The Grocery Commissioner is warning influential suppliers that their 'undesirable behaviour' could force him to impose a new wholesale code of conduct, as independent retailer Supie goes bust owing $3 million
The founder of NZ's biggest independent groceries challenger says she is "devastated" at having to call in administrators to close down her company.
Supie and its two sister companies are insolvent. The voluntary administrators are preparing to liquidate them, at a cost of 120 jobs.
"I have put absolutely everything into Supie," founder Sarah Balle tells Newsroom. "But I’m so grateful for all Supie’s supporters – employees, customers, suppliers and shareholders. Together, we fought so hard to introduce competition in the market so that Kiwis could get a fairer deal for their groceries."
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Balle has given Newsroom and the new Grocery Commissioner a list of suppliers she says have refused to take part in the new government-backed regime requiring supermarkets to give smaller retailers access to their wholesale chain at competitive prices.
Commissioner Pierre van Heerden will speak to the Food and Grocery Council's annual conference this week, warning that "undesirable behaviour" by influential suppliers won't be tolerated.
If they don't level the playing field for small retailers, he tells Newsroom, he will set in place a code of conduct to regulate wholesalers' behaviour.
Balle's list of suppliers are Fonterra, Tatua, cleaning products manufacturer SC Johnson, and international food giant Mars which sells everything from confectionary and pet food to Ben's Rice and Dolmio sauces.
"One of my points today is making sure that suppliers do their part, that they don't opt out of the wholesale supply network in order to supply their product direct at a higher price." – Pierre van Heerden, Grocery Commissioner
Since founding Supie in 2021, Balle has sweated blood to win market share off the two dominant supermarket chains, Foodstuffs and Woolworths. She's told how she would often work late, sleep on the floor of her office, then get up and resume work at 5am. "Often I go for a nap in the car," she told The Spinoff. "I’ve gotten real used to sleeping in the car."
She was one of the first competitors to speak out publicly about "the duopoly", giving evidence to a Commerce Commission inquiry. But she's been unimpressed with the solutions delivered out of the inquiry. In particular, she's a robust critic of the new government-backed system encouraging the supermarket chains to on-sell their products to other retailers on comparable terms, concerned that it's open to abuse and further strengthens the supermarkets' dominant positions.
Last month, she told Newsroom those four big grocery suppliers had refused to participate in the new regime, but also weren't directly supplying their products at fair prices.
Supie had managed to negotiate direct supplies from three of the four companies, but only at a premium price through a third-party middle-man – meaning Supie couldn't offer products like Fonterra's at the competitive prices advertised by supermarkets.
"It's disappointing, given they should be doing what they can to help Kiwis. Helping the duopoly doesn’t count in my eyes!" – Sarah Balle, on Fonterra
Balle also said it was nigh-on impossible for independent retailers to get new direct deals with these companies – meaning they could neither source these key consumer brands via the supermarket wholesale mechanism, nor directly.
She said opening up wholesale via the supermarkets sounded like a good idea but had been another failure because major suppliers like Fonterra, one of New Zealand’s biggest companies, had opted out. "It's disappointing, given they should be doing what they can to help Kiwis. Helping the duopoly doesn’t count in my eyes!"
Van Heerden, who has just taken up the new role of Grocery commissioner at the Commerce Commission, say he had been talking with Balle about Supie's difficulties with suppliers. "One of my points today is making sure that suppliers do their part, that they don't opt out of the wholesale supply network in order to supply their product direct at a higher price."
He hasn't talked directly to any of the suppliers at this stage. His first step will be a shot across the bows at the conference in Sydney – though he describes that as education, rather than wielding a big stick.
Somewhat ironically, the first "influential supplier" he's called out has been Sanitarium – where he was executive general manager – for refusing to supply Weetbix to The Warehouse. "One's got to, as a regulator, be independent and call things as you see it," van Heerden says.
"Supie was a customer of ours and, as with all customers, we have worked to find a commercially beneficial arrangement for both parties. We welcome competition and want to see a well-functioning grocery sector that works for all participants." – Brett Henshaw, Fonterra Brands
Sanitarium restored supplies and his successor as general manager, Michael Barton, said: "We apologise for any concern created for our loyal consumers."
Tatua's chief executive Brendhan Greaney didn't respond to a message yesterday, but Fonterra Brands expressed its regret at the news of Supie being put into voluntary administration.
"Supie was a customer of ours and, as with all customers, we have worked to find a commercially beneficial arrangement for both parties," Fonterra Brands managing director Brett Henshaw told Newsroom. "We welcome competition and want to see a well-functioning grocery sector that works for all participants."
He confirms the company is not using the government-mandated new wholesale distribution network, as it has its own franchisee network that distributes product directly to retailers. Despite Balle's criticisms, he says that's working well.
"Supie utilised this franchisee network to purchase product from us," Henshaw adds. "Our franchisee network brings competition to wholesale distribution in New Zealand. It consists of 44 family and privately owned small businesses that any customer can order from. This network services over 22,500 local dairies, cafés and a range of independent retailers across rural and urban communities in every corner of Aotearoa."
He rejects Balle's criticism that Fonterra isn't doing anything to help New Zealanders through the cost of living crisis.
The company has provided more than 13 million dairy serves through the likes of the NZ Food Network, Māori Food Network and other community groups to Kiwis across the country, Henshaw says, and has delivered more than 60 million nutritious breakfasts to 1,400 schools through the Kickstart Breakfast programme, in partnership with the Ministry of Social Development and Sanitarium.
The difficulty obtaining competitively-priced wholesale supplies from Fonterra, Tatua and other suppliers was not the main cause of Supie's difficulties. An investor pulled funding and on Friday, company directors Ben Kepes and Hadleigh Ford quit the board, leaving Balle as sole director.
Richard Nacey and Stephen White, of PwC, were appointed voluntary administrators of Supie Limited, Workerly Limited and Bevie Limited on Monday, this week. Nacey says Supie was established in 2021 as a start-up, with the aim to introduce competition into the industry, as part of its mission to ensure all Kiwis have access to affordable, healthy food.
Supie undertook multiple raises, most recently this month when it tried to raise $3m from investors – but in the end, it wasn't enough.
Balle's decision to appoint administrators followed a key investor ceasing funding to the business, Nacey says. "This resulted in the business facing cash flow difficulties. While sales have rapidly grown over the last calendar year, recent growth has been lower than expected, and insufficient to provide the scale needed to operate profitably in what is a highly competitive industry.
"As voluntary administrators, we don’t have sufficient funding to continue to trade the business in administration. In the absence of securing funding, we expect to be seeking to have the three companies in the Group placed into liquidation in the near future.
Creditors are owed about $3 million, Nacey adds, and it's unlikely there will be sufficient funds available to pay wages and holiday arrears to the staff.
– additional reporting Andrew Bevin
