The Finance Minister is hopeful she can bring more competition to the supermarket sector.
The Government's seeking advice on breaking up the duopoly, possibly separating their retail and wholesale arms.
Nicola Willis says New Zealand currently has one of the least competitive grocery markets in the world - and Kiwis are paying more at the checkout as a result.
"What I want to achieve is a properly competitive market, to put downward pressure on prices, to motivate innovation and to ensure that shoppers get more choices."
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Episode Transcript
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Speaker 1 (00:00):
Right now the Finance Minister Nicola willis good evening, Good evening, Ron,
good to have you on the show. A lot to
discuss tonight. We'll start with the supermarkets. What impact do
you expect because you've basically threatened to force the sale
or to break up the cooperative in food stuffs, some
of the brands around supermarkets, you've threatened to break them up.
(00:22):
What impact do you think that will have on those
supermarkets as we stand today?
Speaker 2 (00:28):
Well, right now we have one of the least competitive
grocery markets in the world, and we are paying more
for our groceries as a result. So what I want
to achieve is a properly competitive market to put downward
pressure on prices, to motivate innovation, and to ensure that
shoppers get more choices. So the intention here is yep,
(00:49):
first protocoll, let's try and get a third operator in.
But if there are market structure issues preventing that happening,
then I feel duty bound to take a next step
and look at how we can fix that market structure.
Speaker 1 (01:01):
All right, Well, we'll talk about that and whether that
is the issue that should be at the forefront of
any investigation. But what do you think the threat of
a being broken up as a business hanging over you.
What does that do to an individual family who might
own a supermarket that's part of their co op at
Food Stuck, for example, are they going to invest in
(01:22):
new technology? Are they going to invest in new machinery
efficiencies while there's that holding hanging over them? And does
that not in a way undermine the work that you're
trying to do?
Speaker 2 (01:36):
Well, Ryan, As a Minister of the Crown, I am
responsible to the many, not the few. I'm responsible to
the millions of New Zealanders who do their grocery shop
each week, rather than a few hundred people who are
fortunate enough to own and operate a supermarket. I think
a lot of those supermarket owners do a really good job.
(01:56):
My issue is with the structure they are operating in.
And actually you'll find that some of those operators of
supermarkets themselves raise concerns about the way that their cooperative
or their company operates, and so the request for information
process that I'm running will give them the opportunity to
raise concerns about that model as well.
Speaker 1 (02:18):
The Commerce Commission initially recommended breaking them up, but by
the final report had pulled back because it was too risky.
Why raise it again?
Speaker 2 (02:28):
Because what the Commus Commission said was, let's see if
these new regulations that we're introducing will introduce some more
competitive pressure to the market. Since then, there has been
no more competitive pressure. In fact, the market has become
more concentrated. There's evidence that margins are increasing, that profitability
is increasing average key. We certainly haven't seen better prices
(02:50):
at the checkout, and in the meantime we've had misleading specials,
pricing and accuracies, ongoing investigations, consumer complaints, issues with the
supply code, issue with the wholesale code. None of that
tells me that the supermarkets are taking this seriously. They
haven't pulled their socks up. They aren't actually delivering anything
(03:11):
materially better to New Zealanders. A year on from when
these regulations were first brought in, and the first grocery
Port review is pretty sobering reading. It points out that
despite all of the good intentions, things actually haven't gotten better.
So I can sit back and say, oh, well, I'm
going to cross my fingers and hope that aldi turns up,
(03:32):
or I can take action, and I'm choosing to take action.
I'm actively pursuing a third entrant, and I'm preparing for
a scenario in which that doesn't happen.
Speaker 1 (03:41):
Can we just be clear for people who listen to
this type of retrick and we've had it from previous
Ministers of Finance and prime ministers saying we will rain
them in, will make it better. Can we just be
clear about how much we're being ripped off by? So
it's a million dollars a day, so you know, three
hundred and sixty five million a year. If you divide
by the population of New Zealand, we're talking about a
(04:02):
dollar forty a week I think per person.
