Retail Sector

According to Euromonitor, retail sales in the packaged food market in New Zealand will reach nearly US$9.2 billion in 2022.  That represents a growth rate of 16.3% or nearly US$1.3 billion since 2018.  By the year 2026 the retail sales in the packaged food market in New Zealand is expected to reach US$10.6 billion, a growth rate of 15.1% and US$1.4 billion from 2022. 

High growth products in the forecast include:

• Edible Oils
• Ready Meals
• Sauces, Dressings & Condiments
• Soup
• Sweet Spreads
• Baby Food
• Dairy

FAS Wellington reports that the grocery industry is highly concentrated in New Zealand and the sector is made up of three major grocery retailers, several independents, green grocers, and small convenience stores.  The two major supermarket groups are Foodstuffs New Zealand and Progressive Enterprises (using the name Countdown).  In addition, a third major grocery retailer is the Warehouse Group, which is a general retailer such as Walmart, but with a large grocery component.  Combined these three groups make up almost 90% of the entire grocery retail market in New Zealand.  The arrival of Costco to New Zealand, with their first store expected to open in Auckland in early 2022, will also increase competition in the sector as well as provide increased opportunities for U.S. food and beverages.

Foodstuffs New Zealand is the market leader, representing 47% of the total grocery market, making them a significant player even by global standards.  Their structure, however, is rather unique in that it is a cooperative and consists of many individual owners in the form of franchisees with each individual supermarket having its own owner/operator.  Foodstuffs have a centrally controlled system where the stores can source their products, but individual stores can also source some products direct from suppliers.

The Foodstuffs supermarket brands are separated into three brands: New World which is a premium supermarket offering; Pak’nSave which is a low-cost bulk purchase offering; and Foursquare which is a local supermarket/convenience offering often located in smaller centers across New Zealand.  Foodstuffs operate as two separate businesses, delimitated by New Zealand’s two islands.  One business is Foodstuffs North Island, the other is Foodstuffs South Island, and the purchasing of products is primarily done separately by these two entities.

Euromonitor reports that since New Zealand has one of the most concentrated retail grocery markets in the world; the government has ordered the Commerce Commission to conduct a market study on supermarkets, to ensure a more transparent pricing strategy for fair competition and consumer benefits.  The preliminary findings revealed by the Commerce Commission highlighted the market duopoly and consistently high profits, with the move expected to bring about transparency and regulate competition in New Zealand, so that consumers do not have to bear the brunt of higher prices for groceries.  Lack of competition had also been cited as an issue as the duopoly made it more difficult for new players to enter.  The Commerce Commission published its final report on 8 March 2022, and recommended a set of changes to be made to help improve the price, quality and range of produce available to consumers in New Zealand.

Euromonitor also reports that sustainability continues to have a growing influence in New Zealand as local consumers become increasingly concerned about environmental issues.  The use of recyclable packaging by retailers is an important element, which consumers particularly associate with sustainability. In 2021, supermarkets continued to roll out eco-friendly and sustainable practices.

Countdown opened a new eco-friendly supermarket in Waiata Shores at the end of 2021, following the launch of a supermarket in Richmond the June, making it the country’s first ever Green Star grocery store. The stores focus on offering sustainable and environmentally-conscious products and features including an energy management system, digital shelf labels, solar panels to generate a percentage of the stores’ energy, and electric vehicle charging points.

According to Euromonitor, after a flat performance in terms of value sales in 2020, convenience stores experienced a decline in 2021 on the back of panic-buying reversal and a greater shift to online grocery shopping.  Convenience stores located in city centers and close to airports continued to be particularly negatively affected.  Local consumers have been making bulk purchases in supermarkets in order to minimise shopping trips, due to safety and hygiene concerns.

The change in consumer lifestyles, as schools remained closed and many New Zealanders worked from home also reduced on-the-go consumption occasions.  The number of convenience stores also continued to decline, with independent local convenience stores facing the stronger brunt of the pandemic’s impact due to lower footfall.

