Supermarket duopoly goes to court today
New Zealand’s supermarket merger case goes back to court today with Australian supermarket giant, Woolworths, and New Zealand equivalent, Foodstuffs, both seeking the right to buy the Warehouse. All of the media coverage is in the business pages and looks at what might be best for Woolworths, Foodstuffs and Warehouse shareholders. I haven’t seen any coverage on what the best outcome might be for grocery consumers, so I will be interested to see if that comes through in the Commerce Commission’s evidence.
Meanwhile Food Democracy has this quote from Vandana Shiva:
The right of corporations to force-feed citizens of the world with culturally inappropriate and hazardous foods has been made absolute [in the globalizing economy]. The right to food, the right to safety, the right to culture are all being treated as trade barriers that need to be dismantled…we have to reclaim our right to nutrition and food safety. We have to reclaim our right to protect the earth and her diverse species. We have to stop this corporate theft from the poor and from nature. Food democracy…is the new agenda for ecological sustainability and social justice.
April 28th, 2008 at 2:39 pm
It’s impossible to take anyone seriously when they use phrases like “force-feed citizens of the world with culturally inappropriate and hazardous foods”.
Uh-huh.
I’ve yet to see a suit holding down a devout Jew and feeding them some hazardous bacon, but perhaps Vandana shops in some pretty rough neighborhoods…
April 28th, 2008 at 3:21 pm
Yup. On hazardous, I speculate that maybe she means: the only affordable food they make is heavily reliant on chemicals in them, as opposed to actual food. No idea about ‘culturally’ though.
April 28th, 2008 at 5:31 pm
It probably means someone used some nasty superphospahte on it instead of getting the family to relieve themselves on it.
April 28th, 2008 at 5:54 pm
Alright, take the piss guys, if you must! But this is a serious issue. Essentially, we face a situation of a food duopoly that is trying to gain control of what they see as their biggest potential competitor.
Just like the oil companies, they operate to maximise their profits to shareholders by following each others’ price trends, and there is no real competition at all.
If the Court doesn’t stop this takeover from occurring, Government should legislate to prevent it.
It is scandalous that New Zealand’s food supply has already been allowed to be duopolised by two retail outlets working in tandem to put profits in the pockets of the shareholders, rather than affordable food in the bellies of the population.
Maybe there is a case here for setting up a state-owned nationwide food outlet, to provide Foodstuffs and Woolworths with some genuine competition. Kiwibank may not have actually challenged the ANZ/Westpac cartel’s profitibility, but at least it provides affordable financial services to wage earners who are more likely to be borrowing than investing.
I think there is a role for the State here. Eagerly awaiting BB’s and BP’s responses!!!
April 28th, 2008 at 6:53 pm
Setup a co-operative food network. Let the shoppers and suppliers own the lot. Label origins. Stock only the food you deem worthy. You can start tomorrow.
Eagerly awaiting your shakeup of the food market….
April 28th, 2008 at 7:09 pm
Did anyone see Sunday last night? About a couple who went bush 50km south of Haast. The two teenage children grew up with nothing more exciting than listening to National Radio. They ate their own veges, fish shellfish.. Seemed like a lovely (content) couple of teens).
April 28th, 2008 at 7:54 pm
The thing that everyone is forgetting though is that you essentially have a supermarket duopoly in Australia too between Coles and Woolworths (IGA doesn’t really count, it is a miniscule player and is essentially the glorified version of the village dairy), yet you don’t have problems with lack of competition. I don’t think that New Zealand can support any more than two major supermarket chains; especially given the structure of Foodstuffs
April 28th, 2008 at 8:18 pm
Presumably the aim of the state-sponsored suggestion is that it results in lower prices. I’m not quite sure how, as supermarket margins are minuscule as it is.
However, if there are huge profits to be made, as Frog intimates, then the competitors will surely move in sooner rather than later, and compete on price.
That’s how the Warehouse came about….
