Supermarket Excess Profit Petition

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#2912645 11-May-2022 14:02

mattwnz:
coffeebaron:

So to do the maths on that, if they cut their profit to $0, then each New Zelander would save 20c per day, or for a family of 5, $7 per weely shop?

That is excess profit, not profit.

Yeah, but its the excess profit that is the seen as "bad" and hence needing to be controlled/removed/regulated...... there have been absolutely no announcements or comments that the Supermarket industry should be run as a "not for profit"

mattwnz

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#2912650 11-May-2022 14:24

It is excess profit within a non competitive sector, where potential competitors are unable to to setup and compete. Removing the excess profit still leaves them a healthy profit. I don't think there is any suggestion they shouldn't make any profit.

I should also note as per this PR from the Beehive

“Even at their conservative estimate, the market study found that the major grocery retailers were earning excess profits of around $1 million a day, well above what would be expected in a workably competitive market.

https://www.beehive.govt.nz/release/annual-food-price-rise-confirms-need-rein-supermarkets%E2%80%99-super-profits#:~:text=%E2%80%9CEven%20at%20their%20conservative%20estimate,in%20a%20workably%20competitive%20market.

So the $1 million is a conservative figure.

mattwnz

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#2912652 11-May-2022 14:32

It looks like some people are getting confused about the profits. The $1 million a day isn't the profit supermarkets are making a day. The profit they make each day is far higher than that. The $1 million dollars a day is EXCESS PROFIT that supermarkets are making each day. To that is in addition to the profit they make. People expect them to make a profit just like any business, but because of the lack of competition, they shouldn't be making excess profit due to the non competitive environment. That is what this topic is about, excess profit.

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#2912724 11-May-2022 18:13

MikeAqua:
We seem to have only two large firms in a number of retail sectors: -

Foodstuffs and Progressive

Repco and Supercheap

Bunning ands M10

(I know there are other players in those sectors but they are either small, or not really consumer focussed).

Forgetting the grandaddy of the building supply, Fletchers/Placemakers

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#2912725 11-May-2022 18:14

wellygary:

I could see Costco being used by dairies and superettes out West if they are cheaper than the supermarket controlled wholesalers they currently use,

But as you say, the regular supermarkets aren't likely to be worried too much...

Don't forget that many dairies are actually part of the Foodstuffs co-operative (such as Four Square).

Either way, I can't see them doing what you suggest - the savings aren't there for individually packaged products. It's not like old mate can take a 2kg bucket of Vegemite and part it out into 500g jars.

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#2912742 11-May-2022 20:26

Paywalled, requires subscription or a certain chrome plugin https://www.nzherald.co.nz/business/foodstuffs-boss-hits-back-at-incorrect-claims-supermarkets-earning-1-million-profit-each-day/WT3TMEXQMSOCTGLK2J3LV5THA4/

Most relevant bits:

Foodstuffs boss Chris Quin says supermarkets in New Zealand's $22 billion industry are not earning excess profits of $1 million each day as claimed.

"We need to be really clear - we don't make excessive profits, and we don't make an excessive profit of a million dollars a day. The claim that is based on is an incorrect assumption, and an opinion really, that says a business should only earn what its capital costs

"It isn't correct that there is a million dollars a day in profits in the industry. Even if you took that incorrect argument; if you work the profit difference back, it is $185 a year per household."

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Lias

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#2912745 11-May-2022 20:33

Kyanar:

Don't forget that many dairies are actually part of the Foodstuffs co-operative (such as Four Square).

Four Squares aren't really dairies, they are usually decently bigger, but FSSI has the "On The Spot" brand for smaller convenience stores. I'm not aware of FSNI having anything similar. Progressive has Super Value and Fresh Choice for sub supermarket size stores, although I confess I'm not sure what the differentiator between those two is.

allan

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#2912747 11-May-2022 20:43

Lias:

... Progressive has Super Value and Fresh Choice for sub supermarket size stores, although I confess I'm not sure what the differentiator between those two is.

Have to say I wondered that myself recently, after being in the fairly new Fresh Choice in Greytown. It's bigger than either Countdown or New World supermarkets here in Karori.

sen8or

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#2912786 12-May-2022 08:01

Lias:

Paywalled, requires subscription or a certain chrome plugin https://www.nzherald.co.nz/business/foodstuffs-boss-hits-back-at-incorrect-claims-supermarkets-earning-1-million-profit-each-day/WT3TMEXQMSOCTGLK2J3LV5THA4/

Most relevant bits:

Foodstuffs boss Chris Quin says supermarkets in New Zealand's $22 billion industry are not earning excess profits of $1 million each day as claimed.

