Kerre Woodham: What's it going to take to get supermarket competition?

We're going a little bit back to the future today because the annual report card into the grocery industry came out yesterday, and we were overrun with health talk. So we'll go back to that report and look at the ramifications for the industry, for the suppliers, and for us, the consumers.  

So according to the report, we are paying higher prices, specials are confusing, and loyalty schemes aren't delivering overly significant rewards. Paying $10,500 for a glass container isn't really enough in terms of loyalty (if you're collecting the stickers from New World, you'll know what I mean). According to the ComCom’s first annual grocery report all major supermarkets experienced an increase in price cost margins, which means retail prices were increasing faster than the cost of the goods. Those wanting to enter the market are not finding it easy. Despite 150,000 members signing up to Costco by March, Costco still suffered a $20 million loss. Restrictive land covenants were hampering new entry for new players and existing ones. The Commission has already prosecuted Foodstuffs North Island for historical abuses, grabbing land and holding on to it so nobody else can build there.  

We also saw alternative grocery shopping places like Huckleberry shut down – that's been around forever and that's been placed into liquidation. Online retailer Supie failed, Bin Inn closed 5 stores, so it's tough, it's a tough market out there. And it's tough for Foodstuffs and Woolworths too, I'm sure. They've had to pay increased costs, and security guards, and thefts and the like, it has not been easy for them. They've had to look after their staff, who face relentless barrages of abuse, and probably this report card won't help.  

So, it's not an easy industry to be in right now. It's a much, much tougher one to get into if you want to. While the number of covenants around land had decreased, the Commission has expressed concern at the more than 100 properties currently owned by major retailers that are not being used for stores, with no immediate plans to put a supermarket there. The Commissioner said, well, yes, I suppose some of these properties could be used for car parks or storage, but they certainly included potential expansion sites when properties held for more than 20 years were considered. Sue Chetwin from the Grocery Action Group, told Ryan Bridge on Early Edition that the government needs to show its teeth if we want to see any significant change to the market.  

“All of the rules that they've put in place, all very well meaning, but have not worked. They have really just tinkered around the edge, so unless you make some structural change to encourage competition or to allow competition to happen, then we're just going to get more of the same.” 

Yeah, and that's the thing. There was a Commerce Commission report, there were some prosecutions, the duopoly of Foodstuffs and Woolworths were put on notice, and nothing happened. If anything, it's got slightly worse. So the government is interested in turning up the heat, Commerce and Consumer Affairs Minister Andrew Bayly says he plans to seek advice on the sites currently being land banked, alongside broader regulatory reviews that could lead to potential change, including the Overseas Investment Act and the Fair Trading Act.  

What about the concerns of suppliers? We've looked at consumers and said, yep, you're paying more than you need to for food, even taking into account seasonal fluctuations, even taking into account everything's more expensive, what the report says is that the increase in price cost margins has given them a greater profit than they needed to have. The report says a monthly index of suppliers prices produced by Informetrics for Foodstuffs North Island and pumped out to the media —in fact it was referred to in th

Episode Transcript

Speaker 1 (00:06):
You're listening to the carrywood of morning's podcast from News
Talk SEDB.

Speaker 2 (00:11):
We're going a little bit back to the future today
because the annual report card into the grocery industry came
out yesterday and we were overrun with health talk. So
we'll go back to that report and look at the
ramifications for the industry, for the suppliers and for us

(00:33):
the consumers. So according to the report, we are paying
higher prices, specials are confusing, and loyalty schemes aren't delivering
overly significant rewards. Paying ten five hundred dollars for a
glass container isn't really enough in terms of loyalty. If

(00:55):
you're collecting the stickers from New World, you'll know what
I mean. According to the Comcom's first annual Grocery Report,
all major supermarkets orientst an increase in priced cost margins,
which means retail prices were increasing faster than the cost
of the goods. Those wanting to enter the market and

(01:18):
not finding it easy. Despite one hundred and fifty thousand
members signing up to Costco by March, Costco still suffered
a twenty million dollar loss. Restrictive land covenants were hampering
new entry for new players and existing ones. The Commission
has already prosecuted Foodstuffs North Island for historical abuses grabbing

(01:41):
land holding on to it so nobody else can build there.
We also saw places like the alternative grocery shopping places
like Hucklebriep shut down that's been around forever, place that's
been placed into liquidation. Online retailer Soupy failed bin In
closed five stores. So it's tough. It's a tough market

(02:05):
out there, and it's tough for Foodstuffs and Wiolworths too.
I'm sure you know they've had to pay increased costs
and security guards and thefts and the like. It has
not been easy for them. They've had to look after
their staff who face relentless barages of abuse, and probably
this report card won't help. So it's not an easy

(02:26):
industry to be in right now. It's a much, much,
much tougher one to get into if you want to.
While the number of covenants around land had decreased, the
Commission has expressed concern at the more than one hundred
properties currently owned by major retailers that are not being

(02:48):
used for stores. No immediate plans to put a supermarket there.
The commissioners said, well, yes, I suppose some of these
properties could be used for car parks or storage, but
they certainly included potential expansion sites when properties held for
more than twenty years were considered. Sue Chetwin from the

(03:09):
Grocery Action Group told Ryan Bridge on earlier edition that
the government needs to show its teeth if we want
to see any significant change to the market.

