Grocery business: Comings and goings in NZ’s supermarket scene

A nationwide supermarket chain has changed hands while another new player has opened up a glitzy shop in the middle of the coronavirus pandemic.

Despite enormous disruption, operating a grocery business amidst a global pandemic has proven lucrative for most so it comes as no surprise there is a hum of activity in the sector with new businesses setting up shop – and others closing down.

Perhaps the newest supermarket to open its doors in New Zealand, Four Candles, located on Constellation Drive on Auckland’s North Shore, was started by two Englishmen, Murray Snowden and Chris Fisher.

The 700sqm supermarket – named after an old BBC comedy sketch – opened in October. It was due to open in August last year but this was delayed due to Auckland’s lockdown.

The currently Auckland-only business is focused on working with local artisan suppliers that are too small to have their products stocked in the major supermarkets, as well import products, such as French cheeses, Italian pasta and wines from South America. Four Candles is targeting the premium end of the market, similarly to Farro, but supposedly with cheaper prices. It is said to sell brands that are not found in the major supermarkets.

Managing director Snowden said the business strived to offer quality food that operated on “a more ethically focused business model”. He has big plans to expand Four Candles outside of one Auckland store.

Snowden was tight-lipped on just how many million he had invested to start up the business, but the former ASDA executive told the Herald the idea for the store had been in his mind for a couple of years. It had faced multiple setbacks to opening sooner, largely due to New Zealand’s archaic laws, he said.

Finding the right location had proven difficult. Dominant players Foodstuffs’ and Woolworths NZ’s major land bank – a pipeline of locations earmarked for future sites in coming years – had made it particularly difficult, Snowden said.

“We found a number of sites that unfortunately had a willing tenant; that was us, and a willing landlord, but there was a covenant on the land that prevented any food being sold, dating back to 1986,” Snowden, who has worked in retail for 30 years, told the Herald.

The Commerce Commission stepped in last year in October to change that, which had ultimately helped Four Candles to set up, he said. “Up until that point, that (we) was an example of the difficulty of an independent trying to set up in the right location.”

The grocery sector’s anti-competitive behaviour has recently come under the microscope as part of the Commerce Commission’s market study looking at competition – or lack of – in the grocery sector. The consumer watchdog is convinced the $22 billion sector “is not working well for consumers”.

One of the options being explored to improve competition is the forced sale of supermarket’s wholesale businesses or some sites. It is currently considering the Government’s role in facilitating the entry of new players into the market and will make a final report next month.

Snowden said starting a retail business in the midst of a pandemic had been challenging. Supply chain difficulties, staffing and even customer behaviour and risk profiles had been challenges the business had to work through, he said.

The layout of the store had been designed with Covid-19 in mind and had implemented aisles that are 30 per cent wider than regular grocery aisles, as well as low-level shelving.

“We chose a pathway of continual progress over delayed perfection,” Snowden said.

“Back in early 2021 when we pressed the button on this site we were happily keeping Delta at bay in New Zealand, and of course Omicron has come along and has changed things, and ultimately every business is going through these ups and downs at the moment.”

He described trading over the past five months as “like a rollercoaster on top of a jumping jack” as unpredictability remained the biggest challenge to forecasts and planning. “It’s impossible to predict.

“There are days that are particularly quiet followed by days which are well above average. A lot seems to depend on the delay case numbers, which have a big effect on sentiment.”

Snowden said Four Candles would open two more sites in the “short term future”. The self-funded Constellation store was being used as an experimental location to find what worked best, and it planned to expand “rapidly” over the next five years.

Snowden has worked in management roles at Walmart, the UK’s biggest food manufacturer Northern Foods and British supermarket chains Asda and Iceland. His business partner Chris Fisher has previously led the buying teams at Countdown and Mitre 10.

Huckleberry changes hands

In other grocery retailing news, organic supermarket Huckleberry has changed hands. The new owner, investment company 2121 Group, purchased the business for an undisclosed sum and the transaction was settled four weeks ago.

New chief executive and co-owner Darren Guo told the Herald the deal included the Huckleberry brand, four stores, the online shopping platform and cafe.

Guo said he did not know why the business was put up for sale, but he was approached to take it over and thought it was a great opportunity.

Millennial Guo is inspired by Whole Foods gains in the grocery space in America, and he said he would look to do similar on a smaller scale in New Zealand.

He said his vision for Huckleberry was to “create the most memorable and enjoyable grocery shopping experience for New Zealand families”.

To do this, Guo said, Huckleberry would first expand its product range to offer a bigger variety of high quality and locally sourced produce.

Huckleberry will also soon begin upgrading the interior of its stores as Guo said they were “a little bit vanilla right now”. He was not able to share any specifics of this as it was still in the planning stage, he said.

“We’re currently in the process of planning out what that looks like and how we can integrate some of those traditional grocery shopping concepts to make them really fun.”

When the Herald last spoke to Huckleberry in 2018 – under its previous ownership, the business has 11 stores located nationwide and had lofty ambitions to grow its market share.

Prior to 2121 Group taking over early this year, it had six stores located across the country.

Only four were included in the sale to 2121 Group, the other two located in Browns Bay and Mount Maunganui remained owned by the previous owner, Guo said. The Browns Bay store – considered its biggest, which had a yoga studio, playpen for children and a cafe inside – has recently shut down, assumed to have been affected by the lockdowns and trading restrictions, while the Mount Maunganui location is believed to be undergoing a rebrand. The Herald has been unable to confirm this.

Under 2121 Group, Huckleberry plans to invest significantly both in its online and in-store stores. It has a lot of work to improve its customer service, and once the business had completed its store upgrades, Guo said it would look to expand by opening more stores.

“We’re keen to come back to the [North] Shore in the medium term and we’re always on the lookout for good locations. It’s our mission to make the maximum impact to the overall community so expansion is a big deal for us in the medium term.”

Guo is inspired by Whole Foods’ buying strategy – buying local from each state for each store and how its buyers try and test the product before it hits shelves, as well as its overnight delivery of groceries.

The ambitious Guo is also impressed by Whole Foods’ use of labelling and plans to implement a very similar strategy in Huckleberry stores.

“When you walk into Whole Foods you know immediately what is organic, what is free-range; they have a really strong ratings system, so consumers are aware of what they are picking up.

“If it is organic there is a bright red sticker, similarly for their produce, they work with their farmers to come up with a ratings system too. I think there is an opportunity for the whole grocery supply chain in New Zealand to do better and I’m super stoked to give it a crack.”

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