Grocery prices: Let’s make sure we’re comparing apples with apples

When it comes to comparing grocery prices, context matters.

There’s a difference between a small rural Four Square and a big city PAK'nSAVE - just as there is between New Zealand and other countries like the UK.

To understand why groceries cost what they do, we need to look at the bigger picture, including geography, population, supplier costs, and purchasing power.

Our two Foodstuffs grocery co-ops are among the most data-driven businesses in NZ. With over 500 stores nationwide, stocking more than 60,000 products and serving 4 million customer visits per week, our systems process every product, price, purchase, and web click.

Our team analyse that data to help our support centres, stores, and supply chains operate as efficiently as possible. That commitment to data-driven insights ensures we consistently lift productivity and deliver value to our customers.

Despite some perceptions, NZ’s grocery industry is highly competitive, especially for our population and scale. Not only do our two Foodstuffs co-ops compete with other food providers, but our stores also compete with each other.

In fact, when I ask our grocers who their biggest competitor is, it’s not unusual for them to point to another of our co-ops' supermarkets close by.

Take, for example, a small rural Four Square compared to a big urban PAK'nSAVE half an hour away. While the Four Square offers convenience, the PAK'nSAVE can offer lower prices, in part because it has more customers to spread costs such as wages.

Larger stores in more populated areas benefit from economies of scale, which is why comparing prices between these stores isn't comparing apples with apples - it's more like comparing kiwifruit with watermelons.

On a global scale, this analogy holds true. The Numbeo World Grocery Index highlights that groceries are generally more expensive in smaller, wealthier, and more remote countries.

With our small population and distance from major global markets, NZ naturally faces higher distribution costs and less competitive pricing than larger, more centrally-located nations.

Add to that our goods and services tax (GST) on all groceries - while countries like the UK, Ireland and Australia have no sales tax on most grocery foods.

New Zealand's weaker currency and lower average wages also play a role. They mean the average Kiwi household’s purchasing power isn’t as great as those other countries, so groceries can take up a larger slice of their income.

Our Foodstuffs co-ops are focused on being customer-driven, productive, and reinvesting in local communities. And our average net profit after tax remains fair: less than four cents per dollar of the shelf price of retail goods.

We work hard to ensure our suppliers - many of which are big overseas multinationals - are treating us and Kiwis fairly, too, as they account for around two-thirds of the shelf price.

We’re committed to putting our customers at the heart of what we do, and we're up for having conversations on prices and profits, including comparisons with overseas.

But let’s make sure those conversations include all the facts, so Kiwis know if any such comparisons are truly apples with apples.

-CQ