Supermarket Excess Profit Petition

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#2958941 24-Aug-2022 17:15

mattwnz:

But we know that we are all overpaying by over $1million each day due to the lack of competition

Yes, but what they don't repeat as often is that figure is based on a turnover of $22 billion/year, so its actually 1.6% of turnover, so sure its a big number, but its not a HUGE number when you look at the actual amount of money going through the sector...

+the tax man will be taking 28% thank you very much, ... and I noticed that the government didn't offer its $100 million back to consumers....

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#2958946 24-Aug-2022 17:32

wellygary:

mattwnz:

But we know that we are all overpaying by over $1million each day due to the lack of competition

Yes, but what they don't repeat as often is that figure is based on a turnover of $22 billion/year, so its actually 1.6% of turnover, so sure its a big number, but its not a HUGE number when you look at the actual amount of money going through the sector...

+the tax man will be taking 28% thank you very much, ... and I noticed that the government didn't offer its $100 million back to consumers....

But the more than $1 million a day isn't just their actual profit. Their actual profit would be multitudes more than that, but we don't know what that is. The more than $1 million a day is just the 'excess' profit due to a lack of competition. So we are essentially paying the best part of between a 1/3 - 1/2 a billion dollars a year EXTRA, because of a lack of competition. The problem is that with the way it has been reported, many people seem to think that supermarkets are only making a $1 million a day in profit, which doesn't seem to bad, but that isn't the case.
The government takes their cut too of that extra profit, so they don't want to see it drop either. IMO they should drop the GST rate back down to 12.5 or even 10%, as it affects low income people the most. Whether it should be completely removed from food also should be looked at, or whether the government will introduce another from of cost of living payment to cover this massive increase.

Handle9

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#2958949 24-Aug-2022 17:41

mattwnz:
Handle9: Waitrose is a great example of overpriced groceries. They are horribly expensive while being no better in quality than Carrefour.

But at least consumers over there have alternatives that are far cheaper. NZ also has expensive supermarket brands.

Double the population and you’ll get more companies interested and more competition.

Nz isn’t an attractive market for many companies. It’s too small and in a terrible time zone.

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#2958952 24-Aug-2022 17:48

mattwnz:

But the more than $1 million a day isn't just their actual profit. Their actual profit would be multitudes more than that, but we don't know what that is. The more than $1 million a day is just the 'excess' profit due to a lack of competition. So we are essentially paying the best part of between a 1/3 - 1/2 a billion dollars a year EXTRA, because of a lack of competition. The problem is that with the way it has been reported, many people seem to think that supermarkets are only making a $1 million a day in profit, which doesn't seem to bad, but that isn't the case.
The government takes their cut too of that extra profit, so they don't want to see it drop either. IMO they should drop the GST rate back down to 12.5 or even 10%, as it affects low income people the most. Whether it should be completely removed from food also should be looked at, or whether the government will introduce another from of cost of living payment to cover this massive increase.

I get that, but its not that simple. Do we also wnat regulated gib board prices? Regulated lawnmower prices? Do we want a situation where company profits are regulated? Not playing the Devil's Advocate or supporting supermarkets but its a slippery slope. We need a third player but where are they? All you can really do is thump the table, which fuel companies responded to, as did supermarkets with price rollbacks. Maybe the Govt can own the third party? Then you are going down another slippery slope. Perhaps the Govt can become a distributor or a buyer for smaller businesses such as dairies and smaller food markets. Smaller vege markets

The overriding issue is our population. The whole country is half the size of greater Los Angeles, and many many Asian cities. The worst scenario is the big push for lower prices puts the squeeze on food suppliers in NZ. Fruit, vege, canned goods, and packaged goods. Or we dictate purchase price and margin, hence controlling business who have no ability to innovate.

IMO it goes far deeper than rorting supermarkets.

rb99

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#2958953 24-Aug-2022 17:54

'The whole country is half the size of greater Los Angeles' - any long may that continue.

“The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” -John Kenneth Galbraith

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#2958956 24-Aug-2022 18:00

rb99:

'The whole country is half the size of greater Los Angeles' - any long may that continue.

Yep, there are disadvantages and advantages, I am ok with what we are.

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sen8or

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#2959132 25-Aug-2022 08:14

mattwnz:

But the more than $1 million a day isn't just their actual profit. Their actual profit would be multitudes more than that, but we don't know what that is. The more than $1 million a day is just the 'excess' profit due to a lack of competition. So we are essentially paying the best part of between a 1/3 - 1/2 a billion dollars a year EXTRA, because of a lack of competition. The problem is that with the way it has been reported, many people seem to think that supermarkets are only making a $1 million a day in profit, which doesn't seem to bad, but that isn't the case.
The government takes their cut too of that extra profit, so they don't want to see it drop either. IMO they should drop the GST rate back down to 12.5 or even 10%, as it affects low income people the most. Whether it should be completely removed from food also should be looked at, or whether the government will introduce another from of cost of living payment to cover this massive increase.

Can we please get off the "no gst on food" bandwagon, its a massive fail and will never work.

Our GST system is straight forward with minimal compliance costs for businesses, there are bugger all exclusions and what exclusions there were have been in place the entire time and are well defined. Lets not go down the whole "cooked chicken attracts GST, frozen chicken doesn't" debacle that Australia had.

There will only be 2 parties that benefit from no GST on food, the supermarkets and IT companies -

Give it 1-2 news cycles after the whole GST on food thing has gotten tired and prices will creep back up. Just look at fuel after the Govt removed 25c/litre, how quickly gas prices shot back up to the same level as previously and shock/horror, fuel companies profits increased. Food will be no different.

