Shoppers turn to Pak 'N Save as grocery prices increase.
Grocery co-operative Foodstuffs (SI) Ltd achieved a major milestone in the year ended February by reaching $2 billion in revenue from sales.
The group, which operates New World, Pak 'N Save and Four Square supermarkets and the Henry's Beer, Wine and Spirits chain, recorded $2.14 billion in sales in the period, up 7.5% on the $1.99 billion reported in the previous corresponding period.
Records show Foodstuffs (SI) reached $1 billion in turnover in 1999.
Since the group merged in 1988, sales have risen from $399 million to the current $2.14 billion.
Operating profit for 2008 was $221.9 million, up 12% on the pcp.
Chief executive Steve Anderson told the Otago Daily Times the increased turnover was a mixture of increased food prices through supermarket tills and a growing market share throughout the South Island.
"All round, it has been a very good year."
Because the Foodstuffs' financial year ended in February, the recent increase in food prices was not included in the figures.
However, he had noticed a recent trend towards increased sales at Pak 'N Save supermarkets as shoppers followed the advertised claim of New Zealand's lowest food prices.
Rural stores, such as Four Square supermarkets, were showing improved turnover as people started to feel the pinch of higher food prices.
"If you live in Lawrence, you start asking if you really need to go to Dunedin.
If not, then you go to the Four Square."
Shoppers were making other choices in the supermarket aisles, Mr Anderson said.
Far fewer 1kg blocks of cheese were being sold and far more 500g blocks were being sold.
There had also been an increase in house brand sales, such as Pams.
Competitors were also promoting their own house brands as people made different buying choices, he said.
Asked if supermarkets were facing the same problems as petrol outlets, where there was an increase in the number of people driving off without paying, Mr Anderson said the group was more aware of loss prevention.
Trents, the group's food service arm, was wary of bad debts as the food industry faced tough times.
The increased food prices would have a positive affect on the group's sales figures but the mix of profit would be different.
Retiring chairman Russell Nieper, of Dunedin, said one of the most pleasing aspects of the group performance was the continued excellent performance of all retail outlets - a tough task taking into consideration that the group was chasing large figures from previous years.
The Henry's chain had grown significantly in the year and Foodstuffs now had 13 stores trading, with more to open this year.
Costs rose due to the introduction of a new computer system across the total operation, together with the increases in employee benefits and the cost of converting accounts to be compliant with international financial reporting standards, he said.
"As with most wholesale distribution operations, freight costs, and the interest costs relating to expenditure on capital works to support our growth, remain a challenge."
Nationally, the three Foodstuffs (Auckland, Wellington and South Island) groups increased their collective turnover by $393 million to $7.61 billion.
The three groups bought a strategic 10% stake in The Warehouse Group, a move followed by Woolworths.
Applications by both chains to buy 100% of The Warehouse shares were declined by the Commerce Commission but approved on appeal.
The approval was in turn appealed by the commission.
A decision from the Court of Appeal is expected soon.
