Woolworths gets Commerce Commission warning over beer ads

Woolworths’ Progressive Enterprises unit, which has about 40 percent of New Zealand’s supermarket sales, got a warning from the Commerce Commission over misleading advertising of discounts on beer.

The competition regulator found that beer ads claiming discounts of 20 percent or 25 percent, run in late 2010 and early 2011, were based on “standard shelf prices” that hadn’t been used in the previous eight months.

“We believe that this practice breaches the Fair Trading Act,” Kate Morrison, manager of competition said in a statement. “It is misleading to use a standard shelf price as the basis for a saving claim when that price has not been displayed or charged for lengthy periods of time.”

Progressive GM of marketing Bridget Lamont told NBR, "Progressive Enterprises did not set out to mislead customers. In its decision released today regarding the promotion of beer sales in late 2010 and early 2011, the Commerce Commission noted the previous practices of the company “is fairly widespread in the retail sector” and that the Commission is considering how it can best address sector-wide issues with retailers."

The commission said, Progressive, which owns Woolworths, Foodtown and Countdown brand supermarkets, confirmed the discounts were calculated off “standard shelf prices.”

For example, a 12 pack of NZ Pure brand beer was advertised as “20 percent off” but had not been sold at the standard shelf priced or close to it for eight months, the commission said.

“It appears that this type of practice is fairly widespread in the retail sector,” Morrison said. “For these reasons we have decided to warn Progressive Enterprises. We are now considering how we can best address sector-wide issues such as this with retailers.”

Australia’s Woolworths this month reported wider margins and record growth in first-half earnings in New Zealand. It has been rebranding all of its local outlets as Countdown as part of a strategy to won market share off rival Foodstuffs, which has the Pak’nSave chain.

Foodstuffs has 60 percent of the market, worth about $8.06 billion in 2011, through its Pak’nSave, New World, Four Square, Gilmours and Liquorland outlets.