Despite increasing price sensitivity, pushing consumers to search for the most affordable options, the economic impact across the country has spurred a strong movement in supporting local businesses and consumers have been frequenting convenience stores to replenish pantry items, as well as for on-the-go options as restrictions eased for certain periods.

The “shop local” trend therefore continued to shape local consumer dynamics in 2021. Convenience stores as a format in New Zealand is well-positioned to benefit from this trend as the nation moved to Level Two, while consumers increasingly searched for convenience in an attempt to avoid crowded or more distant stores.  As New Zealanders continued to spend prolonged time at home in 2021, convenience store chains such as Night'n Day began to offer fresh and on-the-go meals to attract time-poor consumers who were attempting to juggle work with other commitments.

Smaller format supermarkets, such as the New World Metro concept, threaten existing convenience stores as they are increasingly found in busy inner-city locations and densely populated suburban areas.  Like traditional convenience stores, smaller format supermarkets have a strong appeal to time-poor consumers, who prefer shopping more frequently but for fewer items.  Many supermarkets are also able to offer lower prices than convenience stores in addition to a wider product range.  Leading supermarket chain Countdown also opened its second Metro store in Auckland in January 2021 to target office workers and local residents in Auckland’s Wynyard Quarter.  The retailer also opened its first Countdown Metro store in South Island in December 2021.  The Wanaka Metro store addresses increasing demand for online grocery orders by offering a drive-through option for customers to collect their orders.

Foodstuffs (North Island) Ltd remained the convincing leader of convenience stores in 2021 in terms of value share and number of stores, followed by Foodstuffs (South Island) Ltd.  The retailer’s Four Square chain benefited in 2020 from consumers wanting to shop local during the lockdown, with this trend being partially extended into 2021, although South Island stores recorded a stronger value growth performance at the end of the review period.  This is likely to have been supported by the August 2021 opening of a new Four Square store in Diamond Harbor, which features a wider selection of fresh and chilled foods, both alcohol and non-alcoholic beverages, and electronic shelf labels for dynamic pricing to serve the local community.

Best Product Prospects:

FAS Wellington reports that New Zealand often follows the U.S. and Australia in food trends.  To-date there are several products that New Zealand food retailers are looking for, as part of their range expansion.  One product area that supermarkets are on the lookout for is functional beverages. These are beverages that convey a health benefit or performance enhancing substances.  Contactless shopping is a new theme in New Zealand stores so anything that has the perception of contact is not in favor.  As a result, packaged foods are in high demand.  For example, both pre-prepared and microwave popcorn has been selling well, and new flavors are always being sought because it is a growth category.  Other packaged consumer goods of any type are likely popular choices as shopping trends move to online.

Premium ice-cream is a category that has also gone well in New Zealand, as well as several others in recent years.  These include cheese, beverages, spices, sauces and confectionary.  Other products in high demand are fresh fruit, where the U.S. benefits from being a counter-seasonal supplier.  Pet food is another major import from the U.S. who is the number one supplier.

Food Service Sector

FAS Wellington reports that although New Zealand has been less impacted by COVID-19 than most countries around the world, it has still had a major effect on the hotel, restaurant, and institutional (HRI) sector.  This is especially true of the tourism and hospitality sectors which have been severely hit by the closed international borders, as well as the outbreak of the Delta variant in August 2021.  In general, relatively short, and limited lockdowns in New Zealand have allowed domestic spending at HRI establishments to support the sector.  

Like many western countries New Zealand has a sophisticated HRI industry, driven (normally) by international tourism and large events.  New Zealand’s network of accommodation services is extensive ranging from low grade motels, right up to four- and five-star hotels and even the odd 6-star resort peppered across some secluded locations.  New Zealand is a real food nation, and it prides itself on how it presents its food as well as the range of food offerings.  New Zealand follows many international food trends, and its restaurants reflect those trends.  Recently U.S. BBQ trends have reached New Zealand and a number of BBQ themed restaurants have opened.

