Barber Marja Bol cut a lot of locals’ hair over the seven years she worked at Max’s Barber in the Highland Park Shopping Centre. And she talked to a lot of locals. And she got to know the 30-plus independent retailers who worked in the open air mall.
So she was devastated when the longstanding owners of the east Auckland centre sold up to Foodstuffs and, three years ago, they all got letters. Like almost everyone else, Max’s Barber’s lease was terminated after 40 years, to make way for a new Pak’nSave. “It hit us all of a sudden,” she says.
One of her customers was Bruce Kendall. You may remember him as the boof-haired young board-sailor who won bronze at the Los Angeles Olympics in 1984, then topped it with gold in Seoul in 1988. His sister Barbara Kendall followed his lead.
Bruce Kendall is now 57, and a local community leader. He got a call from a security guard, charged with keeping an eye on the vacated shopping plaza. Rough sleepers had moved in, and drug-users. Once a friendly community hub, the desolate retail centre was now somewhere locals avoided.
The question Bol and Kendall and everyone else asks is, why would their community need two, let alone three supermarkets on one city block? “They’re right next to each other,” says Kendall. “I haven’t seen that anywhere else in the country, or the world.”
And why has the stand-off between the two supermarkets succeeded only in driving out the small independent retailers that their community does want and need?
The story goes back 20 years to when Dairy Farm International sold its Woolworths NZ Ltd business and it merged with Progressive Enterprises, the operator of Foodtown supermarkets. That resulted in communities with a mix of Countdown, Woolworths and Foodtown supermarkets – but they were gradually all rebranded as Countdown. In November 2011, the last Foodtown and Woolworths store signs were taken down.
“I think it’s very sad to see all the empty shops. The two Countdowns are there, but all the family stores have been totally empty for more than two years. It’s just this derelict group of shops.”
– Jennie McCormick, resident
That left Highland Park with two big Countdowns on either end of the same block, separated only by the Highland Park Shopping Centre and its well-known clocktower. With plenty of parking, it was popular with locals, especially residents of the nearby Highlands Retirement Village.
There was the Max’s Barber, NAM Nails, Highland Park Jewellers, an organic food store and health store, a pharmacy, the PaperPlus with its Lotto counter, and more. Kitchenette Cafe and Suzie’s Dumplings, which faces out over the carpark of the newer Countdown, are still there – but pretty much everything else is long gone.
When Foodstuffs bought the shopping centre, it was in the knowledge that Woolworths – as a tenant of the shopping centre’s previous owners – held a covenant over the property. They prevented any other groceries retailer opening there. Presumably, Foodstuffs believed this could be easily overturned in court – but it wasn’t to be.
The matter went to the High Court where, in July 2019, a justice ruled that the matter must go to arbitration as the terms of the covenant required … a confidential process that Foodstuffs protested against. It expressed disappointment that the fight over lease covenants would play out in secret. That was more than two years ago, and its concerns have been borne out. The dispute disappeared into the secret arbitration process and had never emerged.
There was little indication of what, if any, progress was being made to resolve the dispute. Foodstuffs had promised locals that when it built its new Pak’nSave it would make space for small retailers, but that still hasn’t happened.
In May this year, a Woolworths corporate affairs spokesperson penned a response to an angry letter to the local Times newspaper in Pakuranga. “We have been proud to be part of the Highland Park community since the 1970s and, like your reader, we’d love to see this return to being a vibrant little shopping centre.
“It’s certainly been a long road and we’re making progress,” he said. “At this point in time we’ve been granted resource consent and have lodged for a building consent to build the latest design Pak’nSave, which will create meaningful work and careers for up to 300 and provide the Highland Park community with a local option of New Zealand’s lowest food prices.”
– Lindsay Rowles, Foodstuffs
“It’s disappointing to see the specialty tenants and other shops close,” she continued. “When Foodstuffs (which has brands including Pak’nSave, New World) bought the shopping centre and became our landlord, they would have been aware of our lease agreement and the need to ensure that the supermarket is part of an integrater and functioning shopping centre, as well as other requirements around maintaining pedestrian and vehicle access for our supermarket.
