Two fledgling food supply businesses are soon to go nationwide offering ranges of fruit, vegetables and other groceries to Kiwi shoppers. No doubt this will mean a better deal for consumers, but what about for farmers and growers?
About 90 percent of the grocery retail market in New Zealand is owned by Foodstuffs NZ and Woolworths who over a long period of time have built a fortified space for themselves with plenty of turrets and moats preventing competition.
As price-takers the livelihoods of farmers selling domestically in this space are often tied to whatever the duopoly offers them.
Sensing an opportunity to make a difference, Pukekohe based entrepreneur Sarah Balle founded Supie, an online-based grocery retailer with an emphasis on supporting local farmers and growers.
Supie supplies the Auckland region and has plans to deliver nationwide soon.
Sarah acknowledges there is a significant risk in being a farmer reliant on the supermarket duopoly – a subject she understands intimately, as a member of the vegetable-growing Balle family.
The Balle Brothers brand has been in farming since the 1920s and is among the largest suppliers to the ‘big two’.
A big driver of the status-quo is the economies of scale involved in getting product from where it’s grown to where it’s sold in commercial quantities.
Sarah says the duopoly enjoyed by Foodstuffs NZ and Woolworths exists largely because they have successfully vertically integrated their supply chains, and the capability of other freight services, to a level of investment unlikely to be matched by a start-up competitor.
Farmers and growers need the confidence they’ll be able to grow and sell enough product all year round, meaning fledgeling businesses like Supie need to give assurance they can buy sustained quantities of produce.
Sarah believes she and Supie are able to achieve this.
She is optimistic there is a future for companies like Supie, but they can’t take on the duopoly alone.
The point where these fledgeling businesses combine their buying powers to provide farmers with this assurance is when Sarah sees farmers having a more dynamic margin on domestically sold produce.
Another start-up taking on the duo are entrepreneurs Angus Simms and Katie Jackson, who founded Wonky Box in Wellington and the Kapiti Coast two years ago.
Wonky Box is a fruit and vegetable delivery service focused on reducing waste and offering another revenue stream to farmers via buying and on-selling ‘wonky’ but otherwise perfectly edible food supermarkets won’t stock.
Angus says during their two years in business they’ve already seen many of their farmer suppliers who previously were purely in fruit and vegetable crops, now branching into dairy to spread their risk.
This highlights the ongoing concerns food producers have about doing whatever they have to do to maintain contracts.
Asked if there’s enough momentum from businesses like his to allow farmers a more dynamic margin, Angus says it’s hard to say.
To create meaningful change for farmers, Wonky Box is just at the beginning.
“We are laying the groundwork for a better buying process. It will need to be supported by government over the long term,” Angus says.
He says farmers can help by being open to new buyers and having those conversations when the opportunity arises.
“It’s all built on relationships.”
Wonky Box aims to be “honest and transparent” with its suppliers.
Vegetables New Zealand general manager Antony Heywood says smaller growers are the least insulated from the duopoly, as they can’t be very forceful in maintaining a price floor for fear of losing their majority channel.
Following recommendations from the Commerce Commission the government has announced Foodstuffs NZ and Woolworths have a year to negotiate wholesale offerings to their competitors or be forced to sell at prices set through a regulator.
The first of these deals has already been struck with an agreement between Woolworths and organic grocer Huckleberry announced on September 2nd.
Antony thinks the recommendations will smarten up the supply chain.
“Under the current system if you’re a grower and you go into a dispute I guarantee you probably won’t come out of it smelling of roses, or having your point even considered”.
Antony recommends growers entering into new supply agreements make efforts to understand what is written and have mechanisms included to ensure equity for both parties.
Whether the government’s shake-up of the supermarket sector will bring about long-term change for farmers and growers remains uncertain. What is certain is Wonky Box and Supie both say they are committed to continue buying from New Zealand farmers and growers as they expand.