Commerce Commission Report on Grocery Sector

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#2752382 30-Jul-2021 12:04

MikeB4:

tdgeek:

If you mean that all of the comparisons to Denmark means that they are best suited to 6 competitors, the largest at 22% of the market , and NZ are best suited to a monopoly of two, ironically operating 6 brands, I didn't miss that point.

My point is that comparing Denmark to Aotearoa is largely pointless based on simple population count as all metrics need to be compared. Example Denmark is circa 42,000 square KMs Aotearoa is circa 260,000 square KMs. Denmark is flat with concentrated population centres. They are also part of a massive trading block. Just the transport and logistics for a new comer here would probably mean their pricing would more or less the same as the current players.

As I mentioned earlier, both countries have adequate existing supermarket coverage. What I bolded is an assumption, the draft report seems to think otherwise. The report is not about logistical costs its about a skew in favour of the two companies due to no competition, and how suppliers are controlled. I fully agree that transport etc etc will be little different, but the report isn't about those costs. Its about competiton and a low level of variety of goods

MikeB4

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#2752387 30-Jul-2021 12:12

It is also worth remembering Foodstuffs are two entities, Foodstuffs North Island, CEO Chris Quinn and Foodstuffs South Island, CEO Steve Anderson. They also have seperate Boards of Directors.

jonathan18

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#2752390 30-Jul-2021 12:18

networkn:
stagnant16:

So not true.

Which part do you disagree with and why? That wasn't much of a contribution.

So true…and what are your credentials/background/experience in this space, so we have some idea of how much credence to give your views…

Dratsab

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#2752417 30-Jul-2021 13:18

jonathan18:
networkn:

Which part do you disagree with and why? That wasn't much of a contribution.

So true…and what are your credentials/background/experience in this space, so we have some idea of how much credence to give your views…

Super quick search indicates Category Manager at Foodstuffs.

sbiddle

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#2752418 30-Jul-2021 13:19

tdgeek:

Good point. We are 18 people per square kilometre, Denmark is 137. Both countries have enough supermarkets to cater for the population, just that all of ours are controlled by two CEO's.

Two CEO's control 6 brands, if say each brand was controlled by one CEO, that would appear to be ideal, and would allow suppliers to deal with all of them in a more capitalist manner.

Woolworths NZ has a single CEO (since they're 100% owned by Woolworths Australia).

Foodstuffs are two different companies with two different CEO's and because they're a co-operative they're basically controlled by the hundreds of owner operators and board of directors made up of those store owners.

Foodstuffs South Island and North Island are two totally different companies that actually don't actually share a lot in common between them.

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#2752423 30-Jul-2021 13:35

sbiddle:

Woolworths NZ has a single CEO (since they're 100% owned by Woolworths Australia).

Foodstuffs are two different companies with two different CEO's and because they're a co-operative they're basically controlled by the hundreds of owner operators and board of directors made up of those store owners.

Foodstuffs South Island and North Island are two totally different companies that actually don't actually share a lot in common between them.

Thanks, so its really 3 not 2. Owner operators I doubt have any control of the franchises though

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#2752425 30-Jul-2021 13:40

Dratsab:

jonathan18:

So true…and what are your credentials/background/experience in this space, so we have some idea of how much credence to give your views…

Super quick search indicates Category Manager at Foodstuffs.

You silly buggers lol

I agree with him. What would this forum be like if most of the posts were yes or no. And he wasn't bagging the credence of that poster

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#2752429 30-Jul-2021 13:55

MikeB4:

It is also worth remembering Foodstuffs are two entities, Foodstuffs North Island, CEO Chris Quinn and Foodstuffs South Island, CEO Steve Anderson. They also have seperate Boards of Directors.

That’s true but almost of academic interest here. It’s not as if FSNI compete in the SI, or FSSI in the NI. Being two separate organisations doesn’t change the duopoly situation.

Sometimes I just sit and think. Other times I just sit.

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#2752503 30-Jul-2021 15:47

networkn:

Yes, actually that is a factor to consider as well, when you have directly connected neighbours, you have the potential to leverage them as well.

Not to mention competition across the border. So for example, Swiss people in Geneva famously used to go to France to buy food where it was much cheaper. And there's the annual duty-free day, where Danish people go to Germany to buy a year's supply of booze.

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#2752504 30-Jul-2021 15:48

sbiddle:
tdgeek:

That's a very good point. High prices have reasons, Winter is one of them

Does the CC report carry weight with you @sbiddle?

I skimmed through the summary and watched the press conference but won't really have a full view until I've had a few hours to read the full report.

There is no disputing there are some issues at a wholesale level with suppliers feeling bullied - this is very different from the (supposed) issue that we're being ripped off at a retail level.

A lot of focus was on the ComCom's claims that ROACE is way too high but it's worth noting this figure is purely an estimate. There wasn't a lot of focus on the NPAT and the fact you're looking at a bottom line profit of roughly 3-4% which at the end of the day demonstrates this is a high volume, low margin business. Try comparing that to most other businesses!

Very low net margins are typical in very high cashflow businesses. The ROACE is very important as it indicates the extent that a business uses its suppliers as a bank.

Typically they are buying on account (or even consignment) and selling for cash. Before they pay their suppliers they have realised the cash from the transaction. This makes the low nett margin viable and incredibly lucrative.
It's a great business model but encourages crappy behaviour towards suppliers.

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#2752523 30-Jul-2021 16:44

You silly buggers lol

I agree with him. What would this forum be like if most of the posts were yes or no. And he wasn't bagging the credence of that poster

That would assume he had any credibility to start with - he's miles out of the ballpark, and to insinuate either myself, or any of my colleagues bully suppliers is but laughable.
He deserved a short retort for such a ludicrous statement without factual proof.

Does that clear it up for you 🙃

networkn

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#2752526 30-Jul-2021 16:49

stagnant16:

You silly buggers lol

I agree with him. What would this forum be like if most of the posts were yes or no. And he wasn't bagging the credence of that poster

That would assume he had any credibility to start with - he's miles out of the ballpark, and to insinuate either myself, or any of my colleagues bully suppliers is but laughable.
He deserved a short retort for such a ludicrous statement without factual proof.

Does that clear it up for you 🙃

To be fair, he said he was previously involved in the area, and is no longer. He doesn't really have any reason to mislead anyone on the matter. If that was his experience, I am not sure how, unless you were also involved at the time, could refute it. It *may* not be 'current' practice, but he did make clear it was something he experienced in the past.

Fred99

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#2752532 30-Jul-2021 17:04

stagnant16:

Fred99:

Maybe a quick trip into a Woolworths in Aus would convince sceptics. Everything looks the same as a Countdown here, but there are far more brands on the shelves.

So not true.

There are 565 Aldi outlets in Australia. So true - even if they're only about 20% of the size of Coles and Woolworths, they've had a significant impact.

stagnant16

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#2752614 30-Jul-2021 18:00

To be fair, he said he was previously involved in the area, and is no longer. He doesn't really have any reason to mislead anyone on the matter. If that was his experience, I am not sure how, unless you were also involved at the time, could refute it. It *may* not be 'current' practice, but he did make clear it was something he experienced in the past.

Doesn't he? He didn't really supply any credible evidence. Just more FUD.. I've been around long enough to understand how the industry operates, long enough to know he's talking absolute tripe.

neb

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#2752615 30-Jul-2021 18:01

tdgeek:
Seems rather draconian to force a business to reduce its size,

That's exactly what happened with AT&T. There's both precedent and a good case study on how to do it.

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