“We’re proud to employ more than 20,000 Kiwis right across the country in our supermarkets, distribution centres and support offices. We always want to serve and positively contribute to the communities we life and work in, and Highland Park is no exception.”
It was a limp shot in a half-hearted public relations battle between the two supermarket chains but in truth, neither chain seemed overly concerned about what the public think. Some locals blame Foodstuffs, some blame Woolworths, but the supermarket chains don’t want their affection – they just want their cold hard cash.
All spin, little substance
“I think it’s very sad to see all the empty shops. The two Countdowns are there, but all the family stores have been totally empty for more than two years. It’s just this derelict group of shops.”
That’s according to Jennie McCormick, a local resident and manager of the Highland Park Community Houses. She would be disappointed to see a Pak’nSave go in there, she said, and wouldn’t shop there on principle. “Big business coming in and forcing out all the small businesses.”
That’s fair, but what is also fair to say is that both supermarket chains are guilty of using these covenants to beat down each other and smaller retailers.
Last week, despite the silence on progress in resolving the Highland Park, the supermarket chains picked up the PR fight over property covenant and lease agreements in the national boxing ring. It accompanied the publication of 95 corporate and public submissions to the Commerce Commission study of the lack of competition in the groceries retail market.
And as much as the two supermarket chains are competitors, when it comes to the Government-order inquiry, they are fighting on the same side against moves to break open their duopoly and allow in new competitors. Done right, this would lower food prices for consumers and increase revenues for local food producers.
In the gooseberry-green corner was Foodstuffs North Island, one of the two co-ops of supermarket owners that makes up Foodstuffs NZ. On Tuesday, the day before the Commerce Commission planned to publish the submissions, the co-op’s boss Chris Quin announced it would clear up its pricing and promotions; work with suppliers and the Government to develop a consumer-focused grocery code; and commit to end the use of restrictive land covenants and exclusivity provisions in leases. It would start that last process immediately.
In the apple-green corner, Woolworths replied with a press release to accompany its Commerce Commission submission the following day. Its New Zealand managing director Spencer Sonn acknowledged the Commission’s draft report identified some areas where the sector could improve, and he looked forward to “being part of this to drive positive change for Kiwis”.
The accompanying infographic said the supermarket chain supported mandatory unit pricing, a grocery code, and waiver of “no supermarket” provisions in leases and land covenants after five years.
“I probably worked there seven years. Everyone knew everyone. If you walked around or went to the supermarket, everyone said hello. It was lovely. The fact that nothing is happening there now, it’s confused all of us really. I haven’t been back to walk through. It would be too hard.”
– Marja Bol, Max’s Barber
Given that government MPs and the Commerce Commission have already expressed their support for the first two measures, these are somewhat hollow concessions on the part of both supermarket chains. And asked repeatedly over the past few days whether the waiver applied to its Highland Park covenant, the supermarket chain’s corporate affairs general manager Kiri Hannifin refused to confirm that it would stand by its assurance in that case.
She and the company initially pleaded the confidentiality of the arbitration process; when it was pointed out that did not apply, then they said they didn’t have enough time to provide a response. Eventually Hannifin said: “We confirm our position remains not to comment on this matter further than what we have already said.
“As we have said in our submission, we support the removal of property covenants and lease restraints. We expect the Commission will take our views on this issue as well as the views of other submitters into account when it makes any recommendation in its final report, which is required to be issued around the end of November.”
In other words, Woolworths told the Commerce Commission, the media and the public that it supported lifting the covenants – “Such measures have worked well for consumers, suppliers, and the industry in Australia and elsewhere” – but it won’t actually do so until the Commission requires it.
‘Preventing other supermarkets operating’
For my money, that’s a narrow points win to Foodstuffs. Woolworths and its Countdown supermarkets obfuscated and delayed with patently untrue allusions to confidentiality; Foodstuffs didn’t. And Foodstuffs has agreed to start lifting the egregious lease restrictions and covenants immediately, rather than waiting for the Commerce Commission to tell them to do so.
