Foodstuffs North Island (FSNI) and Foodstuffs South Island (FSSI) are standing firm in their belief that uniting into one nationwide co-op will help deliver better prices at the checkout, and will appeal the Commerce Commission’s decision to decline clearance for their merger.
The co-ops share ownership of the country’s most-trusted grocery retail brands – PAK’nSAVE, New World, Four Square, and Pams, as well as On the Spot in the South Island. Foodstuffs North Island owns the wholesale brand Gilmours, while Foodstuffs South Island owns wholesale brand Trents.
In December 2023 FSNI and FSSI jointly filed an application with the Commerce Commission for clearance to merge into one New Zealand-owned co-op, but in October the Commission announced it was declining to give clearance.
Both co-ops’ Boards have subsequently decided to file a Notice of Appeal with the High Court stating that the Commission’s decision is wrong and that the clearance should have been granted, as the merger will not substantially lessen competition in any market.
The merger will also bring benefits for every stakeholder – customers, stores, teams, suppliers and communities, says Foodstuffs.
Chris Quin, CEO of Foodstuffs North Island and CEO-designate of the proposed nation-wide co-op, said the merger was essential to delivering even more competitive prices for customers.
“Customers have been asking for better value at the checkout, and we believe this merger is the single biggest way we can keep improving to achieve that,” he said. “By merging our resources, we can make our buying and operations more efficient, which ultimately translates into better prices for New Zealanders.”
Quin said practical business solutions were needed to achieve lasting change in grocery prices.
“There’s been plenty of talk around grocery prices and competition, but it’s smart, efficient business practices – not headlines and red tape – that will make our operations leaner and truly deliver better prices at the checkout,” said Quin.
Mary Devine, CEO of Foodstuffs South Island, also highlighted the long-term benefits the merger would bring to customers and communities, citing increased efficiency and faster innovation.
“Combining our operations allows us to streamline operations, reduce overheads and better invest in new technology and services that our customers want. This isn’t just a merger – it’s an evolution to ensure we remain competitive and sustainable for the future,” said Devine.
“Our top priority is always to deliver the best value to our customers, and we firmly believe this merger is the most effective way to achieve that. While we had hoped to start passing these benefits to customers immediately, we look forward to becoming a more competitive nationwide co-op once the legal process is complete.”
The two regional co-ops’ 500+ stores are owned and operated by local family grocers. The Commission was concerned that the merger would remove independent rivalry between the co-operatives for the buying of groceries from suppliers.
However, the co-ops say they don’t compete when purchasing groceries, because they each buy to meet the demand of their customers who are in separate geographic markets. In general, purchases by one co-op do not affect the quantity purchased by the other, as they are not competing to serve the same customer.
The Commission said it was concerned a merger would lead to reduced profit margins for suppliers. But the Commerce Act’s purpose is to promote competition for the long-term benefit of consumers – the co-ops believe the merger would not harm suppliers or competition, and would be beneficial for consumers.
The Commission also considered that a merger could increase the likelihood of ‘co-ordination’ with Woolworths. But the merger will not change the way the co-ops retail groceries – under multiple national brands with differing strategies and price points; and in locally owned and operated stores, which serve the needs of their local community.
“We will continue to compete hard against the big Aussie supermarkets. Co-ordination hasn’t happened in the past, it doesn’t happen now and it won’t happen in the future,” said Quin.
Pending the outcome of the appeal, the co-ops will continue to focus on delivering quality, value, and convenience for all New Zealanders, but without the advantage of operating as a nationwide business like their main competitors and other major New Zealand organisations.
“Sitting still is not an option,” said Quin. “Both co-ops are committed to evolving and improving so we remain the first choice of New Zealanders, the best partner for our Kiwi food suppliers, and a resilient local grocery retailer at the heart of communities throughout the country.”