Speaker 2 (04:05):
It's the number I'm focused on is the fact that
when you compare us with other advanced countries and the OECD,
we're paying about nine percent more on average for our groceries.
That's a worry. That is hundreds of dollars every year potentially.
And what I'm also worried about is that with a
lack of competition, you don't get the choice that you
(04:26):
see in other markets. If you're in Australia and many
communities you actually have the choice to go to an ALDE.
Now it has more limited stock, but it's cheaper, and
I know a lot of New Zealanders just want that choice.
Is there a cheaper option, a different option, and right
now our market and most parts of the country doesn't
have that. So competition is about price. It's also about
(04:48):
variety and choice. It's about innovation because there's evidence that
our supermarkets aren't innovating in the same way that you're
seeing overseas because they don't have to. There's not huge
amounts of competitive pres share on them. I believe in
markets ryan competitive markets. I'm a backer of business and
private enterprise, but for that to deliver the dividends, it
has to be truly competitive. And the evidence is pretty
(05:12):
clear that here in New Zealand we have a functional duopoly.
We have the effects of market power, which is that
the big providers don't need to provide the price pressure
or have the relationships with supplies they would in a
competitive market.
Speaker 1 (05:26):
We asked the former managing director at Costco, Patricknon this afternoon,
what are the main barriers to getting into New Zealand
government regulation.
Speaker 3 (05:35):
I suppose real estate prices was a massive barrier and
is a massive barriers just not a lot of retail
space available to be purchased or a rent, so I
think that's a huge barrier, and then logistics as well,
getting stuff into the country at a nice timely manner.
Speaker 1 (05:55):
By far and away, the biggest issue was lands owning.
That's got.
Speaker 2 (06:01):
Absolutely and we are tackling that by replacing the RAMA
at the same time. Ryan Right now, according to the
Grocery Commissioner, the supermarkets are holding at least forty six
properties which they haven't used for retail for more than
twenty years. So that to me suggests that the current
incumbents are land banking. They are bastily holding sites so
(06:25):
that others well they are, but and the Grocery Commissioner
is looking into progress on that. But there are still
sites that they hold and traditionally, of course they used
covenants and other tools, but we sought to block out
new entrance.
Speaker 1 (06:38):
We sorted that out, didn't we. I mean, that's part
of what.
Speaker 3 (06:40):
They are now.
Speaker 2 (06:42):
We've now banned the use of covenance. But my point
is there are still land holdings which the Grocery commission
is looking into because they want to know do they
own them for a real reason or are they owning
them to block out the competition. So that's one of
the issues that we need to look at. But I'm
a big believer too. We need to get rid of
the zon owning laws and requirements in the RMA that
(07:03):
have made it too hard for all kinds of industries
to develop and expand I'm absolutely on that agenda. Let's
get that red tape out of the way.
Speaker 1 (07:11):
Okay, fairies. Winston Peters was on the show earlier, So
basically you had an option which was following the advice
of the Working Group, which didn't include rail. Can you
let us in on what the price difference was between
the no rail option that you didn't go that Cabinet
hasn't gone with and Winston's option with rail.
Speaker 2 (07:34):
All I can tell you is that this deal that
we've done is going to deliver a far far more
affordable option than was being proposed by the past government.
And you'll understand that revealing our budget to third parties
that would usually be a pretty poor strategy for give
value for bablock money.
Speaker 1 (07:53):
So we're not going to be remarked Minster. That's not
what I'm asking you to do. What I'm asking you
is to tell us the difference in price between what
you had proposed and what you've gone.
Speaker 2 (08:02):
With, Well, that's yet to be determined because it rests
on the negotiations which are now going to occur, both
for the purchase of ships and for infrastructure development proposal.
Let me we've been.
Speaker 1 (08:14):
Out to stay. Let me be more specific. Can you
tell me the price difference an estimate between the two?
Speaker 3 (08:21):
No?
Speaker 2 (08:21):
I can't. What I can tell you infrastructure side? No
I can't, because actually we want to do a good
commercial deal. We're not going to have the will pulled
over our eyes like the last guys who allowed you
the price to be read without because they knew the
taxpayer was on the hoop.
