Supermarkets in New Zealand

PROSPECTS

Growth to continue despite margin pressure

Increasing levels of price competition, particularly in produce categories placed increasing pressure on supermarkets’ margins in 2019. Despite this, increasing sales volumes driven by population growth is expected to result in a value CAGR over the forecast period that is comparable to 2019 sales growth.

Social responsibility becoming more prominent

Given the large carbon footprint of supermarkets in New Zealand, across all facets of the supply chain, supermarket retailers have become increasingly focused on illustrating their corporate responsibility credentials. During the review period and into 2019, this included voluntarily removing plastic bags from stores (prior to a Government mandated ban being enacted) and both supermarket retailers have committed to reducing their overall carbon emissions over the next ten years.

Online sales becoming more prominent

Progressive Enterprises has an established online sales capability, with growth in this platform outperforming that of physical stores. While lagging behind, Foodstuffs has, during the latter stages of the review period, developed its own online sales functionality, and as such online sales through both at home delivery and in-store collection, are expected to be a key growth driver in the channel over the forecast period.

COMPETITIVE LANDSCAPE

Countdown remains the largest brand

Progressive Enterprises Ltd’s Countdown brand was the leading brand within supermarkets in New Zealand, accounting for almost a third of all sales in 2019. The company’s performance in 2019 was underpinned by selling larger volumes off foodstuffs at lower margins, contributing to an improved financial performance.

Foodstuffs enters e-commerce

Foodstuffs North Island and Foodstuffs South are two regional co-operatives which run the New World and Pak’N Save chains throughout New Zealand. Being a co-operative means that stores are owner-operated rather than the corporate owned stores model operated by rival Progressive Enterprises, meaning that the operating model for both chains are considerably different - for example Foodstuffs outlets have in-store butcheries, whereas meat products are prepared and packaged at a centralised facility for Progressive Enterprises before being distributed to the physical stores.

Costco arrival expected to shake things up

Supermarkets in New Zealand is an effective duopoly between Progressive Enterprises and Foodstuffs, and while competition exists, the small size of the New Zealand market means that grocery costs are considerably higher than in Australia. In 2019, Costco announced that it would enter the New Zealand market during the forecast period.

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