Z Energy looks to ‘top up' the supermarket conversation
The station's operator Wayne Kennerley suspects the latter is not selling as well because it doesn't have a pull tab like the spaghetti, and needs a can opener.
'Suddenly it means that it's actually not that convenient. Whereas Watties' spaghetti, I can open it, heat it up in the microwave and I've got a cheap lunch, a snack or even dinner.
'What we've learned is we've got to fail fast. Because you're tying up product, which does date.'
Kennerley, who operates 17 Z sites in south and east Auckland, is at the sharp end of Z's move to diversify its business by expanding its presence in the 'top-up' grocery market.
Wayne Kennerley says we've learned we've got to fail fast. Photo: Eugene Bingham
Z isn't going to rival the likes of Woolworths or New World but it's keen to see more competition in the grocery sector.
'We think we've got an opportunity to bring consistency for those 'top-up' shops, which is largely made up of small independents such as dairies,' Z CEO Lindis Jones says.
Z believes moves by governments to increase competition in fuel retailing have worked well and could be applied to the grocery market.
In March the Government launched a request for information to hear from investors and prospective grocery market competitors about possible barriers to entry, along with obstacles to growing at scale in the market.
Submissions will inform policy decisions on potential regulatory changes and support for new entrants or those looking to expand their current offering.
The request followed a 2022 market study by the Commerce Commission into New Zealand's retail grocery sector, which found the market is dominated by Foodstuffs North Island, Foodstuffs South Island and Woolworths New Zealand.
Nicola Willis, Finance Minister, said in March that she had sought external advice on a possible break-up of the main players to help accelerate competition. The Government is open to a range of 'interventions' in the sector to make it easier for a third national competitor, she said.
'Competition between these players is muted, and if competition in the market was stronger, consumers would benefit from better pricing, quality and range of grocery products,' the Government's request reads.
'New Zealand grocery prices appear high by international standards and the scale and pace of innovation is lower than would be expected from a more competitive market.'
Jones says visibility in wholesale pricing increases compatibility and drives competition. The Fuel Industry Act 2020 is an example of this working in practice and is a piece of legislation Jones says the grocery sector can learn from.
'I think the first thing is clear and transparent wholesale pricing. How that actually works will vary from industry to industry, but we know that it has made a material difference to competition in the fuel industry.'
Z Energy is already a major player in the 'top-up' grocery market, with 80 retail sites already offering a top-up grocery range and plans to roll this offering out more Z sites over the course of the year.
Jones says the service stations are 'not there to compete with the role of supermarkets' but rather to offer an alternative to the local dairy for motorists in need of breakfast cereal to take to the office, or a missing ingredient for their dinner recipe.
Jones says with around 180 locations, Z competes more with independent dairies and convenience store chains such as Night 'n Day than supermarkets.
It isn't the third player being sought by the Government in its bid to enhance competition in the grocery market, however, with 180 well-located sites around the country and around a million transactions a week, Jones says Z can play a role in improving the choices for consumers.
The company is targeting customers looking for convenience in between their large weekly shops.
'It could be when you run out of something and we're the closest place to go … That could be something for your dog, your cat, your child, or it could be a treat like chocolate or coffee. Another occasion could be on the way home where you know you've forgotten something, whether that's something you need for your meal or something you need for your family.'
Z's strategy is stocking one of each type of good, rather than stocking multiple brands. Stock differs store to store based on the area and customer demand – inner-city stations may sell more snacks or personal hygiene goods while those in residential areas, particularly those with a dearth of supermarkets, would sell more pantry top-ups such as sugar, or milk.
Around one in four Z stations have electric car chargers, which works hand in hand with a grocery offering. Customers are on the forecourt and the wider site for longer, so have time to look around the store.
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