Ernie Newman: Grocery expert says supermarket discounts aren’t being passed on to customers

The Commerce Commission is ramping up efforts to disrupt the supermarket monopoly. 

It says supplier charges and promotional pricing are reinforcing the dominance of Foodstuffs and Woolworths. 

It's proposing a simplified grocery code, reducing the range of payments that supermarkets can charge suppliers. 

Grocery expert Ernie Newman told Ryan Bridge that supermarkets are receiving billions of dollars in discounts - which largely aren't being passed on to consumers.  

He says there's more money floating around in the sector than the Commerce Commission had previously identified. 

LISTEN ABOVE 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
So the Commerce Commission cracking down on unfair behavior. What
they say is unfair behavior in the grocery sector. The
Grocery Commissioner is worried about promotional payments between the big supermarkets,
the dropoly and the suppliers. He says that around five
billion dollars a year in promotional rebates contributes to higher
average prices for goods and contributes to price fluctuation. He's

(00:24):
warning the ComCom may have to act if the supermarkets
don't voluntarily stop the rate at which this is happening.
Ernie Newman is a grocery policy expert with me this morning. Ernie,
good morning, Good day Ryan. Can you explain to me
why offering discounts or specials at the supermarket getting rid
of those would make life better for us consumers?

Speaker 2 (00:47):
Yeah, it's interesting. It's a very complicated market that we're
talking about here, But what the Commissioner is showing in
this report is that there are these vast sums of
money that the supermarkets are negotiating from their largest supply,
is not all of which is being passed on to consumers.
So they're talking now about five billion a year in

(01:07):
discounts and rebates. And promotional allowances and whatever. And when
you come to work that I tried to do the
math last night, it comes to you know, for a
family of four, that's about four grand a year per
family that the supermarkets are getting in discounts with their suppliers,
not all by means of which is being passed on
to consumers at the checkout.

Speaker 1 (01:27):
You better how much is being passed on and isn't
being passed on? Wouldn't that be central to whether you
do anything about it?

Speaker 2 (01:33):
Well? Yeah, but the way in which the Commissioner is
phrasing was it's pretty obvious there is a very very
large amount that is simply going into the pockets of
the supermarkets and not being passed on. And you know,
in a proper competitive market that would not be possible
because of one supermarket didn't pass it on to the customers.
Another one would problem is, of course, we've got a

(01:55):
broken market here. We've only got a duopoly with two
people making decisions for supermarkets at wholesale and retail level
for the entire country. So our market is broken.

Speaker 1 (02:06):
Okay, And if what you're saying is true, then you know,
when we started this whole exercise about the supermarkets. We
were told they were making a million dollars a day
in excess profits. So three hundred and sixty old million
dollars a year. What you're now talking about, and what
the Commission is now talking about is billions.

Speaker 2 (02:23):
Yeah. Yeah, so come out of loose money floating around?

Speaker 1 (02:27):
Did we underest? Are you saying that the million dollars
a day in excess profits was out by what tens
hundreds of millions financially?

Speaker 2 (02:37):
Yeah? Yeah, there's far more loose money floating around in
this sector than the Compress Commission has identified in previous occasions.

Speaker 1 (02:46):
But the problem is they haven't. They haven't identified it,
had they They've just said, hey, look there are five
billion dollars of payments going from A to B. They
haven't said how much of it's actually been passed on
or not. This is a Is this not a phishing exercise?

Speaker 2 (02:59):
No, it's more than that. The problem we've got here
is we've got a market that is almost it's almost
mafia alike. You know, there are just so many discounts
and rebates and allowances and money going sort of under
the table, but nobody from outside can you can absolutely
say with certainty how much loose money. There is slotting

(03:20):
around in the system. What we do know is that
it's the supermarket servant at the top level and not
the consumers that are getting the benefit of a great
deal of this.

Speaker 1 (03:29):
Ernie, appreciate your time this morning. Ernie Newman, who's a
grocery policy experts, has gone nine minutes away from six
loads of texts on this. Ryan Specials add variety and
fun to the drag of shopping. I love this. Don't
touch my don't you come for my specials? Commerce Commission
this is interesting. I'm a supplier to food stuffs, and
what the commissioner is talking about is that we might

(03:52):
have a product that we want to sell at say
two dollars fifty every day, but food stuffs make us
put the price up so many a year so that
they can call it a special, when all we really
want to do is to have the price lower every day.
But the question is overall, as the price on average
higher or lower than it would otherwise be, That's the question.

Speaker 2 (04:15):
For more from Early Edition with Ryan Bridge. Listen live
to news Talks it'd be from five am weekdays, or
follow the podcast on iHeartRadio.