Speaker 3 (03:17):
All of the rules that that put in place, all
very well meaning that have not worked. They have really
just printed around the edge. So unless you make some
structural change to encourage competition or to allow competition to happen,
then we're just going to get more of the same.

Speaker 2 (03:37):
Yeah, and that's the thing. There was a Commerce Commission report,
there were some prosecutions, the duopoly of foodstuffs and more
words will put on notice and nothing happened. If anything,
it's got slightly worse. So the government is interested in
turning up the heat. Commerce and Consumer Affairs Minister Andrew

(03:59):
Bailey says he plans to seek advice on the sites
currently being land banked, alongside order regulatory reviews that could
lead to potential change, including the Overseas Investment Act and
the Fair Trading Act. What about the concerns of supplies.
So we've looked at concerns and said, yep, you're paying

(04:20):
more than you need to for food, even taking into
account seasonal fluctuations, even taking into account everything's more expensive.
What the report says is that the increase in price
cost margins has given them a greater profit than they
needed to have. The report says a monthly index of

(04:43):
supplies prices, produced by Informetrics for Foodstuffs North Island and
pumped out to the media. In fact, it was referred
to in the press release following the release of the
ComCom report yesterday, has consistently failed to include the impact
of so called trade spend, the impact of rebates, discounts
and payments that run to billions of dollars annually on

(05:06):
the prices supermarkets actually pay to their suppliers. The report
stopped short of calling this lying. Business Desk said, let's
settle for embarrassing. So what does this all mean. We
are a very small country, you know, we're not even
as big as most cities in the United States. So

(05:29):
anybody who's interested in coming here from overseas has to
know that they'll make a profit even if there was.
The government arranged for a prime piece of real estate
in the middle of Auckland, New Zealand's biggest city, and
air marked it for an overseas player and said, come, I,

(05:51):
how do I come here? Very welcome, This land is yours.
Put your supermarket up there, filure boots. I'm not entirely
sure they'd make a profit. You know, that's a huge investment.
It's a huge investment in building up relationships that cannot
happen overnight. With supplies, it takes time. And the reason

(06:13):
that food Stuffs and Warwards are so successful is that
they are old companies. They're very old. They're of the
certainly with Foodstuffs when you trarace their fucker Pappa back,
they are part of the landscape back to the sixties.
So this has taken time to build to get into
this position of strength. And while there might be huge

(06:34):
players overseas, they don't have that network of contacts, that
history that the others do here. It's got to be
worth their while. They've got to know that they're going
to make money if they upsticks and invest here. How
likely is that there are plenty of huge multinationals or

(06:56):
international companies that are many, many different countries. They've probably
had a look, you know when probably some young gun
who joins the company wants to make a name for
themselves and hey, have we thought about Australia and New
Zealand let's go there? Are you insane? Where is New
Zealand there? No, I don't think so. Goods to market

(07:18):
and all that sort of thing. I mean, is there
any real likelihood of a third player? We've seen faroh come,
We've seen and that's doing well, but that's only for
a certain percentage of the market. Not everybody can afford
to go there. We've had the organic you know, with
huckle where that's been around forever. That's gone. Super trying

(07:42):
to appeal to the younger kids and those who do
all their shopping online, that's gone. What's it going to
take to get real competition? What is it going to
take to get prices, to have the supermarkets competing with
one another so that the consumer and indeed the suppliers

(08:05):
benefit because they're not making a huge amount of those
men and women who are out in the fields, out
in the orchards and the wet and the cold and
the wind and watching the weather forecast, nervously praying the
hail doesn't come and ruin their crop. They're not the
ones making squillions. They're getting screwed down too. So is

(08:28):
it going to take from a coalition government that really
doesn't like regulation. Are they going to have to swallow
a dead mouse and say, okay, well we'll have to
regulate this industry because they're not doing it themselves. The
message from Foodstuffs yesterday seem to be we are, we're
doing it, We're taking it seriously. Just give us time.
There's been a lot of change, We've had a lot

(08:49):
going on. It'll happen. Just cool your jets. Any change
is not happening fast enough for the Grocery Commissioner, so
as the consumer as the supplier. Do you see this

(09:09):
oversight of the supermarkets and the industry. Is it a
welcome change? Is it good to have an annual report
card to keep the pressure on the supermarkets? And what
in reality do you expect to see change as a
result of this pressure, of this castigation, of the threats

(09:31):
from the Grocery Commissioner.

Speaker 1 (09:33):
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