Is Supermarket Advertising Power Influencing Journalism?

12 February 2023

Who, like me, has wondered why there is so little push from mainstream media about the crying need for a compulsory breakup of our supermarket duopoly?

An excellent segment today on Radio NZ’s “Mediawatch” threw light on the reason. (Fast forward to the 11th minute.)

Every month, economic consulting firm Infometrics releases a “Grocery Supply Index.” Invariably it shows that the cost supermarkets pay for groceries is going up faster than supermarkets' selling prices – implying that supermarkets are contracting their margins to help struggling consumers.

But thanks to Mediawatch we now know the reality. The Index is paid for by supermarket chain Foodstuffs, and relies on cost data supplied to Infometrics by them.

According to Mediawatch, the mass media – the Herald, Stuff, TVNZ, Newshub and RNZ – give the Index generous coverage each month but seldom disclose that the Index is anything but independent.

Whats more, according to National Business Review Senior Writer Dita de Boni who was interviewed on the programme the cost data Foodstuffs provide to Infometrics is highly misleading. It ignores the very substantial fees that the supermarkets extract from suppliers under the guise of promotions, warehousing, preferential shelf space, and exposure across the full range of stores. None of that offsetting revenue, she says, is reflected in the Index.

(From my own experience I’d add substantial rebates that many suppliers pay, often direct to individual store owners and potentially missing from head office accounts.)

With a highly misleading cost index getting mass media airing each month, its no wonder that the anger consumers ought to be feeling about this failed market is muted.

Let me elaborate on my recent personal experience:

I wrote this opinion piece - “Supermarket Problem Needs Lateral Thinking.” The Herald accepted it, and it appeared on their Web site overnight on Wednesday 1 February.

At 6.47am next morning the Herald received from public relations consultant Trish Sherson a lengthy email headed “Re Factual Errors in Ernie Newman’s Claims in Column Today.” Sherson challenged my assertion that food prices are rising faster than general inflation by referencing – you guessed it – the Infometrics-Foodstuffs NZ Grocery Supplier Cost Index. (My own figures were drawn from a report by Australian consultancy Coriolis commissioned by MBIE.)

"Factual errors"? No. My MBIE-commissioned survey, versus your Foodstuffs-commissioned one relying on (according to Dita de Boni) incomplete data.

Nonetheless, around 9am the Herald’s Managing Editor Duncan Bridgman alerted me to Sherson’s complaint and sought my response. Meanwhile the Herald took down my article from the site.

Later that morning after talking with me, the Herald decided to delete one paragraph from my article and republish it, along with a response from Foodstuffs CEO Chris Quin. My article went live again mid afternoon, followed by Quin’s response.

But here’s the rub. About 7pm my article was removed a second time. Quin’s rebuttal remained, and has done for the ensuing 12 days. But since 7pm that evening the only way to find my original article has been via a link embedded in the Foodstuffs response.

In a way I sympathise with journalists. As Dita de Boni explained on the Mediawatch item, the media is in a bind because the supermarkets are such big and powerful advertisers.

But to paraphrase de Boni again, there needs to be context and understanding of business journalism – affordability of food is a massive contemporary issue which should be given much more prominence.

Much of the way the supermarkets are reacting to the threat of divestment is a direct copy of the Telecom breakup in the 2000s. I remember journalists who took the trouble to decipher the complex issues in those days having Telecom CEO Theresa Gattung and others take their editor to lunch to complain about the journalists’ adverse coverage. I'm happy to report that the tactic failed.

New Zealanders deserve better.

Top marks to Dita de Boni and the Mediawatch team for exposing this. Next time I hear the Infometrics index reported on without a clear disclosure that it is paid for by Foodstuffs and based on figures supplied by them, I’ll be back in print.