Market Information
Asia Pacific

Market Brief - The Retail Grocery Market in New Zealand

June 2005

The Government of Canada has prepared this report based on primary and secondary sources of information. Readers should take note that the Government of Canada does not guarantee the accuracy of any of the information contained in this report, nor does it necessarily endorse the organizations listed herein. Readers should independently verify the accuracy and reliability of the information. This report is intended as a concise overview of the market for those interested in its potential and is not intended to provide in-depth analysis which may be required by the individual exporter.

New Zealand is a developed and varied market comprised of over 4 million people. The population is diverse in culture with over 70% of the population of European origin, 8% Maori, 9% Polynesian and 4% Asian. Two thirds of the highly urban population resides in the major centres of Auckland, Wellington and Christchurch.

The retail grocery market in New Zealand is well developed with main food retailer categories such as supermarkets, small-scale grocery stores, fresh food specialty stores and convenience stores in all major population centres. The retail grocery scene has experienced gradual increases in convenience store food sales; a representation of busy consumers and consumer lifestyles seeking ready-made food and quick-grab items. Fresh food specialty grocery outlets are slowly decreasing in numbers as small grocery store formats as well as convenience store formats have grown 17% and 13% respectively. Despite this the importance of fresh food and specialty food outlets within the market will remain high as the return to 'local' shopping for specialty and fresh food items is a recently observed trend.

New Zealand retail grocery sales were valued at over US$7 billion in 2004, with nearly 80% of retail grocery sales made in supermarkets and the balance in fresh food specialty stores, small-scale grocery stores and convenience stores.

A great challenge to expanding Canadian exports to New Zealand is the vast output of Australian multinational food companies that enter New Zealand duty-free. This output includes production from major North American players such as Kellogg's and Campbell's.

Quick facts

New Zealand

• Population: 4,041,000 (2005)
• Population growth rate: 1.02% (2005)
• Age Structure: 0-14 years: 21%, 15-64 years: 67%, 65 years and over: 12%
• Unemployment Rate: 4.2% (2004)
• GDP real growth rate: 4.8% (2004)
• GDP per capita: purchasing power parity US$23,200

Economy

New Zealand has shown strong economic development over the past few years, with the economy growing by 4.5% in 2004, making New Zealand one of the faster growing countries within the Organization for Economic Co-operation and Development (OECD). This growth is a reflection of increased household spending and business investment. Household spending alone grew to a value of US$54 billion* in 2005, a 78% increase since 1990. This spending increase is a result of a boost in goods and services available to the population, an increase in average consumer incomes as well a shift towards more refined consumer tastes.

Real GDP growth reached 4.5% in 2004, but is expected to slow to 2.5% in 2005 due to high interest rates and sluggish population growth.

New Zealand trades extensively with the UK and Australia for historical and geographical purposes. Other significant trading partners are Japan, other South-East Asian countries and the US. New Zealand's major exports recorded in 2003 were dairy products accounting for 16.6% of all exports, meat at 14.7% and forestry products at 7.3%.

Market Highlights

• New Zealand retail grocery sales were valued at over US$7 billion in 2004
• main food retail formats are supermarkets, fresh food specialty, small grocery stores and convenience stores
• small grocery store formats are growing at the fastest pace of 17% with supermarkets and convenience store formats growing at a 13% rate
• agricultural imports totalled US$1.4 billion in 2003
• Australia holds 52% of the food import market

Opportunities

• Canadian products enter the market duty-free
• Nearly 13% of total consumer expenditure valued at US$6.5 billion is allocated to food and non alcoholic beverage purchases
• consumer food expenditures have increased in the ready-made meal category, and overall demand for convenience foods are at an all time high
• retail food sales are expected to grow 15% by 2008
• white meat consumption is increasing in place of declining red meat consumption
• consumers leaning more towards fresh, flavourful, low-fat, natural and organic food choices; this trend has supported a move back to local shopping and niche market success
• growing acceptance of ethnic foods
• stronger activity in the private label food sector
• product trends: fresh fruits and dried fruits, snack foods and nuts, microwaveable and ready-made packaged meals (soups, pastas, sauces), health foods and organic foods, niche market food preparations, canned salmon, ethnic foods, pet foods, as well as, fruit juices and wines (particularly high quality)

Key Players

• two chains dominate New Zealand's retail grocery market each offering a range of store formats spanning discount to full-service supermarkets
• Foodstuffs (NZ) accounts for 55% of the retail grocery market working under the names of Pack 'N' Save, New World and Four Square
• NZ Progressive Enterprises represents the remaining 45% of the grocery retail market under the brands of Foodtown, Countdown, 3 Guys, Woolworths, Big Fresh and Price Chopper
• these two chains operate over 360 stores throughout New Zealand, with 150 in Auckland, 91 in lower sections of the North Island and 115 on the South Island
• franchise specialty food chains Brumby's and Bakers Delight have thrived in the specialty food retail category

Buyers and Consumers

Buyers

• New Zealand importers like to deal directly with manufacturers
• with two dominating retail chains, buyer bargaining power is strong and something to consider when making business connections with these retailers
• buyers are interested in new-to-market products

Consumers

• seek convenience
• 18-24 year old consumers snack often and steer away form three complete daily meals; they are observant of pricing, the environment and healthy eating habits
• consumers over 45 qualify food purchases based on product and service quality, safety and convenience
• in general, consumers are alert to biotech issues surrounding food production and consumption

