Blenheim food producer warns Kiwi jobs are at stake if Commerce Commission opens door to a ruthless new overseas supermarket chain
Mark Johnson says his business likes to “fly under the radar” – but what shoppers don’t know is that when they buy their New World Pam’s and Countdown Select sauces and relishes, it’s his 50 staff producing them.
The Springbrook Foods founder was one of the last voices on the final day of Commerce Commission hearings into competition in the grocery industry. He turned up on the zoom video conference at the last minute, after reading suppliers’ angry criticisms of the supermarkets on LinkedIn.
His view is very different, though, from that of Sealord, Yum Granola, Orchard Gold and other Kiwi producers “deleted” from the supermarket shelves. Johnson says he sells his chutneys, dressings and produce to all the big food companies – Foodstuffs, Woolworths, Bidfood, Night ‘n Day and more. “That’s 300 to 400 tonnes of product out the door a month.”
A Woolworths excutive welcomed his contribution but, for the record, Johnson says he wasn’t put up to it by the supermarket chains.
“Like a silly fool I put my hand up and said, well, you know, we’re just a small family business but being suppliers to all those people that were speaking there, right across the board, and there’s been no high-handed attitude,” he told Newsroom, after the hearing concluded.
“I read language like ‘abuse’ and ‘demanding’ and ‘pressure’ and ‘extracting’ and ‘threat’ and ‘rejection’ and ‘bullying’ and you know, in our 12 years in dealing with house brands we’ve had none of it.”
“We’ve got over 50 staff here that are reliant on us, we’re a Kiwi business, and all the money goes back into locals’ pockets. And all the companies we’ve dealt with in New Zealand are brilliant, so we just don’t want to jeopardise that by putting laws in place that will restrict them and how they can deal with New Zealand suppliers.”
– Mark Johnson, Springbrook Foods
Johnson argues the New Zealand grocery market can’t sustain another big player – that the entrance of an aggressive new overseas retailer would likely drive down prices for suppliers, and jeopardise family businesses like his.
Springbrook Foods opened its doors in 1986, developing out of the family farm in Marlborough where they planted garlic and cherry trees.
Johnson recalls growing up with evenings spent in the family kitchen. When he took over the family business, they built a small food grade facility on the orchard. As wet harvest followed wet harvest, the food processing business quickly overtook the farming. They got contracts to pit cherries and process other fruits for Air NZ, Pizza Hut and others.
In 1996 Johnson designed a machine to peel garlic – and indeed, on the company website they still sell 500g and 1kg bags of freshly-peeled garlic cloves. But they also now produce dressings, sauces, chutneys, aiolis, curry pastes and more. Some products like sugar and olive oil have to be imported, but Johnson says most of the fruit is local, like 500 tonnes of tomatoes from Gisborne each year. “We try to buy local.”
Grocery shoppers won’t see the brand Springbrook on the supermarket shelves, though. Instead, they produce products for the supermarket own brands, including Foodstuffs’ Pams and Woolworths’ Select ranges.
“If there was proof they were making 40 percent margins, well I’d be thinking differently, but if they’re happy to open the books and say to the commission, look this is this is the effects of it, we’re making nine to 13 percent, then that’s not exorbitant.”
The Commerce Commission concluded nearly two weeks of hearings, by discussing what recommendations it might make to the Government to facilitate entry or expansion in the grocery sector – and whether the two big supermarkets should be required to sell off some of their retail or wholesale businesses to a new market entrant. Commissioners asked: “Might facilitation of entry or expansion occur in conjunction with a divestment remedy?”
But Foodstuffs and Woolworths rejected any such “extreme confiscation of private property” and echoed Johnson’s concerns about the dangers of inviting in a big new international supermarket chain.
Woolworths NZ strategy director Josh Gluckman said the commission was considering “unprecedented” actions with a risk of unintended consequences that might impact on other suppliers and consumers. “There are many players who aren’t here, whether they be the many hundreds of small suppliers, like Mark Johnson, who we deal with every single day,” he told commissioners. “Significant new entrants like Costco, one of the largest and most price focused supermarket players in the world, are very real, and a very big deal.”
Johnson cautioned the commission about the risk to New Zealand producers and suppliers. “I’d really like to see New Zealand suppliers’ voices being heard more, and I’m really concerned about a third party coming in. The likes of Aldi in Australia, there’s no way we can match the prices of the product they bring in from Asia and other parts of the world.
He concluded: “We’ve got over 50 staff here that are reliant on us, we’re a Kiwi business, and all the money goes back into locals’ pockets. And all the companies we’ve dealt with in New Zealand are brilliant, so we just don’t want to jeopardise that by putting laws in place that will restrict them and how they can deal with New Zealand suppliers.”
Springbrook already sends container-loads or produce to Australia, he tells Newsroom afterwards, so he watches international food prices closely. He says they will pay only $1 for products he could earn $2.50 from in New Zealand. “I’m fearful that if it came to New Zealand, those prices would follow. It could be detrimental.”
He worries that job would be put at risk at companies like his. Some of his staff are long-serving. One, peeling line leader Rokobina Harrison, has worked with him for more than quarter of a century.
“I love working for a family owned company,” she says. “I’ve worked for Springbrook for 25 years and during this time I’ve watched the company grow and I feel like I am part of the family.”
Johnson warns that sort of connection is at risk. “Another big player coming into the market could cause a detrimental effect rather than a positive effect on New Zealand suppliers and on New Zealand in general, especially is all the funds and incomes go back offshore.”