After all, the Commission’s position was pretty clear in its draft report: “The availability of land for new entrants and existing firms is reduced by difficulties in getting planning permission to develop potential sites and conduct by the major grocery retailers relating to property, including how they use restrictive covenants on land and exclusivity covenants in leases to prevent other supermarkets operating.”
The Commission says it has identified more than 80 restrictive covenants entered into by the major grocery retailers, the majority of which are still active. At least 50 instances of these were either not time limited, or had terms of 20 years or more. These covenants were lodged across the country, but were largely in Auckland, Wellington and Christchurch – though the Commission has redacted their details.
Critically, these covenants are not just the boxing gloves with which the two supermarket chains pummel each other; these covenants are what they use to punch down to potential new entrants to the groceries market.
When newcomers can’t get land, and can’t get wholesale, and can’t deal direct with suppliers because one of the supermarkets has pressured them to not sell to anyone else, then it becomes nigh-on impossible to enter the market. Little wonder that many of the submitters to the Commerce Commission last week were scared to put their names to their submissions.
“Covenants and land-banking has been a major hidden barrier to grocery competition and the laws need to change to prohibit this practice. The duopoly has been using the law as a barrier to each other and potential new entrants. It’s indefensible.”
– Katherine Rich, Food and Grocery Council
One, “Anonymous submitter T”, told of talking with a potential lessee for a liquor store in Prebbleton, Canterbury. Foodstuffs had imposed a restriction so if the man wanted to lease a site for a liquor store in the development, the only bottle store franchise he could use was either Henrys or Liquorland – both banners owned by Foodstuffs subsidiary Liquorland. “He informed me this is very common knowledge within the industry and that Foodstuffs South Island and North Island both land-bank at new developments, so they can determine what brands are included in their development.”
So both supermarkets have been using these restrictive covenants to maintain their local monopolies.
Lindsay Rowles, Foodstuffs North Island property general manager, told Newsroom there was the potential of change in the wings as a result of the Commerce Commission’s market study. “And Foodstuffs North Island is absolutely supportive of any measures that can improve access to land sites so we can more easily serve communities like Highland Park.”
“We’re looking forward to the day we can break ground and even better the owner operator can open the doors of a brand new Pak’nSave for Highland Park,” he added.
“We’ve always been optimistic and while it’s not been easy, we absolutely remain committed, it’s what we want to happen and it’s what the community deserves.
“It’s certainly been a long road and we’re making progress,” he said. “At this point in time we’ve been granted resource consent and have lodged for a building consent to build the latest design Pak’nSave, which will create meaningful work and careers for up to 300 and provide the Highland Park community with a local option of New Zealand’s lowest food prices.
“We respect there’s a process and although hold-ups can be frustrating for all parties we do need to follow it.”
‘A major hidden barrier’
Food and Grocery Council chief executive Katherine Rich said covenants and land-banking had been “a major hidden barrier to grocery competition”.
She was unconvinced by the supermarkets’ press releases and assurances. “The laws need to change to prohibit this practice,” she said emphatically.
“The duopoly has been using the law as a barrier to each other and potential new entrants. It’s indefensible which is exactly the reason why supermarkets have struggled to explain the practice in a convincing way both to the Commerce Commission, as noted in the draft report, and the public.”
As for Max’s Barber, they’ve now moved down the road to Pakuranga. Marja Bol says some of their regular clients came with them – but they’re still very upset that there’s nothing there at Highland Park Shopping Centre.
“I do know I had a few clients who bought into the area, heading into the later stages of their life with their eyesight going, and they moved there because of the shopping centre. And the people in the old folks’ village, they could just walk there.
“I probably worked there seven years. Everyone knew everyone. If you walked around or went to the supermarket, everyone said hello. It was lovely.
“The fact that nothing is happening there now, it’s confused all of us really. I haven’t been back to walk through. It would be too hard.
“It was a lovely little place.”
