Nick Hogendijk: Retail Consultant on Australian supermarket inquiry

The grass might not be greener in Australia as an inquiry into supermarket’s is recommending 20 reforms to support consumers and suppliers.

It has been revealed that Aldi, Coles and Woolworths are among the most profitable supermarkets in the world.

Retail Consultant Nick Hogendijk tells Ryan Bridge they’re no better off than New Zealand's supermarkets.

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Episode Transcript

Speaker 1 (00:00):
Right now, we're going to go across the Tasman the
equivalent there of the Commerce Commission has said to the Aussies,
you're getting a raw deal from your supermarkets. And we
often look to Australia as almost a panacea of supermarket operations.
Well not so apparently. The Australian Competition Consumer Commission, the
a Triple C, has found the big chains, along with

(00:22):
the discount rival Aldi, are among the most profitable supermarket
businesses in the world and the sector requires widespread reform.
Nick Hogan Dyke is a retail consultant over there, and
he's with me this afternoon.

Speaker 2 (00:37):
Get a Nick, Hi, how are you?

Speaker 1 (00:39):
I see Cohles has already come out and said, actually,
you guys don't know what you're talking about. That you've
you calculated our margins incorrectly.

Speaker 2 (00:48):
That sounds a lot like Foodstuffs and Walworth, New Zealand
a couple of years ago with the grocery market study,
doesn't it.

Speaker 1 (00:54):
So who's right? I mean, do they have a point?
Does the Commerce Commission or the A Triple C in
your actually know what they're talking about?

Speaker 2 (01:02):
Oh? Look, I think they do. I think the issue
is that their powers are actually quite limited, so they
can make a lot of statements that they can't actually
enforce them and see them through. And this is a
prime example here with the atrible c in Australia, Woolworths
and Coals are operating in what is not a dyewopoli
because of the fact we have Costco and Aalde here
as well, and to a lesser degree in met Cash.
But the reality is still an oligopoly and they do

(01:23):
have a significant market share of you know, seventy plus
share of the share of mouth, if you like, in
terms of everyone and what they buy and they eat
when they go home and unpack their groceries. And the
reality is that they do have as a result of
the power that they have, they're able to enforce themselves
upon not only the suppliers that work with them, but
also the consumers or shoppers who buy oft them.

Speaker 1 (01:43):
So what hope do we have then, Because the answer
to all of our problems, we're told is another supermarket chain.
You've got one and that's still bad.

Speaker 2 (01:51):
Well, we do have another chain, but they're a discanunder
so they're not a full service supermarket in the same
sense that you have with a pack and Save or
a New World or a Willlwork sort of Coals, et cetera.
So Costco is a retailer who happens to sell grocery products.
They are not a grocery store. Aldi is a store
that has somewhere in the vicinity of a thousand to
two thousand products depending on their range at the time,

(02:12):
and the and the aisle down the middle with their
special buyers that typically aren't grocery products either. So versus
a supermarket like a New World or a Walworths or
of Coals that'll have twenty five to thirty thirty five
thousand SKUs or products on their shelves, they're a very
different proposition. So you know, if you look at the
New Zealand market, then yes, do you need a third
infant or do you need to break up the existing

(02:34):
duopoly and created into three or four retailers? Most likely
that's going to give you some some relief. But what
you've one of the most important things is actually how
you go about governing that moving forward. Because at the moment,
as you see with Wolworths and Coals, as you see
with Foodstuffs North Island in particular, and Wolworths New Zealand.
They're not really competing against one another because they don't

(02:56):
have to. So whilst they may not have a gentleman's
agreement between one another, they do typically you know, not
press the envelope too hard because you're talking about four
of the most profitable supermarket businesses in the world per
square met.

Speaker 1 (03:07):
But is that because we're so far down the bottom
of the world, our populations are so much smaller that
these big companies that we need to come here that
are full services you put at just uninterested.

Speaker 2 (03:20):
Well, I don't. Well, yes, look I spoke to someone
senior at ALDI some time ago during the course of
the market study, trying to convince them that they needed
to look at New Zealand, and one of the challenges
they pay so is well, there's eighty four million people
in the Philippines, why would I go to five million people? Now?
That's so, there may need to be some incentives there,
but if you don't look overseas, then how do you
bust them up and get people locally to take on

(03:40):
that responsibility? You know, the reality is that there's ten
percent of the grocery products give or take in New
Zealand aren't from Woolworth and food Stuff's in New Zealand.
So you know there is a if you look at
the size of the market, that's what a one point
three to one point six billion dollar business that you
could have. Someone offered me one of those. I take it.

Speaker 1 (03:56):
Yeah, But the problem is the more I mean, because
what they are you will see talking about what the
ComCom here is talking about is more greater regulation and
that inevitably will mean higher prices. And I mean if
you start breaking them up, like running a supermarket will
never be more profitable than it is right now in
Australia and New Zealand. And even with that being the case,

(04:18):
we still can't attract new entrants.

Speaker 2 (04:19):
You know, yes, look and I think that the barriers
to entry, but particularly in New Zealand is the land
aspect as well. You know, you're geographically you've got a
very densely populated couple of pockets of your country and
then the rest of the country is fairly sparsely populated,
so it's also navigating that through. But if you can't
get access to land, how do your sites? How do

(04:41):
you then open up a supermarket chain? So therefore the
bust up is probably the most logical solution in New
Zealand if you look at it on place value. The
challenge you've got it with that, of course, is that
you can't tell me that the lights of Wilworth and
Chris Quinn and co. Are going to go straight to
court to time flight that and stave that off.

Speaker 1 (04:55):
Exactly, and that good point. Thank you very much for that.
Nick Hogan Dark who's a retail consultant out of It Australia,
on this hable c report into supermarkets there. For more
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