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Woolworths purchase 'good for consumers'

By Phil Boeyen, ShareChat Business News Editor

Monday 28th May 2001

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Perth-based retailer Foodland (NZSE: FAL) says a purchase of the Woolworths group of supermarkets in New Zealand would be good for consumers.

Foodland last week revealed it had applied for Commerce Commission clearance to buy the Woolworths outlets, although they are not officially up for sale.

Woolworths New Zealand includes the Woolworths, Big Fresh and Price Chopper brands and is owned by Hong Kong's Dairy Farm International.

Dairy Farm has just recently been granted regulatory permission in Australia for the sale of its chain of around 290 Franklins supermarkets.

Australian-listed Woolworths is planning to buy 57 of the stores while a South African company, Pick'n Pay, is reported to be interested in 50 of the outlets.

In New Zealand Foodland owns the Progressive Enterprises business, which includes 63 Foodtown, 3 Guys and Coustdown supermarkets.

It is also a grocery wholesaler to FreshChoice and Super Value groups, and owns the Farmers department store chain and the soon-to-be dismantled Deka group of stores.

Foodland MD, Trevor Coates, says the company has completed the recent filing with the objective of confirming to Dairy Farm its interest should the Woolworths New Zealand group be offered for sale.

"The merger of our respective businesses would significantly improve the capacities of the combined entity to compete with the supermarket banner groups controlled by the Foodstuffs Co-operatives which have a market share of 55%.

"The synergies which would flow from the consequent reform of New Zealand's costly supply chain practices would, without question, produce a more efficient supermarket industry, resulting in lower grocery prices for New Zealand consumers."

However there is also an argument that the purchase would create a duopoly in New Zealand, with just two major companies holding over 90% of the market.

A decision on Foodland's application is due on June 11.

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