Food and beverage to New Zealand
Trends and opportunities
The New Zealand retail grocery industry is worth over NZ$15 billion. There are two main supermarket chains in New Zealand, Progressive Enterprises and Foodstuffs. Gourmet supermarkets such as Farro, Nosh and Huckleberry farms and Asian supermarkets are popular as well as smaller independents.
Foodstuffs is the largest supermarket chain with about 55 per cent of the market share and an annual turnover of NZ$7.6 billion. The retail brands include Pak’nSave, New World and Four Square. Foodstuffs is made up of two regional cooperatives, Foodstuffs North Island and Foodstuffs South Island, owned by its independent retail members.
Every regional co-operative supports and services their local stores through an integrated warehouse and transport operation.
Foodstuffs North Island: Foodstuffs North Island Ltd has recently been formed by the amalgamation of Foodstuffs Auckland and Foodstuffs Wellington and as such the supply chains in the Upper and Lower North Island regions are not currently integrated.
Foodstuffs South Island: Foodstuffs South Island Ltd has two Distribution Centres.
Most of Foodstuffs business is done at store level, rather than through central warehousing. It is unique in its regional focus. For exporters to achieve national coverage they have to negotiate with each office. Therefore, good representation on the ground is required. Australian companies usually work with a local importer, broker or distributor.
Pak’nSave has a capped range, which includes a mandatory range of top selling brands. New World’s range is not capped but they have a mandatory core range. There is considerable scope for individual New World owners to buy products at store level that are suited to their local market. This increases the necessity for good relationships at store level. (Source: Foodstuffs, September 2016).
Progressive Enterprises is owned by Australia’s Woolworths Limited. It is estimated to hold 45 per cent of the market share and a turnover of NZ$6.4billion. This includes its main supermarket chain Countdown and two small independent franchise groups Fresh Choice and Super Value. Most mainstream product lines used to stock their supermarkets are centrally warehoused and ranges are reviewed on an annual basis. Since Woolworths purchased Progressive in 2005, purchasing has become more centralised. There has been closer alignment with trans-Tasman pricing and terms putting pressure on New Zealand suppliers. (Source: Progressive Enterprises, September 2016).
Private label products (own brand) are an increasingly important part of both Progressive and Foodstuff’s business. Around 40 per cent of products have an own-label alternative. Private label is used for all high volume products and in some cases only one or a maximum of two independent brands will be allowed in store. Generally, the ranges are reviewed every one or two years, with suppliers invited to tender for supply. A significant percentage of own-brand products are imported. Each of the two major supermarket chains has buying offices dedicated to Private Label. It is the only range that Foodstuffs co-ordinates at a national level, with its Auckland based company – Foodstuffs Own Brands Limited. Pams and Budget are the two brands. There are more than 450 Budget products and 2500 under the Pams label at New World stores.
Progressive’s brands are: Select, Signature, Basics and the Woolworths Homebrand. Countdown has 2400 own-brand products of a total of 21,000 products in stores.
(Source: Foodstuffs, Our Brands, September 2016; New Zealand Herald, Home Brands a Foreign Legion, August 2013, based on research by Andrew Murphy, Massey University)
Gourmet supermarkets, such as Nosh, Farro and Huckleberry Farms are popular in the Auckland region. They are known for their quality produce, artisan products, and unusual ingredients. Products are stocked from small and medium-sized New Zealand producers that are unlikely to make it onto a mainstream supermarket shelf. Gourmet supermarkets cater to high-end customers who are shopping for the experience as much as the products. Prices are sometimes comparable with high street supermarkets making them accessible to an average household, while other products are more expensive. However, gourmet customers are willing to spend more on quality products. They are looking for treats, not bulk buys.
Supermarkets selling ethnic food such as Asian, Indian, South African and British are expanding rapidly in New Zealand. Asian supermarkets in particular are becoming bigger competitors to the mainstream operators. They are estimated to have cornered at least five per cent of the market in New Zealand. (Source: Coriolis Research Group, 2013).
There's still room for Asian supermarkets to grow in New Zealand, as the population expands and they begin to compete with mainstream operators for non-Asian customers. The two largest supermarket operators are unlikely to succeed in attracting Asian customers who want to buy products from home.