Market Entry Considerations

• New Zealand's importers prefer to deal directly with Canadian manufacturers rather than brokers
• use of local agents/distributors can be beneficial in the facilitation and promotion of Canadian consumer-ready foods as approximately 90% of all imported food products are distributed within New Zealand through agents/distributors
• common import channels are sales agents, import-distributors and direct importers; sales agents are the most preferred method as they generally represent a variety of products ready for distribution to large wholesalers and retailers
• specialty importers/wholesalers are available to handle representation and distribution of specialized products such as organics; fresh/perishable products can be sold directly to specialty importers who offer storage and handling for major institutional users
• Canadian exporters will find the business environment similar to that of Canada, including language, business communication tactics and customs
• low barriers to entry and a Canadian reputation for high quality products provide a definite advantage in securing trade partnerships
• New Zealand importers and wholesalers often seek new ideas and purchase from suppliers while attending international food shows
• Canadian Agri-food exporters might consider exhibiting their products at New Zealand based trade shows such as the Foodstuffs, the Auckland Hospitality and the Katrina Gordon Trade Shows

Challenges

• the Treaty of Closer Economic Cooperation with Australia eliminates tariffs on Australian food products; this coupled with close proximity advantages facilitates their domination in the New Zealand agri-food import market; Australia holds 52% of the imported foods market
• rigorous phytosanitary/sanitary regulations for fresh produce and meat imports
• Intense price competition from domestic products, as well as products coming from Australia

Trade

• Canada and New Zealand are strong trading partners with bilateral transactions in 2004 totalling $996 million
• total imports from New Zealand were valued at $538 million, while Canadian exports to New Zealand were valued at $458 million
• total Canadian imports from New Zealand are dominated by agri-food products which account for 20 of the 25 top imported commodities
• total Canadian exports to New Zealand were led by products such as potassium chloride, methanol and lumber, while swine cuts, wheat and processed salmon products were among the top 10 exported commodities to New Zealand in 2005

Agri-Food exports to New Zealand

New Zealand is Canada's 11th largest agricultural trade partner with bilateral trade exceeding $424 million in 2004. New Zealand is also Canada's 7th largest source of agricultural imports with imports exceeding $383 million.

• Canada's agri-food exports to New Zealand totalled $41 million in 2004
• Canada's top five agri-food exports to New Zealand in 2004 were: swine cuts at 30%, wheat at 19%, hams at 11%, kidney beans and white pea beans at 8.5% and sauces and preparations at 7%
• 2004 agri-food exports grew by nearly $5 million from 2003 totals; this was largely due to a $3 million dollar increase in miscellaneous edible preparations as well as the fruit and nut category doubling in value to $1.3 million; besides these fluctuations most export trends within product categories remained consistent from year to year
• other commodity categories not ranking among the top exports, but whose export totals grew substantially in value from 2003 to 2004 are oilseeds, caseins and albumins, coffee and tea, preparations of meat and essential oils
• 2004 imports from New Zealand were valued at $383 million, this total was down nearly $20 million from 2003; first quarter statistics have 2005 imports as of March in the $105 million range, an indication that total imports might be returning to 2002/2003 levels
• Canada's top five agri-food imports from New Zealand in 2004 were: bovine cuts at 24%, milk and cream powder at 15%, sheep cuts at 14%, fats and oils derived from milk at 6% and casein at 5%

International Trade Competitors

• New Zealand trades extensively with the UK and Australia for historical and geographical reasons. Other significant trading partners and consequently key international trade competitors are Japan, other South-East Asian countries and the US
• the Treaty of Closer Economic Cooperation with Australia eliminates tariffs on Australian food products thus promoting their dominates the New Zealand Agri-food import market
• while Canada is a major supplier in the red meat category, representing 18% of the market; Australia and the US are trade competitors within this commodity category account for 61% and 10% of the market respectively

Canadian Contacts in New Zealand

Canadian High Commission
PO Box 12 049
3rd Floor, 61 Molesworth Street
Thorndon
Wellington, New Zealand
Phone: 64-4-473-9577
Fax: 64-4-471-2082
E-mail: wlgtn@dfait-maeci.gc.ca

Canadian Consulate - Trade Office
PO Box 6186, Level 9, Jetset Centre
44-48 Emily Place
Auckland, New Zealand
Phone: 64-9-309-3690
Fax: 64-9-307-3111
E-mail: aklnd@dfait-maeci.gc.ca

Local Contacts

New Zealand Food Safety Authority
PO Box 2835
Wellington
New Zealand
Phone: (+64)-4-463 2500
Fax: (+64)-4-463 2501
Web: www.nzfsa.govt.nz

Food Standards Australia New Zealand
PO Box 10559
Wellington 6036
New Zealand
Phone: (+64)-4-473 9942
Fax: (+64)-4-473 9855
Email: info@foodstandards.govt.nz
Web: www.foodstandards.govt.nz

New Zealand Customs Service
(Wellington, Corporate Office)
The Customhouse, 17-21 Whitmore Street, Wellington, Client Service, PO Box 2218
Wellington, New Zealand
Phone: (+64)-4-473 6099
Fax: (+64)-4-473 7370
Email: feedback@customs.govt.nz
Web: www.customs.govt.nz

Ministry of Health
PO Box 5013
Wellington, New Zealand
Phone: (+64)-4-496 2000
Fax: (+64)-4-496 2340
Email: EmailMOH@moh.govt.nz
Web: www.moh.govt.nz