Paddock to Pantry sales surge as online model grows

Paddock to Pantry says its online grocery model is reshaping how retailers can compete in New Zealand's supermarket sector, with sales almost tripling in the past year.

The family-owned retailer argues that eCommerce and centralised fulfilment remove the need for a challenger to build a nationwide network of physical supermarkets before reaching scale. Instead, a smaller property footprint and a national delivery network can offer a path into a market long dominated by the country's two biggest supermarket groups.

In the 12 months to the end of July, Paddock to Pantry recorded a 197% rise in sales from what it described as a multi-million-dollar base. A business with little mainstream direct-to-consumer grocery trade three years ago now processes thousands of orders a day, carries more than 2,000 products and delivers across New Zealand.

Its warehouse network has also expanded sharply, with capacity rising from fewer than 50 pallet bays to more than 700. The same-day delivery fleet is due to grow from four to six vehicles.

Pricing push

Paddock to Pantry is also seeking to position itself as a seller of everyday grocery staples rather than a specialist food outlet. It has introduced the same grocery pricing nationwide in a move aimed at reducing the price differences consumers can face between larger cities and smaller regional communities.

According to pricing analysis compiled by the retailer, supermarkets trading under the same brand can show regional price variations of as much as 32% across a basket of 30 core grocery items. An initial comparison also found its selected basket was up to 18% cheaper than major supermarkets when the figures were collected.

It said those prices are not short-term promotions and do not depend on a loyalty card or paid subscription. The strategy is focused on widely bought branded lines, including staple products such as butter, milk and flour.

John Kennerley, Business Manager at Paddock to Pantry, linked that approach to a broader change in the economics of food retail.

“The traditional assumption is that to compete with the major supermarkets you need to build hundreds of stores. E-commerce changes that equation - we can operate from centralised infrastructure, reach customers nationally and build purchasing volume without having to replicate the enormous property footprint of a conventional supermarket chain. That creates the potential for a very different form of grocery competition in New Zealand,” said Kennerley.

Wholesale access

Kennerley said the company's growth followed wholesale access arrangements introduced through government reforms aimed at increasing supermarket competition. Those arrangements helped the retailer secure the purchasing scale needed to negotiate directly with major manufacturers.

That matters in a market where the largest fast-moving consumer goods suppliers account for a significant share of products on supermarket shelves. New entrants often struggle to secure direct supply deals because multinational manufacturers usually require substantial minimum orders before opening accounts.

More than 99% of Paddock to Pantry's purchasing by value now comes directly from manufacturers, and its sales volumes exceed those of many individual supermarkets, according to the company.

Kennerley said the reforms helped overcome a long-standing barrier to entry.

“The reforms effectively allowed us to advance to scale almost overnight. Prior to having wholesale access, we faced a classic chicken-and-egg problem. The multinational suppliers that supply most of the country's consumer goods wouldn't offer supermarket-level pricing until you had significant volume, but without competitive pricing it was almost impossible to build that volume. The wholesale arrangements allowed us to jump that first hurdle, establish a competitive range and start building volume. From there we've done the hard work of negotiating directly with suppliers and building the infrastructure ourselves, but without that initial intervention the same process could easily have taken many years,” said Kennerley.

Changing habits

One challenge now is changing how shoppers view the brand. Paddock to Pantry began with a stronger association with specialty food, but it wants consumers to see it as an option for a full weekly grocery shop.

Kennerley said that repositioning sits behind the latest pricing push.

“For customers, the proposition is straightforward: whether you are ordering from Auckland or a smaller regional community, the online grocery price is the same. We expect competitors may respond quickly to match some of this pricing, but in the longer term, if that helps bring grocery prices down in regional communities, then ultimately that's a win for consumers across New Zealand,” said Kennerley.

He said the company wanted to move beyond its earlier image.

“There is probably still a perception from our name and our history that Paddock to Pantry is somewhere you go for specialty groceries. That's not where the business is today. We want New Zealanders to think of us as somewhere they can do their normal supermarket shop, where they can buy grocery brands they know and love, at prices that are competitive or better than the duopoly, get great quality meat and fresh produce with no need for a loyalty card or subscription. We're already one of the largest grocery retailers in the country, delivering New Zealand-wide. The next stage is making sure consumers understand that we're not a niche gourmet retailer anymore, we're competing for the full grocery basket,” said Kennerley.

Anna Kennerley, Brand Manager at Paddock to Pantry, said shifting shopping habits would take time in a category where routines are deeply established.

“People may have been shopping at the same supermarket for 10 or 20 years, so getting them to change isn't simply about being cheaper on one product. We often see customers start with buying one of our meat specials or a smaller order while they test us out. They then come back more frequently and gradually add more of their everyday groceries. Eventually you're seeing customers placing $300-plus orders and using Paddock to Pantry for their normal supermarket shop. That's the behaviour we're trying to accelerate with this next phase,” said Kennerley.

The retailer also argued that policy debate should not focus only on the arrival of a large overseas chain with a national store network.

“We don't need to sit around waiting for an Aldi to arrive that would need to spend millions building a national store network. The economics of grocery retail are changing. Digital retailers can reach customers nationally without having a supermarket on every corner. Competition can come from regional businesses and independents like us all taking a bigger share of the market. The competitors are already here. The focus now should be on making it easier for them to grow,” said Kennerley.