Outlets that import Korean, Indian, British and South African products are growing in numbers too. Their products provide a culinary and sentimental link with their home country, as well as introduce New Zealanders to new flavours.
Huckleberry Farms has set the benchmark in New Zealand as a retailer of natural, organic and gluten free products. It has introduced a set of values to ensure the products sold in its stores meet strict ingredient criteria and do not contain artificial preservatives, colourings, flavourings and thickeners.
These products are favoured by Auckland consumers with restricted diets and food allergies. It has a huge and comprehensive range of gluten free products. Products are supplied from small businesses who would be unable to supply the mainstream supermarket chains. (Source: Huckleberry Farms, September 2016)
With 228 stores and over 14 000 employees, The Warehouse is New Zealand’s largest retailer (Source: The Warehouse Company, September 2016). The purchase of massive quantities from its suppliers combined with a very efficient stock control system makes The Warehouse's operating costs lower than its competitors.
The Warehouse sells as many different items as possible allowing the company to grow revenue over its fixed cost base (more sales out of the same store). This is why, in 2006, The Warehouse began to sell low margin groceries. (Source: The Warehouse Group, September 2016).
The foodservice industry
There is a strong foodservice industry in New Zealand. Rising consumer confidence and strong tourist numbers are having a positive effect on the hospitality industry.
As of September 2016 there were:
- 7210 cafes and restaurants
- 1578 pubs, taverns and bars
- 421 clubs.
(Source: Statistics New Zealand, September 2016)
A number of distributor groups service the trade (cash and carry wholesalers truck fleets for direct deliveries). The largest distributor is Bidvest. Others include Gilmours (Auckland), Toops (Wellington) and Trents (South Island) who are part of the Foodstuffs Group.
Australian food and beverage products are well respected. Opportunities exist in the following areas:
- products that are not locally produced
- premium, fresh and counter seasonal products
- raw materials for local production as New Zealand is moving towards more value added processed foods
- organic, gluten free and vegan goods
- healthy convenience is a growing trend – food to go and single portion packaging
- collaboration in food research including food safety such as AusGrainz and The Fresh Produce Safety Centre Ltd.
There is a proposal for the New Zealand Ministry for Primary Industries to increase the varieties of fruit and vegetables that can enter New Zealand under irradiation treatment beyond the existing varieties of tomatoes, capsicums and mangoes.
Under the proposal, apples, apricots, cherries, honeydew melons, nectarines, peaches, plums, rockmelons, strawberries, grapes, zucchini and scallopini would be irradiated to allow their entry into New Zealand.
Tariffs, regulations and customs
The Ministry of Primary Industries is responsible for quarantine regulations. Some products, such as honey, and certain egg products are prohibited, although egg protocols are under review. Some herbs are subject to additional inspection.
Product labels do not generally need to be altered for New Zealand because of trans-Tasman mutual recognition of food standards. Imports of products with more than 50 per cent Australian content are duty free. There is 15 per cent GST (Goods and Services Tax), which applies to all products.
New Zealand and Australian governments are committed, via the Trans-Tasman Mutual Recognition Arrangement, to creating a single trans-Tasman market for food.
Food Standards Australia New Zealand (FSANZ) is responsible for joint food standards between Australia and New Zealand. There is trans-Tasman recognition of food standards, meaning products labelled to meet Australian standards are accepted in New Zealand. It is not required to show the country of origin on food products. For Australian products, the name and address of the Australian manufacturer is sufficient. Therefore labels generally don’t need to be changed for New Zealand.
The New Zealand Ministry for Primary Industries oversees food safety issues. All imported food or food products have to satisfy the New Zealand import clearance procedure and requirements.
New Zealand Ministry of Commerce administers the Fair Trading Act. This Act relates to false or misleading claims to consumers in products or services. The Act has the power to override food standards, especially in relation to claims for products being light, low-fat, less fat than other standard products or where product is claimed to be 'fresh' etc.
Marketing your products and services
New Zealand is a sophisticated and highly branded market. Potential areas to consider when entering the market include:
Price sensitivity – Products in New Zealand supermarkets are sold on price promotion more than anywhere else in the world – 26 weeks per year is common. Because of this, brand loyalty is often weaker than in Australia.
