Woollies Buying Up Land Under Standing Consent
Supermarkets don’t often appear in the OIO Decisions, yet they are among NZ’s biggest and most essential businesses, as evidenced by the fact that they were among the few businesses allowed by the Government to keep operating during the 2020 national state of emergency and covid lockdown. This approval involves General Distributors Limited and Wholesale Distributors Limited Australia 99%, Various 1%. To quote the OIO: “The Applicants are part of the Woolworths Group, one of the largest supermarket operators in New Zealand. The Applicants are the asset holding vehicles for Woolworths Group’s Woolworths, FreshChoice and SuperValue branded stores”.
“This standing consent (non-residential use and incidental residential use tests) has been granted under section 23A of the Act. Residential (but not otherwise sensitive) land acquired under this standing consent will be used for:
- the development and operation of supermarkets (in some cases together with ancillary retail and/or commercial premises), or
- the development and operation of facilities in support of the supermarket business, in the ordinary course of business of the Applicants”.
“This standing consent permits the Applicants to acquire up to 75 hectares of land in New Zealand in a maximum of 15 transactions by 28 February 2027. The Applicant must notify Toitū Te Whenua Land Information New Zealand each time it settles a transaction under the standing consent” (the OIO is part of Land Information NZ).
$400 Million Rebrand
This is a reminder that, in 2023, Australian-owned Woolworths announced that it was going to rebrand all of its NZ Countdown stores to Woolworths. And the cost? An eyewatering $400 million, approximately. “The rebranding of the Countdown supermarket chain to Woolworths is a turn-off for shoppers, according to a recent brand survey, with more than half of consumers seeing the investment as a waste of money. Countdown’s Australian owner Woolworths said the $400 million rebranding programme would be phased in over the next three years, with store upgrades, a revamp of its loyalty programme, and expansion of its online offerings”.
“However, a survey of more than 1500 consumers by brand tracking platform Tracksuit indicated one in ten consumers would shop less at Countdown. ‘Spending $400m on a rebrand in the midst of a cost of living crisis when many of your customers can’t afford fruit and vegetables is tone deaf’, Tracksuit co-founder James Hurman said, adding it did not make much sense from a corporate point of view either”.
“‘To take all the equity that you’ve got in an existing name like Countdown, which has been built up over now many, many years and just sort of throw it out is usually a kind of stupid thing for a business to do. Of course, businesses can make changes and improvements, as Woolworths say that they’re going to do – they don’t need to change their name to do that'”.
“The survey indicated more consumers shopped at Countdown than any other supermarket in the past 12 months, but more than half thought the rebrand was a waste of money. It found nearly half of consumers over the age of 35 felt the spending was wasteful amid an economic downturn that has seen strong increases in the price of groceries” (RNZ, 28/9/23).
Restrictive Land Covenant s
The OIO’s approval of Woolworths buying up land under a standing consent also focuses attention on one of the reprehensible and anti-competitive features of NZ’s supermarket duopoly of Woolworths and Foodstuffs – restrictive land covenants (and land banking) which the supermarket chains used to prevent their rivals from setting up on that land. The Commerce Commission identified these covenants as an issue in its market study of supermarkets (ditto for its market studies of the fuel supply and building supply industries).
(In 2022) “the Government, through the Commerce (Grocery Sector Covenants) Amendment Act 2022, introduced a strict liability test for restrictive covenants with effects on retail grocery competition” (Simpson Grierson, 23/3/23).
ComCom Market Study A Cop Out
Mention of the Commerce Commission’s 2022 market study into the supermarket duopoly reminds us that it was ultimately a softly, softly, cop out. “The supermarket giants will be breathing a sigh of relief. Along with possible divestments, opening up wholesale supply had the most potential to disrupt their existing models and profits. Yes, if the Government takes on the Commission’s recommendations, there will be greater oversight of the industry, and that has to be a good thing”.
“But for the most part, the supermarkets can carry on with business as usual. They have what they wanted: suggestions rather than enforcement, theory rather than action” (Jon Duffy, Consumer NZ Chief Executive, Stuff, 10/3/22). The duopoly marches on, reaping fat profits during the cost of living crisis.