The man behind a world-beating Kiwi chocolate company has given evidence at the Commerce Commission hearings into grocery market competition – and he seemed as surprised as anyone
When Giles Barker put up his hand to speak (virtually, at least, on zoom) it was unplanned. He hadn’t submitted written evidence. He was pretty much unknown to the big players in the hearing.
But ahead of the Commerce Commission turning its attention today to how Foodstuffs and Woolworths treat their suppliers, his message was unequivocal: the way supermarkets are pressuring suppliers is not just driving out small businesses, but it is hurting household shoppers.
Wanaka-based Barker established Bloomsberry & Co in 2002; in the subsequent 20 years his company has expanded into (and sometimes retreated from) the UK, the US and Australia. As well as selling his novelty chocolates through Briscoes, Whitcoulls, some Super Value locally-owned grocers and countless gift stores in New Zealand, and high-end retailers like Selfridges and Harrods of London, he has sold through global groceries heavyweights like Tesco, Sainsbury’s, Coles and a range of US supermarkets.
Yet you won’t find Bloomsberry chocolates on the shelves of the big Kiwi supermarkets – not in Countdown, not in New World, not in Pak’nSave or Four Square or Fresh Choice… and there’s reason for that.
Barker had jumped through the hoops to gain Foodstuffs accreditation but in the end, as he explained to the Commerce Commission, he decided he didn’t want his business to be vulnerable to the whim of one or two big and powerful supermarket chains.
“New Zealand is a tough, tough place with a veneer of classic Kiwi collegiality and goodwill, but underlying it is a very aggressive position,” he said. “Promotion pricing – if you’re not on promotion, you don’t sell.
“And people are turned off promotion to control their behaviour, and to send very strong messages to suppliers by the two supermarkets.
“And I don’t know if people want to say it out loud. I am very reluctant to be involved in the process. It’s very dangerous to be involved, I believe, for a business.”
In 2007, Commerce Minister Lianne Dalziel visited Bloomsberry & Co, which had won up to $100,000 funding a year to expand into overseas markets. “I’m very interested in this 100 percent guilt-free chocolate,” she laughed.
Now, the tables have been turned as Barker appears before the Commerce Commission to help it with its study into supermarkets competition. The Commission needs his help – there are very few supermarket suppliers who have been willing to speak at the seven-day hearing concluding next week.
Barker explained why: “I don’t know why we’re not talking about what promotional pricing does to supplier behaviour and to the relationship,” he said, “and that is that ability of them to peel and suddenly you don’t sell. I’ve got example after example of how that works. And I think most people here know how that works.”
Food and Grocery Council chief executive Katherine Rich told the hearing she agreed with all Barker’s comments. “With regard to the consumer impact, promotion is frenetic and relentless. Suppliers are expected to continuously promote – the supermarkets demand that.
“With reference to the 4000 products that might be on special at any one time, retailer advice to the Food and Grocery Council is that while there’s all this noise, there are really only a group of 10, maybe 20, products that actually are part of competition in getting customers to come from one supermarket over to the other.
“And it’s an ethical issue, that quite often suppliers will offer savings and discounts that may not be passed on. A good example would be offering a dollar scan; 50 cents of that may get passed on to the consumer.
“Giles is correct, quite often blocking suppliers from promoting is used as a way of getting leverage over suppliers. The way that impacts consumers is that consumers do not have access to buying some of their favourite brands at a lower price, if that’s one of the suppliers that has been blocked from participating.”
The Commerce Commission invited Woolworths and Foodstuffs executives in the hearing to respond, but they did not address those statements by Barker. The hearing resumes on Tuesday, after the Labour Weekend holiday.