operate across a national network, including communities where the economics of grocery retail can look very different from Auckland or Christchurch.

This is why any proposal to compulsorily separate, acquire or restructure privately owned grocery businesses needs careful consideration. The question is not simply whether intervention would create more entities. We need to understand what the market would look like afterwards.

Separating stores or parts of an existing cooperative network could reduce the volume across which the costs of procurement, distribution, technology and infrastructure are spread. Any credible assessment needs to consider which efficiencies could be lost or duplicated, whether the resulting businesses would be effective competitors and whether some of those additional costs would ultimately find their way back to consumers.

There is also a geographic dimension that deserves more attention. A new domestic or international competitor would understandably be attracted first to New Zealand’s larger and more commercially attractive population centres. If significant grocery volume moved away from an existing national network in those places, there would be fewer stores and customers across which to spread the costs of serving provincial, rural and remote communities.

Competition could therefore increase in one part of New Zealand while the economics of serving another part became more difficult. Any assessment of structural change needs to consider both.

There are wider implications too. New Zealand businesses make long-term investments within ownership structures permitted by law and with a reasonable expectation that regulatory settings will be stable, transparent and consistently applied. Compulsory separation, acquisition or restructuring of a lawful privately owned business would be a significant intervention. It should require compelling evidence of long-term public benefit and careful consideration of property rights, regulatory certainty and investment confidence.

But there is another side to this debate that I think offers a more interesting opportunity for New Zealand.

Rather than focusing predominantly on how we might divide or acquire the grocery businesses we already have, what would it take to create more competitors and more forms of competition?

Cooperatives themselves offer several possibilities.

It is useful here to distinguish between different types of cooperatives. Producer cooperatives like Fonterra allow producers to aggregate supply and strengthen their position in markets. Retailer cooperatives such as Foodstuffs, allow independent businesses to aggregate purchasing power, infrastructure and capability. Consumer cooperatives are different again: they are owned by the people who buy the goods and services.

Consumer-owned grocery cooperatives are comparatively uncommon in New Zealand, but they are well established elsewhere. While many will be familiar with the UK’s Co-op, the model is successful around the world, from Switzerland where consumer-owned Migros and Coop are the country’s two leading retail groups with millions of cooperative members between them, to Japan. Japan alone has around 31 million consumer cooperative members nationally. These are not simply small community alternatives. They demonstrate that consumer ownership can operate at considerable scale.

Could we create more of that form of consumer-driven competition here?

Community and consumer-owned grocery cooperatives are one possibility. Regional buying cooperatives, producer-to-consumer food models and digital cooperative marketplaces could provide others. They do not need to replace national supermarket networks to increase choice. They can add different forms of competition and create new routes between New Zealand food producers and consumers, bolstering our food security on the way.

Nor should every new entrant necessarily have to recreate an entire national supply chain before it can compete. Effective access to existing wholesale and distribution infrastructure could allow smaller retailers and community enterprises to use existing scale as infrastructure upon which further competition can be built.

There is another characteristic of cooperative ownership that should not disappear from this discussion.

Concern for Community is one of the internationally recognised Cooperative Principles. Where cooperative members are themselves locally owned businesses, the model can combine substantial collective scale with highly local ownership, investment and relationships.

We see that in grocery stores supporting local schools, clubs, charities, and food rescue in the communities where their owners live and work. We also see it collectively through initiatives such as social supermarkets, where cooperative supply-chain capability and resources are combined with the knowledge of local community organisations through initiatives including Manaaki Kai, Wellington City Mission Social Supermarket, Te Hiku Pātaka and Pātaka Kai.

Scale and localism do not have to be alternatives.

Members can pool resources nationally while ownership, entrepreneurship and community relationships remain distributed around New Zealand. That is an economic and social characteristic of the cooperative model that deserves to be understood before decisions are made that could fundamentally alter it.

None of this is an argument for leaving grocery competition untouched. Cooperative Business New Zealand supports evidence-based measures that increase competition and improve outcomes for consumers.

It is an argument for looking more broadly at how we achieve those outcomes.

New Zealand’s geography, population and distance from international markets are not going to change. For generations, one of the ways New Zealanders have overcome those constraints has been by cooperating.

As we debate the future of grocery competition, perhaps the question should not only be what we separate, restructure or bring into public ownership.

We should also be asking what we could enable more New Zealanders to own, build and compete in together.

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