New Zealand’s food service industry is made up of predominately small-to-mid-range cafes and restaurants.  Like the accommodation sector, cafes and restaurants have been significantly impacted, but have been supported by domestic consumer spending and the government wage subsidy.  New Zealand consumers are very familiar with U.S. food trends and U.S. brands, and New Zealand has a large concentration of U.S. restaurants and fast-food establishments.  Some of these include McDonalds, KFC, Pizza Hut, Taco Bell, Carl’s Junior, Burger King, Denny’s, Krispy Kreme, and others.

Euromonitor reports that travel and lodging consumer foodservice locations are set to enjoy a rapid and strong surge in sales from 2022 onwards as inbound tourism ramps up.  This will be thanks to the COVID-19 virus being globally brought under greater control (mainly through the vaccination program) and travel restrictions being eased.  Although the country will remain highly cautious in lifting any restrictions, its relatively strong performance during the pandemic will no doubt ensure many tourists will feel safe visiting the country.  However, international tourism will remain lower in the early forecast period, driven by expensive flight tickets and continued wariness around the virus.  In addition, even if consumers feel safe going to New Zealand, they may be hit by the need to isolate when returning to their home country, thus discouraging them from traveling.  Therefore, a full recovery is not expected in either category until 2025.

Despite being less dramatically impacted in 2020 and 2021, consumer foodservice locations in retail are not anticipated to make a full value sales recovery until 2026, with the forecast compound annual growth rate (CAGR) less than a half of that of travel locations.  This is because consumers have become used to eating from home during the pandemic and are less likely to dine out as regularly in the future.  Nevertheless, as restrictions ease and people go back to work, foodservice operators in city centers and shopping malls are likely to see strong growth. Glimpses of this recovery were seen during lower alert levels during 2021 and operators will do what they can to encourage further demand.

Best Product Prospects:

As a result of the negative economic impact of COVID-19, and the effect on consumer’s purchasing power, this has shifted consumer preferences while eating out, and they are increasingly making menu choices in the mid-price range (US$15-$21) rather than the higher end.  Hotels are back open but heavily discounting both their rooms and their in-hotel restaurants.  For consumer-oriented products, there has also been some tendency to move away from the premium end of the market.  Despite some reduction in consumer spending, demand for imported foods remains robust, including meat, sauces, beverages, and confectionary.

Food-Processing Sector

FAS Wellington reports that New Zealand’s agricultural imports are categorized into three main groups. The first are ingredients or inputs for New Zealand’s sophisticated food manufacturing sector.  The second are consumer-ready products, such as baked goods and confectionary for the retail market.  New Zealand consumers are becoming more discerning and anxious to consume a wide variety of products from other markets.  The third group is ingredients for animal feed, which are used in the livestock and dairy sectors.  Despite being a small country, New Zealand is a major exporter of food and beverage products, and many of these products are manufactured in-country requiring inputs from other countries. New Zealand’s food sector is large, and in fact, it accounts for 46% of all goods exported by New Zealand.

Products imported from the United States are viewed favorably in New Zealand and import demand has remained strong.  However, robust competition from Australia, Asia, and the EU exists.  In addition, New Zealand companies are price sensitive and affected by currency volatility, which causes them to shop around for substitute products.  In recent months there has also been consolidation in the food ingredients category with some companies hesitant to look at new products.  Despite this, New Zealand continues to have very high demand for many products it requires for its manufacturing sector, which is still going strong.

Best Product Prospects:

FAS Wellington reports that the growth of New Zealand imports of products from the United States are mostly high-value consumer-oriented products. Animal feed and other ingredient products are also available in the New Zealand market and have experienced significant growth. Food processing ingredients that do well in the market include dried distiller’s grains, food preparations, lactose, pork, dairy, corn and hops.