A change of GST codes is a massive undertaking and will cost millions to implement, those millions will be paid by the retailers to IT companies, guess who will pay for those increased costs, the consumer, there goes any benefit of the reduction.

Even if GST was removed from food and in a socialist fantasy land (or communist "govt control everything" horror land), no prices were increased and the consumer received the full benefit, this means less income for the Govt, what services do you want cut when they can't afford them, health? education? social assistance?

This is all ofcourse if you believe that the calculators used by the regulators are reliable and not slanted to report results that the Govt was looking for, after all, this Govt has been nothing if not "open and transparent"......

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#2959139 25-Aug-2022 08:29

Nothing will change.

My wife is in the U.K. at the moment and sent me a message saying that she had forgotten what supermarkets could be like and suggesting ours were akin to 1970’s Soviet Russia in comparison.

She was exaggerating of course but there really is a massive difference in several ways other than price - the attractiveness of the store, the wide range of food and so on.

Of course we’ve not got the population, although the fact that most people are poor has more to do with it than the number of people. If the number was the same but everyone earned $10 million a year, we would have supermarkets selling the kind of food we wanted rather than the kind of food we could afford.

I really can’t see much changing unless the government of the day decided to offer Lidl or Aldi tax incentives to open here in an effort to tempt another player. That’s probably a bit too commercial in thinking for the current government.

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#2959141 25-Aug-2022 08:35

Geektastic: Nothing will change.

My wife is in the U.K. at the moment and sent me a message saying that she had forgotten what supermarkets could be like and suggesting ours were akin to 1970’s Soviet Russia in comparison.

She was exaggerating of course but there really is a massive difference in several ways other than price - the attractiveness of the store, the wide range of food and so on.

Of course we’ve not got the population, although the fact that most people are poor has more to do with it than the number of people. If the number was the same but everyone earned $10 million a year, we would have supermarkets selling the kind of food we wanted rather than the kind of food we could afford.

I really can’t see much changing unless the government of the day decided to offer Lidl or Aldi tax incentives to open here in an effort to tempt another player. That’s probably a bit too commercial in thinking for the current government.

Not sure about too commercial, it sounds like a political "ism" How can we tempt another player or two if the population is too small to support it? Can we support 8 brands of baked beans? 6 brands of canned pineapple? I guess we could tempt two other players to come here and just pay them their proft?

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#2959162 25-Aug-2022 09:30

Tax breaks. The U.K. used to have (might still have) things called Enterprise Zones. Where there was an area that it was deemed to be in the greater good to increase investment and employment, businesses moving or expanding in an EZ got significant tax breaks for 15 years or so.

All government can do is try to create conditions in which commercial operators might choose to try NZ.

Favourable tax treatment for a period of time might help. After all they do it for the film industry.

tdgeek

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#2959208 25-Aug-2022 10:58

Geektastic: Tax breaks. The U.K. used to have (might still have) things called Enterprise Zones. Where there was an area that it was deemed to be in the greater good to increase investment and employment, businesses moving or expanding in an EZ got significant tax breaks for 15 years or so.

All government can do is try to create conditions in which commercial operators might choose to try NZ.

Favourable tax treatment for a period of time might help. After all they do it for the film industry.

Tantamount to a Government engaging in anti-competitive behaviour by subsidising one competitor at the expense of the other. Film industry is not a similar comparison by any level

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#2959239 25-Aug-2022 13:00

If you look at the claim that's out there. The excess profit is $1m per day. 5m people. So that's about 20c per person per day? ~$75 per person per year. Assuming that we are prepared to tolerate a fair profit (and I haven't stuffed up the maths while multi-tasking) the size of the prize doesn't seem very big.

I'm not even convinced focussing on profit is the right approach. Sure its emotive and allows people to say "greedy". But the objective would surely be to reduce retail prices. If the supermarket makes a profit but prices are affordable then that's OK, in my view.

Decreasing supermarket profits by increasing their costs, wouldn't help consumers, at all. If that sounds silly, then think again. Some of the proposals being mooted could do just that, maybe.

Mike

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#2959366 25-Aug-2022 16:03

Unfortunately, the current Govt (and its even further left based partner) thrive on making it look like businesses are greedy, "the rich" don't pay their fair share and that they are the entire cause of inequality in society. Rather than try and build up the population through education and productivity, its far easier to try and chop down those that have gotten ahead.

The "excess profits of $1m per day" is simply a sound bite / click-bait headline that allows them to beat up on the industry and keep appealing to their voter base. National are guilty of it too, and their latest bit about punishing job seekers who aren't doing their part to get off the benefit is appealing to their base.

gzt

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#2959409 25-Aug-2022 17:28

Geektastic: My wife is in the U.K. at the moment and sent me a message saying that she had forgotten what supermarkets could be like and suggesting ours were akin to 1970’s Soviet Russia in comparison.

My experience of UK supermarkets a few years ago was very different. One thing NZ supermarkets are really good at - fresh fruit and vegetables. The UK effort I would definitely compare to stereotypical soviet times.

mattwnz

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#2959470 25-Aug-2022 18:24

MikeAqua:

Decreasing supermarket profits by increasing their costs, wouldn't help consumers, at all. If that sounds silly, then think again. Some of the proposals being mooted could do just that, maybe.

You mean like what happened in the electricity market space.

IMO what the government has announced looks like it is just kicking the can down the road to the next government to deal with. Seems too hard and very difficult to unwind the current situation. They should have never allowed it get into a duopoly situation because they were warned this would happen back then.

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