The grocery sector has faced growing scrutiny over recent years, with two main players, Woolworths New Zealand (Woolworths, Fresh Choice and Supervalue stores) and Foodstuffs New Zealand (New World, Pak'nSave and Four Square stores) having significant market share, leading to concerns about lack of competition contributing to high grocery prices.
In Australia, there is a third entrant, Aldi, which has a 15% share of the supermarket market, with Woolworths at 55% and Coles at 30%. But the third entrant really hasn't broken the "Colesworth" (Coles + Woolworths) duopoly. Loyalty programmes - Everyday Rewards for Woolworths and Fly Buys for Coles - linked to frequent flyer programmes (Qantas Frequent Flyer and Virgin Velocity respectively) are key to maintaining duopoly market share along with nearly identical pricing, specials, use of home brands and loss leaders to drive customers to their stores. Woolworths is using Everyday Rewards in New Zealand as a tool to maintain and grow market share. Another factor at play in Australia, which doesn't apply in New Zealand, is minimum parking requirements which applies in all but the centres of large cities in Australia. This effectively pushes supermarkets to large sites to provide the required parking without using expensive structured parking.
I'd understood zoning to have contributed to Kaufland's giving up on Australia. In short, it was too hard and too slow to get permission to build supermarkets on acquired sites.
Thanks Darren, both are excellent points and yes, thankfully we do not have to worry about Minimum Parking Requirements here in Aotearoa.
A couple of points, while it may not have "broken the duopoly", that 15% market share held by Aldi is likely to be making a real difference by forcing the other two to compete with lower prices. At least in key markets where Aldi exists.
This being said, I don't think this proposal is a silver bullet. We also need greater competition at the distribution level to see more competition from smaller players, as you would see in much of Europe.
https://www.afr.com/companies/retail/why-aussie-consumers-are-losing-the-supermarket-wars-20250320-p5ll8n - "The two major chains have increased their profits over the past five years despite a period of high inflation...". Aldi have operated in Australia for a 1/4-Century, and extracted roughly 1/2 as much market share (significant, given their far smaller market footprint) as the major Aussie chains have, yet prices rise unreasonably regardless. It should indeed make us very sceptical that just turning our duopoly into a triopoly is a real solution?
In Australia, there is a third entrant, Aldi, which has a 15% share of the supermarket market, with Woolworths at 55% and Coles at 30%. But the third entrant really hasn't broken the "Colesworth" (Coles + Woolworths) duopoly. Loyalty programmes - Everyday Rewards for Woolworths and Fly Buys for Coles - linked to frequent flyer programmes (Qantas Frequent Flyer and Virgin Velocity respectively) are key to maintaining duopoly market share along with nearly identical pricing, specials, use of home brands and loss leaders to drive customers to their stores. Woolworths is using Everyday Rewards in New Zealand as a tool to maintain and grow market share. Another factor at play in Australia, which doesn't apply in New Zealand, is minimum parking requirements which applies in all but the centres of large cities in Australia. This effectively pushes supermarkets to large sites to provide the required parking without using expensive structured parking.
I'd understood zoning to have contributed to Kaufland's giving up on Australia. In short, it was too hard and too slow to get permission to build supermarkets on acquired sites.
Thanks Darren, both are excellent points and yes, thankfully we do not have to worry about Minimum Parking Requirements here in Aotearoa.
A couple of points, while it may not have "broken the duopoly", that 15% market share held by Aldi is likely to be making a real difference by forcing the other two to compete with lower prices. At least in key markets where Aldi exists.
This being said, I don't think this proposal is a silver bullet. We also need greater competition at the distribution level to see more competition from smaller players, as you would see in much of Europe.
https://www.afr.com/companies/retail/why-aussie-consumers-are-losing-the-supermarket-wars-20250320-p5ll8n - "The two major chains have increased their profits over the past five years despite a period of high inflation...". Aldi have operated in Australia for a 1/4-Century, and extracted roughly 1/2 as much market share (significant, given their far smaller market footprint) as the major Aussie chains have, yet prices rise unreasonably regardless. It should indeed make us very sceptical that just turning our duopoly into a triopoly is a real solution?