Breaking up the supermarket duopoly.

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#3076482 15-May-2023 21:05

OldGeek:

Rikkitic:

Why can't Foodstuffs be forced to divest 4-Square? That is already a competitor in waiting. If they could buy it, they can sell it.

4-Square is a brand and style of store (large Dairy). Every store is independently-owned so Foodstuffs dont own them. Store owners would have to be forced out of the co-operative.

Same is true for most supermarkets too, they are independently owned.

I believe 3 of them sold in Palmerston North is the last year or so.

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#3076483 15-May-2023 21:32

OldGeek:

Rikkitic:

Why can't Foodstuffs be forced to divest 4-Square? That is already a competitor in waiting. If they could buy it, they can sell it.

4-Square is a brand and style of store (large Dairy). Every store is independently-owned so Foodstuffs dont own them. Store owners would have to be forced out of the co-operative.

They aren't truly independent businesses. A 4 Square owner can't sell their business on the open market to a buyer of their choosing, it is tightly controlled by Foodstuffs.

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#3076538 15-May-2023 22:07

Handle9:

They aren't truly independent businesses. A 4 Square owner can't sell their business on the open market to a buyer of their choosing, it is tightly controlled by Foodstuffs.

That is true for many franchises , especially one with high profile public names.

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#3076592 16-May-2023 09:03

Handle9:

They aren't truly independent businesses. A 4 Square owner can't sell their business on the open market to a buyer of their choosing, it is tightly controlled by Foodstuffs.

It is ownership, not independence, that is required. Any owner of a New World/PaknSav/4 Square store can sell to anyone that Foodstuffs approves of, as defined in their contract with Foodstuffs. Foodstuffs have no right at all to sell or force the owner to sell unless the owner has breached their contract requirements with Foodstuffs.

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gzt

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#3076766 16-May-2023 12:52

In regard to Four Square franchisees I'm going to repeat myself

Pak an Save for example, retail branding and franchise association membership with national advertising and so on is something that can continue independently of wholesale.

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#3076779 16-May-2023 13:46

gzt: In regard to Four Square franchisees I'm going to repeat myself

Pak an Save for example, retail branding and franchise association membership with national advertising and so on is something that can continue independently of wholesale.

Foodstuffs is a co-operative (there are 2 operating companies plus a 3rd holding company). Each store owner is a part-owner of one of the Foodstuffs operating companies and contracted to it. They are licenced to use one of the Foodstuffs brands (ie 4 Square, New World etc.) - their contractual relationship is to Foodstuffs not the brand. Each of the brands has no significant market value except for the Trademark. So we still remain with the fact that stores (regardless of the brand) do not belong to Foodstuffs and therefore cannot be sold off without cancelling the owners ownership rights.

A potential solution is to legislate for Foodstuffs to allow store owners to exit at no cost - they get back what they paid for their Foodstuffs share(s). Any such owner would have to relinquish their Foodstuffs branding. This is viable if an owner considers an offer to join a new entrant brand as better than staying with Foodstuffs.

Wholesale supply is a different issue and does not impact on ownership rights as far as I can see.

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#3076805 16-May-2023 14:53

Ownership rights are not particularly important in the case of legislated structural separation. The ownership rights of telecoms shareholders were impinged during its structural separation but that’s how it goes when you break up cartel businesses.

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#3076869 16-May-2023 15:27

While I agree with that - imo in practice there will be no actual need to require individual owners to sell stores. The owners being members of the parent entity will naturally move towards a solution that resets the relationship without the monopoly aspects while allowing store owners to retain the customer facing value of retail brand membership and association.

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#3076873 16-May-2023 15:31

Incorrect about Telecom - the spin-off of Chorus and subsequent renaming of Telecom as Spark were all the result of shareholder-approved decisions:

Telecom NZ splits in two • The Register

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#3076886 16-May-2023 17:10

OldGeek:

Incorrect about Telecom - the spin-off of Chorus and subsequent renaming of Telecom as Spark were all the result of shareholder-approved decisions:

Telecom NZ splits in two • The Register

It became a fair accompli due to government policy decisions regarding unbundling and the UFB roll out due to Telecoms monopoly behaviour.

They were effectively forced into separation to maintain their market capitalisation.

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#3076893 16-May-2023 17:44

With the supermarkets we have a duopoly instead of a monopoly and no government ownership or development funding leverage, so the situation is very different. The fact remains that to force the selloff of any stores aligned to Foodstuffs (regardless of brand), owners of Foodstuffs shares and associated stores will be forced to exit Foodstuffs in one way or another.

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#3076897 16-May-2023 18:00

OldGeek:

The fact remains that to force the selloff of any stores aligned to Foodstuffs (regardless of brand), owners of Foodstuffs shares and associated stores will be forced to exit Foodstuffs in one way or another.

Yes. That is the point of forcing separation.

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#3076910 16-May-2023 19:27

Handle9:

Yes. That is the point of forcing separation.

So who makes the choice of which owner/operators are forced out? Is the government going to pay any compensation for direct loses for those affected, bearing that those who are forced out will have no market to sell their Foodstuffs shares to?

This is what lay behind my original post.

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#3076911 16-May-2023 19:39

Why would the government pay compensation? They didn’t compensate telecoms shareholders for unbundling. If an organisation has undue market influence then it’s to be expected that they could
be forced to restructure.

No one would be forced to make their business worthless, they would be forced to break them up into smaller entities. If it happened there would be winners and losers but that’s how it goes. There is no compensation for consumers who have potentially been effected by anticompetitive behaviour nor should there be compensation for forced restructuring.

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#3076921 16-May-2023 20:35

Thing is they will not be forced out penniless into the night, as they can join the new Supermarket operation.

The Skills, Sites, Infrastructure still being needed for the new entrant.

Skills and years of experience in running these operations especially, will be of great value.

They should have been building up considerable wealth and assets from the operation as well giving them some choices of what to do with that.

Similar things happened to industries and business when import licensing came off many goods.
Those that lived off the import restrictions and exclusive licenses moved onto other things with the money they made.
When we dropped car assembly etc.

Many manufacturing enterprises and all the downstream business contracting to them had to move on.

Some new and dynamic businesses took on the opportunity that freedom offered and the maybe the market landscape ended up richer.

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