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The BulletinSeptember 29, 2023

Weet-bix case shows size of mountain supermarket challengers need to climb

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It’s just one product, in one chain of stores. But few stories symbolise the ongoing power of the supermarket duopoly as well as The Warehouse’s Weet-bix situation, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.

A great big breakfast biscuit brouhaha

At first glance, a single grocery brand disappearing from a single chain of stores doesn’t seem much of a news story, let alone one that warrants the sort of blanket coverage we saw yesterday. But amid a cost of living crisis, and with the government finally getting serious about addressing the supermarket duopoly, the Warehouse/Weet-bix controversy instantly became emblematic of the issues plaguing the grocery sector. A behind-closed-doors wrangle with Weet-bix manufacturers Sanitarium burst out into the open when The Warehouse announced its 88 stores would receive no new stock of the breakfast cereal from this Saturday, with Sanitarium blaming vague “supply constraints” for the decision. The Warehouse sells 1.2kg family packs of Weet-bix for $6, up to $3 cheaper than at competing supermarkets, raising suspicions that there’s more to the story than just temporary supply issues. The Commerce Commission is investigating the matter, which chair John Small calls “extremely concerning”. “If you valued all your customers you’d probably try to share out the supply that you’ve got to keep everyone happy,” he said.

The Warehouse’s long fight establish itself as a supermarket alternative

The news came as The Warehouse Group, which includes Noel Leeming and Torpedo7 stores along with the ubiquitous red sheds, released full-year results showing a 66.6% drop in net profit compared to the year before (paywalled). One bright spot was in groceries, particularly the pantry and chilled segment where sales soared by 91.8%. The Warehouse has been trying to establish itself as a supermarket competitor since opening its first Walmart-inspired Warehouse Extra stores in 2008 – a brand extension that ultimately failed just two years later. Last year the retailer’s $4 blocks of butter drew attention to its potential as a lower-priced supermarket alternative, but the ability for people to do their weekly shop at the Ware Whare will remain a pipedream for as long as wholesale “supply constraints” remain.

One year in, what difference has Costco made?

Costco, the other retailer seen as a potential challenger to the supermarket duopoly, celebrated its first New Zealand birthday yesterday. A year after opening in the Auckland suburb of Westgate, Costco is still rammed on weekends, and that’s something for other stores to celebrate, marketing expert Ben Goodale tells the Herald’s Front Page podcast. “The sheer volume” of people going there is an opportunity for other retail in the area, he says. Reps for “big box” retailers agree that the arrival of Costco has been a net positive, Anne Gibson and Alka Prasad report, though nearby Pak n Save and Countdown both stayed mum. That doesn’t necessarily mean they’re suffering: with its much smaller product selection and much higher typical spend, Costco “is not used by consumers as a replacement for shopping at… the nearby supermarket”, according to an Australian study. “So the idea that one store would provide competition for our supermarket duopoly seems unlikely,” write Gibson and Prasad.

The view from Blighty

Since I’m currently living in the UK and have just come back from the supermarket myself, I thought it might be interesting to share some prices from today’s shop. The country is going through a cost of living crisis of its own, and grocery prices have shot up across the board. Still, there were some good buys, especially at Lidl, the German discount retailer which now has stores in most parts of the world. There, a 1kg tub of Greek yoghurt was just £2.20 ($4.50), a 190g jar of bog standard pesto 99p ($2), and a bottle of Bordeaux red wine was £5.30 ($10.85). At my local Asda the savings weren’t quite as impressive: my basket included a 250g block of butter for £2 ($4.10) and some Rose’s marmalade for £2.45 ($5). As for Weet-bix – or rather Weetabix, the UK equivalent – a 1.35kg pack cost a whopping £7 ($14.30). I decided I could do without.

Keep going!