"We need to be really clear - we don't make excessive profits, and we don't make an excessive profit of a million dollars a day. The claim that is based on is an incorrect assumption, and an opinion really, that says a business should only earn what its capital costs "It isn't correct that there is a million dollars a day in profits in the industry. Even if you took that incorrect argument; if you work the profit difference back, it is $185 a year per household."

I'm always suspicious when "experts" are engaged to review anything, be it healthcare, climate change or business operations, somehow the report always supports the viewpoint of the party that engaged it

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#2912788 12-May-2022 08:07

allan:

Lias:

... Progressive has Super Value and Fresh Choice for sub supermarket size stores, although I confess I'm not sure what the differentiator between those two is.

Have to say I wondered that myself recently, after being in the fairly new Fresh Choice in Greytown. It's bigger than either Countdown or New World supermarkets here in Karori.

Once difference is AFAIK Countdowns are all corporate owned by Progressive, but the Fresh Choice / Super Value are some (maybe all?) owner-operated like Foodies stores.

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#2912994 12-May-2022 15:09

Lias:

Once difference is AFAIK Countdowns are all corporate owned by Progressive, but the Fresh Choice / Super Value are some (maybe all?) owner-operated like Foodies stores.

Except I think that with fresh choice at least, PE may own the land they are on. Perhaps it works a bit like McD's? If find FC good to shop in, and they have some good deals, but often the prices of other things are often more expensive than PNS.

I see that the PNS discounting 110 goods, is only going to save people about $1 on an average weekly shop, which is only $12-$15 during the 3 month promotion period. https://www.stuff.co.nz/business/128619451/foodstuffs-price-cuts-will-shave-less-than-1-off-average-weekly-grocery-bill Better than nothing, but I have noticed that they have increased some of their prices markedly in the last month. Mollenburg bread was $2.99 as a normal price, now it is $3.69 . So that is an extra 70 cents on a single product! That is a huge jump in price.

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#2912997 12-May-2022 15:17

mattwnz:

Lias:

Once difference is AFAIK Countdowns are all corporate owned by Progressive, but the Fresh Choice / Super Value are some (maybe all?) owner-operated like Foodies stores.

I see that the PNS discounting 110 goods, is only going to save people about $1 on an average weekly shop, which is only $12-$15 during the 3 month promotion period. https://www.stuff.co.nz/business/128619451/foodstuffs-price-cuts-will-shave-less-than-1-off-average-weekly-grocery-bill Better than nothing, but I have noticed that they have increased some of their prices markedly in the last month. Mollenburg bread was $2.99 as a normal price, now it is $3.69 . So that is an extra 70 cents on a single product! That is a huge jump in price.

The article referenced above is full of holes:

"Based on those numbers, the “roll-backs” are equivalent to Foodstuffs reducing the average price of its entire product range by 0.26%.

That amounts to about 57 cents off the average household’s $226 weekly grocery bill, given that Stats NZ estimates there are just over 1.8 million households in the country to spend that $22b."

Not defending the supermarkets but Foodstuffs have a good selection of the basics with the 10% reduction. So if we look at the typical family buying basics ie mostly stuff with 10% off they will gain far more than $1 a week off

gzt

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#2913108 12-May-2022 16:47

MikeAqua: Repco and Supercheap

Supercheap were good when they first started. Pricing seems to parallel Repco now for many items.

Discount Chemist is a standout. Substantially lower pricing on non-subsidised medications. Way cheaper for the usual pharmacy stuff. Plus, almost overnight all the other pharmacies removed the $5 prescription surcharge.

wellygary

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#2913109 12-May-2022 16:57

gzt:
MikeAqua: Repco and Supercheap

Supercheap were good when they first started. Pricing seems to parallel Repco now for many items.

Fairly typical duopoly behaviour,

1) Enter and grab some market share make your name known, then 2) slowly push up your margin to equal the other competitor as there is nothing to stop you...

3) Profit...

mattwnz

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#2913112 12-May-2022 17:29

That is why we are supposed to have systems to look at this sort of thing, and to make sure that that when companies merge, it doesn't decrease competition and result in higher prices for consumers. The Aussie government has previously brought in laws to help with their supermarkets including over land banking, and I don't know why NZs government didn't do the same.

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