Pierre van Heerden: Grocery Commissioner on the draft simplified grocery code

The Commerce Commission's making moves to level the playing field in the grocery sector.  

It's found the big supermarket players are shovelling in billions of dollars a year through supplier charges and promotional pricing, which largely isn't reaching consumers.  

It's proposed a simplified grocery code that limits the range of payments supermarkets can charge suppliers.  

Grocery Commissioner Pierre van Heerden told Mike Hosking it's about taking away all the carve-outs.  

He says smaller suppliers currently have difficulty pushing back against large supermarkets because of the power imbalance. 

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Episode Transcript

Speaker 1 (00:00):
Brace yourself. The Grocery Commissioner has got some ideas. They're
looking to simplify the grocery supply code by removing the
fear amongst suppliers, are pushing back on supermarket demands, and secondly,
they're looking to cut back on promotional payments in the
wholesale market. Pavender hidden is the Grocery Commissioner, of course,
and is with us. Very good morning to you. Good
morning man, now call me Olfair. I thought we'd already

(00:20):
done this. Have we not done any of this or
were we just talking about doing this?

Speaker 2 (00:24):
Mike. We've done a market study which indicated some issues,
and what we have done subsequently is delved more deeply
into things so that we can understand exactly what's happening
in the industry. And that is why today I've raised
two issues to prove outcomes for consumers, and those two
are as you mentioned the five billion dollars that are

(00:46):
being paid in promotions by suppliers to retailers, and then
also changing the rules to simplify the rules and really
make it more efficient.

Speaker 1 (01:00):
To be clear, are these things going to happen or
are you just announcing them as ideas?

Speaker 2 (01:06):
No? They're not just ideas, Mike. The draft code is
actually being published today and it has been published. What
we are saying in that is we want to simplify
things for all the suppliers out there. It's a complex
code that's been in place. We saw early on that
it wasn't delivering what was expected, and that's why we

(01:29):
announced that we will be reviewing it and we are
looking now to change it so that supermarkets can't push
their costs like for instance, wastage and packing shelves and
other costs onto suppliers. So it's simplifying the way that
they do business. Right.

Speaker 1 (01:46):
So just once again to try and be clear, are
you doing this it will start tomorrow, or are you
in some sort of consultative process where this's gets dragged
on even longer.

Speaker 2 (01:56):
As a regulator, we have to consult. So there's a
sex weeks only a six week window to consult where
we take on views from the supermarkets, from suppliers and
others that are interested, and then we make a decision
as to which way we go, and then of.

Speaker 1 (02:13):
Course that decision is final and will be enacted.

Speaker 2 (02:18):
That's correct, it will come out as a code, and
that will then be the new code that is applicable
to all suppliers and supermarkets.

Speaker 1 (02:27):
When will that happen, We.

Speaker 2 (02:31):
Foresee that not to be later than September because of
the time frames, the regulatory timeframes that are involved in this,
and those are set down for us and we've got
had yea by them.

Speaker 1 (02:42):
Your sense of it at the moment is the supply
code will be curtailed completely. In other words, there will
be no payments, or it will be adjusted slightly, so
there will be some payments, but not as many.

Speaker 2 (02:54):
We want to change it so that all the cars
outs that are currently there are taken away. So currently,
smallest suppliers have difficulty in pushing back against these large
retail large supermarkets because of the power imbalance. They want
to retain their relationships, They want to make sure that

(03:14):
their stock is on shelf, so they scared when they
do that and you know that and everyone in the
media because you can't get a supplier to speak openly
about it. So by taking these carve outs out, we're
making it simpler. In the current code, their carve outs
provided these supermarkets to X and y. Unfortunately, it's become

(03:37):
the norm. I got it, and that's not what was intended.

Speaker 1 (03:40):
I understand. Where is that? Do you what's your gut
say if you did that, would that allegedly fix whatever
it is you found to be needing to be fixed,
or are you going to have to break them.

Speaker 2 (03:50):
Up on the supply code that will fix it. There's
also what we're announced on the promotional spend on the
wholesale because our wholesale market isn't working effectively. Any larger
player that has come and spoken to me about coming
into the market, first thing they say is we can't

(04:10):
get a proper supply of groceries at a price that
we can compete on. And the reason for that is
suppliers are paying supermarkets five billion dollars in rebates and promotions.

Speaker 1 (04:24):
I've got that. What I'm asking about is that part
of what you're announcing, is that going to solve the
so called supermarket problem or are you going to go
down this willers track where we need to break these
big companies up.

Speaker 2 (04:38):
There's no one silver bullet, unfortunately, Mike. We've got to
pull all the different leavers we have and my task
is to improve competition in the long term for key
we consumers, and that is both competition and efficiency, and
if we can get the playing markets level, it will
encourage others to compete, even smaller players who are in

(05:00):
the market currently. If you look at Auckland as an example,
you know, the major players are down to seventy just
over seventy percent. I think it's seventy four percent market share.
In the rest of the country they're still at eighty two.
So if we can get more of those into the market,
the costcos and others, and even the online grosses, we

(05:23):
can make a difference even for rural consumers.

Speaker 1 (05:26):
Fantastic. What well, yeah, okay, maybe we'll get you back
another day and argue about that, But that's pe evn Hidin.
Do you like what he says? Do you understand what
he says? Do you think it's going to make any
difference once the promotional supply code things sorted? Are you
going to see tenner beans cheaper? Do you believe any
of that? For more from the Mic Asking Breakfast, listen
live to news talks. It'd be from six am weekdays,

(05:49):
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