April 28th, 2008 at 8:59 pm
I’m not sure there are huge profits to be made unless you have the purchasing power to control the entire food chain. The margins are definitely slim and there seems to be plenty of anecdotes about supermarkets driving down returns to farmers and to their own workers to keep costs low (or at least to keep profits up).
The real question is not whether the duopoly is price fixing (I believe not, and have seen no evidence to suggest otherwise) but whether the lack of competition in our food supply is shutting out real consumer control over food. If there is an actual duopoly of food supply which other players cannot credibly break into because the start up costs are too high and the market is behaving monopolistically, surely that’s of concern. Especially if it run for the benefit of private shareholders rather than suppliers (a la Fonterra), consumers or citizens.
I’m interested in your views - especially the free marketeers - as to what our competitions law’s response should be to the Warehouse situation? What sort of factors should it take into account and why?
April 28th, 2008 at 8:59 pm
Yep, but BP, the duopoly is trying to lock the Warehouse out, to the extent of an appeal to the High Court against a Commerce Commission decision.
Personally, I’d like to see a couple of hundred competitive players around the country, basing their competitiveness on local distribution, but it’s not happening! Two big players collaberate with each other to run the grocery retail industry, and consumers pay what they demand!
April 28th, 2008 at 9:22 pm
But there are hundreds of competitors around the country. My local butcher, for one.
I dislike private monopolies for the same reason as I dislike state monopolies. There is no incentive to look after the customer. The state should concern itself with ensuring there is competition in the market and that price fixing does not occur. I can’t see how setting up a state competitor solves anything. It will surely result in yet more taxation, leading to less customer spending power.
I’m not sure food prices are extortionate. They’re not cheap, but the same is true in the UK, and they have a lot more competition.
PS: My wife did our yearly accounts yesterday. On average, we spend $9 p/p, per day on food, and we eat very well - fresh fish, fine meat, fresh vegetables. Is that expensive? Seems reasonable to me….
April 28th, 2008 at 9:33 pm
Sunday, April 27, 2008
Support Mount Roskill Foodstuffs strikers!
Ninety Auckland Foodstuffs distribution workers will begin indefinite lunch-time strikes for a $2.50 partial pay parity pay rise starting today, 12 o’clock at 60 Roma Rd, Mount Roskill Auckland.
Distribution sector secretary Karl Andersen says that while every day New Zealander’s suffer food price rises, food companies are making a killing off the backs of their workers low pay.
“Foodstuffs made its biggest profit in the history of the group in 2007,� he said. “Yet food prices continued to rise by 9% since then and grocery and supermarkets sales show no sign of slowing.�
“Foodstuffs - New Zealand’s 2nd biggest company behind Fonterra - made $7.2 billion revenue off the back of its low paid workers who, like other Kiwis, find it difficult to buy food for their kids.�
Mr Andersen says the Reserve Bank’s call for “wage restraints� in light of record profits and increasing sales is ludicrous.
The workers pick and pack food items at Foodstuffs main Auckland distribution centre for its franchises Pak ‘n Save, New Worlds and Four Square.
The company has offered the workers $15.50 an hour.
Mr Andersen says the workers want $17.00 an hour which would achieve partial pay parity with other union distribution centres whose average base rate is $17.50.
The majority of striking staff are on $14.59 an hour and the union is claiming a minimum 5% increase for the minority of higher paid staff.
“Equivalent workers at Progressive - Foodstuffs only competitor - who were locked out several years ago during their own pay parity dispute, are on $17.74 an hour and will go up to $18.34 an hour in August as a result of their successful action.�
Mr Andersen says the union recently won a $3 an hour pay parity pay rise at The Warehouse bringing equivalent workers up to $16.07-$17.73 an hour going up to $16.55-$18.26 in August with another $1.50 pay rise next year in August.
Union distribution workers who work next door to the striking company at Gilmores – a wholly owned subsidiary of Foodstuffs – are watching the outcome of the dispute as they will also be negotiating soon for pay parity from their much lower base rate of $12.25 an hour for identical work.
The union represents workers at Foodstuffs other distribution companies and several of its Pak ‘n Saves who are all on different collective agreements.
