In the ongoing battle for supermarket supremacy there's a lot at stake. Last year New Zealanders spent more than $12 billion at supermarkets with the vast majority of that passing through the tills of the two majors Foodstuffs and Progressive Enterprises.
In both ownership model and approach the two rivals are radically different. Foodstuffs which owns the Pak 'n Save and New World brands is actually a collection of three regional co-operatives controlled by local owner-operators.
By contrast, Progressive Enterprises which runs the Woolworths, Countdown and Foodtown supermarkets is a far more centralised operation owned by listed Aussie retailing giant Woolworths.
The competition between the two has been likened to trench warfare a long grinding battle with progress measured in hard fought increments of a percentage or two of market share. When Woolworths bought Progressive in 2005 it was thought its massive buying power and experience from the Australian market would pose a major threat to Foodstuffs.
But, so far at least, the three co-ops have proved remarkably resilient.
Market-share comparisons between the two chains are complicated by the fact that while the publicly listed Woolworths publishes detailed numbers, the three Foodstuffs co-operatives do not.
Foodstuffs chief executive Tony Carter claims New World and Pak 'n Save had 58.4 percent of total supermarket sales in the year to February, up from around 58.27 percent the year before and around 55 percent when Woolworths bought Progressive in late 2005.
But Progressive chief executive Peter Smith begs to differ. He concedes that Progressive had a small market share loss but says this is largely due to it closing some stores and that the company's market share numbers have been pretty flat over the last two years. "We're sitting on a bit over 43 percent and it's been like that for quite some time," he says.
Most analysts seem to be of the view that Progressive has lost market share over the past three years. Sydney-based JP Morgan analyst Shaun Cousins recently told The Australian newspaper that Progressive had slipped from 45 percent to 43 percent market share.
Tim Morris, of specialist retail research company Coriolis, has compared Progressive's published sales figures with total supermarket sales data from Statistics NZ between 2003 and 2008. While Progressive's sales have grown by 23 percent over the period, the supermarket sector as a whole including independents as well as Foodstuffs grew by 37 percent.
"Foodstuffs has been growing significantly faster than Progressive," Morris says.
He has done work for both companies and describes himself as neutral. "They (Woolworths) talked some good talk when they came in and bought the business. But they've yet to deliver on the market share gains."
There are also significant geographical market share differences. Foodstuffs is particularly strong in Wellington and the lower North Island where Carter claims it has around 70 percent of the market and weakest in Auckland and the upper North Island where he says it has around 52 percent of the market.
"We are weakest in metropolitan Auckland and stronger in the regions. I suspect it's because the focus from our competitor (Progressive) has tended to be on where they live and where they know."
Carter reckons Foodstuffs' decentralised business model, with owner-operators making their own buying decisions, is a big advantage. "We give a lot of discretion to enable guys to tailor their range to the needs of their catchment."
The autonomy and enthusiasm individual store owners have for their staff and customers also make a difference, Carter says.
He also thinks Woolworths' buying power advantage has been over-emphasised. "Half of what we sell is fresh produce and there is no scale advantage in fresh produce. Of the balance, around half is supplied by New Zealand-only suppliers and the other half by multinationals. So they've really only got a perceived buying power advantage on perhaps a quarter of purchases."
In Woolworths' recent result for its New Zealand operations it achieved an earnings before interest and tax (ebit) to sales ratio of 4.19 percent down slightly on the 4.23 percent the year before and well below the 5.52 percent in the Australian supermarkets. "Ebit to sales basically measures how much profit we make from every dollar," Smith says.
The reason for the gap between New Zealand and Australia is because New Zealand has a lot of older stores, a lot of smaller stores and a lot of stores in need of refurbishment, he says. "We've got a lot of old stores that have just had an emphasis on basic groceries but not much else. We're turning that round."
New ordering, merchandising, point of sale and back office systems will be going live by the end of next month, Smith says.
"There isn't anything that's standing still in our business right now. We've had a project going on since we moved here and it's basically re-engineering the business. (Woolworth CEO) Michael Luscombe described it as New Zealand currently having open-heart surgery while it's still walking around. That's effectively what we are doing right now."
Smith promises big investment over the next five years with around 18 to 20 store refurbishments a year.
He points to the Countdown supermarket in the Auckland suburb of Greenlane, recently converted from a Foodtown, as an example of where Progressive is heading.
Painted bright green on the outside with Countdown emblazoned in red lettering, the store has a prominent fruit and vegetable section, stocks a small range of general merchandise such as vacuum cleaners and electronic equipment and features a walk-in beer chiller.
"It's a new generation Countdown you'll see a lot more of those," Smith says. "There were probably some similarities between Countdown and Pak 'n Save in the past but there aren't any now."
But it's the big box Pak 'n Save concept, with its wide aisles and product stacked almost to the ceiling, which has been the main ingredient driving Foodstuffs' growth, Morris says.
"There's a big saving in the Pak 'n Save model. "They do huge turnover per store."
Pak 'n Save has consistently come out as cheapest in Consumer Magazine's regular supermarket price surveys.
But things may be starting to change if Consumer's latest survey is anything to go by. It found that while a basket of 40 basic grocery items was still cheaper at Pak 'n Save in Christchurch and Wellington, it was less than $1 less expensive than Countdown. And in Auckland, Woolworths, Foodtown and Countdown were all cheaper than Pak 'n Save.
Woolworths certainly promised cheaper prices for New Zealand consumers when it first entered the market and drove a hard bargain demanding better terms from suppliers.
But according to one supermarket industry insider, after being beaten up by Woolworths and having to drop their prices by around 10 percent, most suppliers offered the same deals to Foodstuffs and then after the dust had settled quietly raised their prices again.
"It was a hard negotiation for some people when Woolworths came in," says Lindsay Davidson, commercial director of the Food and Grocery Council which represents suppliers. "Most suppliers I'm aware of had a subsequent trading terms discussion with Foodstuffs after Woolworths came in. In a broad sense it's business as usual now."
He's unsure whether there's any lingering ill-feeling towards Woolworths from suppliers. "We do an annual review of supplier preferences and it's all over the map. It varies year on year and category by category."
Smith is adamant that the arrival of Woolworths has led to lower prices. "The market today is a hell of a lot more competitive than when we arrived," he says. But Carter disputes this. "The relative competitiveness of their brands against ours has not improved."
Progressive has come together through various mergers and acquisitions over the past two decades and it along with some of its predecessor companies has had a number of owners, including Hong Kong's Dairy Farm Group and Australia's Coles Myer and Foodland Associates.
Because having the best sites is crucial in the supermarket game, this legacy of changing ownership has had a big impact on the situation today, Morris says. "Most people go to the closest supermarket or the one on their way home from work.
"Foodstuffs has been investing in property for 20 or 30 years. But Progressive in its previous incarnations sold off their property and didn't invest in the future. When Woolworths bought the business there wasn't a portfolio of future sites waiting to be developed. Supermarket retailing is like trench warfare. You've got to just keep throwing waves of troops into the trenches."
He accepts it's taken Woolworths almost three years to sort things because the Progressive systems were bad. "The jury is out to date. Certainly their (Woolworths) track record in Australia suggests you wouldn't count them out."