Previous experience – previous success in Australian supermarkets is favourable. Sales into Woolworths or Coles are considered a positive factor when assessing a new product.
Packaging differences – the use of ‘proudly made in Australia’ can have negative perceptions in New Zealand, given the competitive relationship of both countries. Some packaging graphics and colour schemes effective in Australia may not be appropriate for the New Zealand market.
Promotion of new products is generally required. This can include co-operative advertising with supermarkets, advertising in trade and consumer media and product demonstrations. Costs can be quite high, depending on the product category. Exporters should be aware that they would generally be expected to fund promotional costs.
There are no new line fees for new products. Many categories are reviewed at set times of the year, therefore it pays to check before approaching the market. Terms of Trade differ between the two supermarket chains, with each expecting the best possible price and a range of allowances.
Unless exporters are large enough to set up their own branch in New Zealand, local representation should be considered.
Supermarkets and the hospitality trade do not usually buy products direct from overseas suppliers, preferring to work with a local company who is the importer. For more information, visit Woolworths vendors.
Brokers tend to work with larger brands and specialise in the selling, marketing and merchandising. They tend not to own stock and usually contract out distribution.
Importers often handle everything including warehousing of stock and ownership. Although they may contract out merchandising and distribution, as well as on occasion sales and merchandising at store level, depending on their size.
Wholesalers/distributors in the supermarket industry must have close networks with supermarkets and thoroughly understand their area of expertise. If they are interested in your products they should be able to research the prospects and provide you with good feedback. They often do not import product themselves.
Exclusive distribution is usually a prerequisite for taking on a product for a particular distribution channel. There are occasional exceptions, e.g. where a company only works in the North Island and separate representation is required in the South Island or where there are multiple and distinct channels (such as foodservice and retail). Before deciding on your representation, ensure that the company is strong in your chosen distribution channels across the country. Most companies with national distribution have an office in the main commercial centre, Auckland.
The online retail sector is growing faster than the physical store sector and should be seen as an additional retail channel. It can be competitive but it can also be complementary. It is estimated that the value of the online market is NZ$3.7 billion (Source: Nielsen Online Retail report 2013)
Rates for full container loads (FCL) are lower than less than container loads (LCL). Shipping rates for frozen and chilled product are more expensive than for shelf stable. Perishable cargo transfer is greater than ambient cargo. There is little availability of LCL rates for chilled and frozen products. When considering exporting chilled or frozen products, it is preferable to work with an importer who is already importing full containers.
For domestic freight, the cost of moving a container from Auckland, in the North Island, to Christchurch in the South Island is almost as high as trans-Tasman freight costs. In addition, there is less central warehousing and more direct to store delivery in New Zealand, so distribution costs can be high. Distribution for temperature controlled cargo is well established in Auckland and is increasing in other main centres in New Zealand.
New Zealand has a supportive infrastructure for food and beverage along the total value chain. Care needs to be taken with products that may be of interest to biosecurity.
The most common terms of sale are EXW (ex-works), FOB (free on board), CFR (cost and freight) and DDU or DDP (delivered duty unpaid or paid) - the first three being the most common and straightforward.
The procedures can be daunting for first time exporters but these are made much simpler when professional advice is sought. The following tips will help:
- establish a relationship with a good freight forwarder
- learn incoterms - these are crucial to the way you quote prices for delivery
- keep abreast of the range of logistics options available
- become familiar with shipping times, routes and modes so you can offer your buyer a range of options
- note that precise documentation is critical.
Links and industry contacts
Restaurant and Catering News
Super Market News
Hospitality New Zealand
Restaurant Association of New Zealand
Networks and associations
Hospitality Association of New Zealand
New Zealand Food and Grocery Council
New Zealand Juice and Beverage Association(NZJBA)
New Zealand Retailers Association
Restaurant Association of New Zealand
Australia New Zealand Food Standards
Commerce Commission (Fair Trading Act)
New Zealand Customs Service
New Zealand Ministry for Primary Industries (quarantine restrictions, food safety, import standards)
FineFood New Zealand (Every two years)
Food Show Auckland (Annual event)
Foodtechpacktech (Every two years)
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