· New Zealand Management Magazine Top 200 companies December 2007. Figures based on Foodstuffs Auckland, Foodstuffs Wellington and Foodstuffs South Island revenue sales combined.
April 28th, 2008 at 9:39 pm
PS Vandana Shiva rules - shame on you mr national party peter, and it was metaphorical (the force feeding part). it is essentially force feeding if there is no other option.
If you read the details of some trade policies and look into companies like Syngenta and Monsanto and what goes on where Vandana Shiva is from you might get a better idea of what is happening.
Have you any idea how many farmers have commited suicide in India.. even in Australia.
Food prices are rising, but those growing it aren’t benefiting in many instances.
Fonterra is getting rich, while some farmers are getting in debt. Its the agri buisness that is really creaming it, the Monsanto and Fonterra’s of the world.
April 28th, 2008 at 10:11 pm
I’ll just give my 2ct worth and repeat myself in quoting….
“Eat food not food-like products”
April 28th, 2008 at 10:22 pm
BP said: But there are hundreds of competitors around the country. My local butcher, for one.
Good on you and your local butcher, BP. But does your local butcher sell cheese, or fresh vegetables, or rice, or flour, or detergent, or toilet paper?
The supermarket has the advantage of selling the lot, and consumers have to weigh up the time and travel costs of doing some of their shopping elsewhere. For many, especially those on low incomes, it still doesn’t add up financially, so they never venture past the local Foodtown.
April 28th, 2008 at 10:29 pm
Vandara sounds like a drama queen to me.
No other option? Oh right, there’s no such thing as my local butcher, my local organic market, my local fish market, and my own back yard (I have a great herb garden)
Strange how you people criticise monopoly power due to expense and lack of consumer choice, yet desire to inflict state monopolies on us at every turn…..
>>Have you any idea how many farmers have commited suicide in India
Have you any idea how many dentists have commited suicide in the US?
April 28th, 2008 at 10:38 pm
Toad,
Therefore FoodTown provides a service for those on a low income by providing convienience. Thought you’d be happy about fewer car trips.
I’d also argue that many of these people are, generally speaking, unimaginative and lazy when it comes to food. That’s fine, but expect to pay a premium to have those “needs” catered to, which is the reason why supermarkets exist in the first place.
April 28th, 2008 at 10:42 pm
Barsteward multinational supermarket companies like foodstuffs shouldn’t be allowed. What? they’re a local company?
Ok then scum sucking corporate asset strippers only interested in profits for shareholders. What do you mean they are a cooperative….? There’s got to be something bad about them surely?
April 29th, 2008 at 2:13 am
“Foodstuffs made its biggest profit in the history of the group in 2007,â€? he said. “Yet food prices continued to rise by 9% since then and grocery and supermarkets sales show no sign of slowing. Foodstuffs - New Zealand’s 2nd biggest company behind Fonterra - made $7.2 billion revenue off the back of its low paid workers …”
What have food price rises got to do with whether or not a supermarket makes a profit, unless they are trying to gain a competitive edge by not passing on their rising costs to their customers. Why is Foodstuffs sales revenue stated instead of it’s profit? Are our union leaders innumerate or deceptive? Have non-food prices also risen by 9% or only food prices? The former would suggest price gouging by the supermarkets, the atter price gouging by farmers or wholesalers.
April 29th, 2008 at 6:40 pm
Culturally inappropriate? That is an interesting term.
I do recall an interesting comment I overheard from a (then) Dairy Board employee learning Chinese, that although the board was aware that many Chinese were lactose intolerant, that the Chinese dairy market would grow and “people would get used to consuming dairy products.”
I’d suggest that trying to sell Campbell’s Soups in Taiwan might be culturally inappropriate, considering that traditional Chinese style soup is a quite different product, not mention one that is preservative and additive free.
April 29th, 2008 at 7:28 pm
Good point with the first one jinyang, but in regards to the second - didn’t ‘western’ diets used to be preservative and additive free too? Didn’t stop people from switching over…