The Foodstuffs grocery co-operatives and their advisers will review the Commerce Commission’s full reasons for declining the merger of their two regional co-ops before deciding whether to appeal the decision or explore other options.
The local member-families of Foodstuffs North Island and Foodstuffs South Island own and operate the country’s 500-plus Four Square, New World and PAK’nSAVE stores. Last December they applied to merge the two separate regions after both Boards agreed it would achieve efficiencies that will benefit customers at the checkout.
The co-ops held initial conversations with the Commission in November 2023 and were invited to apply for clearance. In June this year, the grocers of each regional co-op voted overwhelmingly to become one national co-operative.
On 1 October, the Commerce Commission announced that it was declining the merger, and has released the full reasons for its decision.
Foodstuffs North Island CEO Chris Quin says the co-ops will now focus on examining the reasonings received today before deciding their next steps.
“We strongly believe the merger is the best option for making our business more efficient, keeping checkout prices as low as possible, and ensuring the co-ops are match fit to meet new grocery competition,” Mr Quin said.
“Merging our two co-ops will benefit customers, stores, suppliers, and communities. We believe New Zealanders shouldn’t have to wait for this.”
Mr Quin said the merger application process should be a legal test, and he was satisfied the Foodstuffs co-ops met that test.
“Our submissions showed this merger wouldn’t reduce competition in the retail markets because we’re two co-ops in two separate islands,” he said.
“As for the acquisition (our supplier partners) markets, we’ve been clear through this process that this isn’t a three-to-two proposition because our suppliers can currently only supply to one Foodstuffs co-op in each island.
“Now we have the Commission’s full reasons for its decision, we’ll review them with our experts before deciding what we do next.
“If we decide to take it further in the High Court, it will be because we haven’t seen any new information or changes regarding the issues the Commission raised during the clearance process – issues we believe we thoroughly addressed – and we see no valid basis for its final decision.”
Both co-ops’ Boards have 20 working days to give notice of an appeal.
Mr Quin said the industry needs to keep evolving to respond to changing customer needs and competition.
“For us, merging is the right way to do it, because we’ll cut down on the duplication, complexity and additional cost of having two separate companies operating in two islands.
“Suggestions we would co-ordinate with any of our competitors are baseless and fail to appreciate how our business works and how competitive it is.”
Foodstuffs South Island CEO Mary Devine says Foodstuffs owner-operators backed the merger because they understood that being one nationwide co-op would make the co-ops more efficient, agile and better able to meet customer needs.
“Our co-ops have been part of the fabric of New Zealand life for over a century, built on a foundation of delivering value and supporting communities – and that remains our mission every day,” Ms Devine said.
The two co-ops have shown their commitment to helping New Zealand through their united fight against food price inflation, and by providing a low-cost grocery option through PAK’nSAVE.
They’ve also invested hundreds of millions of dollars in new stores or store upgrades in towns and cities across the country, and support local communities through grants and food donations.
“Over the years we’ve had to change and adapt to stay true to our mission, and now the time is right to come together to ensure we continue delivering value and choice to our customers, who remain our top priority,” Devine said.
“Operating as two regional co-ops divided by the Cook Strait no longer makes sense and isn’t what other large players are expected to do. The merger will allow us to think big about our shared vision and keep evolving to be a world-class co-op.”