Woolworths strikes first deal to sell wholesale to another retailer

Photo: RNZ / Richard Tindiller

Woolworths has made its first deal to sell a wide range of wholesale groceries to another retailer, outside its own store brands.

The deal to sell to organic grocer Huckleberry followed a Commerce Commission investigation into the grocery sectorwith recommendations for the big two supermarket chains to sell wholesale goods to smaller competitors.

New Zealand’s supermarket chains were last week given a year to show they would sell wholesale to other retailers to open up competition – and were warned that if not, they could face prices being set by a regulator.

Huckleberry managing director Darren Guo said the government’s push for supermarkets to open up their wholesale channel was what it needed to get the negotiations rolling.

“Eating organic food shouldn’t be out of reach for anyone, which is why we strive to give Kiwi shoppers access to the organic options they want, at the most competitive prices,” he said.

Woolworths New Zealand (WWNZ) director Stephen Sexton also said the government directive and Commerce Commission investigation were the major drives to get the deal going.

The supply deal demonstrated the company’s commitment to encourage more competition, Sexton said, as its business was currently just set up to serve its Countdown, SuperValue and FreshChoice stores.

The wholesale business was planned to operate separately from its Countdown, SuperValue and FreshChoice retail supermarkets.

But Sexton told Morning Report it would use the same infrastructure and logistics network.

About 60 retailers had shown interest in a wholesale deal with the business, including smaller retailers like dairies and convenience stores, right up to national-scale chains.

“Starting a wholesale business and all the complexity that brings isn’t an easy task – but we’re determined to get there,” he said.

“We’ve been working hard to get this [Huckleberry] agreement in place and we are confident it will be the first of many. “

He said WWNZ would have to experiment a bit as it worked through a range of issues, from order to delivery, which it could apply to other would-be wholesale customers.

“The government has been really clear that it wants to see wholesale opening up so we’ve all got to play our part.

“We’ve got a number 8 wire solution for Huckleberry and the medium retailers, and we’ll be able to on-board a few more … if we’re talking hundreds of sites national it’s going to take us 12 to 15 months to get the technical capability and capacity in our network to supply that, but we’re committed and we’ll work through that. “

WWNZ could not give an indication of the price difference of its wholesale-supplied goods compared to what retail customers paid in its own stores, Sexton said, because that was commercially sensitive. But WWNZ would need to make profit from the wholesale business for it to be sustainable.

And the final prices the wholesale groceries would ultimately be sold on for in stores was not something WWNZ had a say in, he said.

“That’s really in the hands of the retailers we supply wholesale … we don’t get involved in their price position. We feel that we’re providing competitively priced groceries.”

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