‘Supply constraints’ mean The Warehouse won’t be able to sell Weet-Bix products from this weekend – but the retailer is confused as to why they’re seemingly the only ones affected. Stewart Sowman-Lund reports.
The Warehouse has headed straight to the Commerce Commission seeking help to resolve a “Weet-Bix situation” after being told the cereal product will be pulled from its stores nationwide this weekend.
The producers, Sanitarium, have blamed “supply constraints” on being unable to provide Weet-Bix to any of the country’s 88 Warehouse stores from this coming Saturday, September 30.
The Warehouse sells the 1.2kg family packs of the popular cereal product for $6, cheaper than it typically retails at other supermarkets like Countdown and New World.
Anna Shipley, head of corporate affairs at The Warehouse, said she doesn’t believe any other retailers will be impacted by Sanitarium’s supply issues – which she found unusual. “As far as we are aware, we [The Warehouse] are the only one affected by this supply shortage. That is again what makes it odd,” she told The Spinoff.
“For us it would be fairer to tell everybody that they’re going to have to live with a smaller amount of supply and then everyone, supermarkets included, have to live with less Weet-Bix.”
The Warehouse Group today reported a 66.6% slump in profits, but said that grocery products were now contributing to 18.7% of the company’s total sales. The Warehouse sells grocery products in stores across the country, including trialling the sale of fresh fruit and vegetables in select areas. Pantry and chilled products have been particularly successful, including The Warehouse’s own range of butter.
Shipley said it was “devastating” for the store and for consumers that Sanitarium had decided to stop supplying Weet-Bix. “We don’t think it’s fair or reasonable for Sanitarium to have decided to solve their supply shortage by cutting off supply to the smallest and most affordable price point in the market,” she said.
“We think it’s a great demonstration of how hard it is to provide affordable groceries in New Zealand. If you can’t get access to the basics, it’s a good example of why progress is so slow and potentially that there is not a third entrant in this market.”
According to BusinessDesk, The Warehouse sells thousands of packs of Weet-Bix every week.
The Commerce Commission was made aware of the issue earlier in the week after negotiations directly with Sanitarium failed to resolve the situation. “We’ve worked pretty hard with Sanitarium up until now to try and get them to change their mind, we’ve called them several times and asked them to reconsider,” said Shipley.
“The answer has been no, so it’s a case of tried and failed to resolve this ourselves.”
The Warehouse Group chief executive Nick Grayston told Stuff he was suspicious of Sanitarium’s claims around a supply shortage. He agreed it had been a challenge competing with the major supermarket chains. “Candidly, we have made no progress in reaching a voluntary agreement with a very powerful duopoly,” he said.
“We want to be able to sell Weet-Bix at a fair price and it does illustrate how hard it is for anyone to break into grocery in New Zealand and keep things affordable.”
Shipley told The Spinoff she was “optimistic” that the Commerce Commission and the newly appointed Grocery Commissioner would step in to assist.
When The Spinoff first approached Sanitarium with questions over a possible supply shortage, a spokesperson they said they were unaware and would investigate further.
In a later statement provided via a PR agency, the company refused to comment on the matter any further. “We respect and value the commercial relationships with all our customers. Necessarily, these details will remain confidential,” the spokesperson said.
“Our practise is not to comment on Sanitarium’s production capacities and stock levels. At this time, we have no further comment to make.”
The Commerce Commission’s chair John Small said the claims made by The Warehouse were “extremely concerning” and Sanitarium had been approached for an explanation.
“We are also considering the potential ongoing implications for competition in the grocery sector – particularly given The Warehouse Group’s stated strategy of expanding in the sector,” he said in a statement.
Updated with responses from Sanitarium and Commerce Commission at 4.55pm.