Speaker 1 (08:36):
Yea, But this number is different.
Speaker 2 (08:38):
I'm not going to put them in jepidy.
Speaker 1 (08:39):
But you're not telling us the number that you've got
available to spend, just the difference between what you're not
spending and what you are spending, which is not telling
them anything.
Speaker 2 (08:48):
But that number is yet to be determined because it
depends on the results of the negotiations.
Speaker 1 (08:52):
The place I'm moving on because getting boring for people?
Do you think are you let me ask you this.
Speaker 2 (09:00):
A boring ryme? May you sometimes ask boring questions?
Speaker 1 (09:05):
With having Winston around the cabinet table. Do you do
you appreciate having someone like that? I mean he didn't
quite say that he was, you know, the old smart
man in the room, but he's sort of implied it
is it nice to have someone around the table like that.
Speaker 2 (09:21):
Look, I get along well with Winston. He's obviously got
a different perspective online. I'm a forty four year old
woman with four kids. He's a man who's almost eighty.
We've got different perspectives and different experiences to bring to
the table, and I think that's a good mix. I
think what we've demonstrated over the past few months is teamwork.
Speaker 1 (09:39):
Very nicely pot Minister, never boring, Appreciate your time, Nichola Willius,
who's the finance Minister. For more from Heather Duplessy Allen Drive,
listen live to news talks. It'd be from four pm weekdays,
or follow the podcast on iHeartRadio.
Right now the Finance Minister Nicola willis good evening, Good evening, Ron,
good to have you on the show. A lot to
discuss tonight. We'll start with the supermarkets. What impact do
you expect because you've basically threatened to force the sale
or to break up the cooperative in food stuffs, some
of the brands around supermarkets, you've threatened to break them up.
(00:22):
What impact do you think that will have on those
supermarkets as we stand today?
Speaker 2 (00:28):
Well, right now we have one of the least competitive
grocery markets in the world, and we are paying more
for our groceries as a result. So what I want
to achieve is a properly competitive market to put downward
pressure on prices, to motivate innovation, and to ensure that
shoppers get more choices. So the intention here is yep,
(00:49):
first protocoll, let's try and get a third operator in.
But if there are market structure issues preventing that happening,
then I feel duty bound to take a next step
and look at how we can fix that market structure.
Speaker 1 (01:01):
All right, Well, we'll talk about that and whether that
is the issue that should be at the forefront of
any investigation. But what do you think the threat of
a being broken up as a business hanging over you.
What does that do to an individual family who might
own a supermarket that's part of their co op at
Food Stuck, for example, are they going to invest in
(01:22):
new technology? Are they going to invest in new machinery
efficiencies while there's that holding hanging over them? And does
that not in a way undermine the work that you're
trying to do?
Speaker 2 (01:36):
Well, Ryan, As a Minister of the Crown, I am
responsible to the many, not the few. I'm responsible to
the millions of New Zealanders who do their grocery shop
each week, rather than a few hundred people who are
fortunate enough to own and operate a supermarket. I think
a lot of those supermarket owners do a really good job.
(01:56):
My issue is with the structure they are operating in.
And actually you'll find that some of those operators of
supermarkets themselves raise concerns about the way that their cooperative
or their company operates, and so the request for information
process that I'm running will give them the opportunity to
raise concerns about that model as well.
Speaker 1 (02:18):
The Commerce Commission initially recommended breaking them up, but by
the final report had pulled back because it was too risky.
Why raise it again?
Speaker 2 (02:28):
Because what the Commus Commission said was, let's see if
these new regulations that we're introducing will introduce some more
competitive pressure to the market. Since then, there has been
no more competitive pressure. In fact, the market has become
more concentrated. There's evidence that margins are increasing, that profitability
is increasing average key. We certainly haven't seen better prices
(02:50):
at the checkout, and in the meantime we've had misleading specials,
pricing and accuracies, ongoing investigations, consumer complaints, issues with the
supply code, issue with the wholesale code. None of that
tells me that the supermarkets are taking this seriously. They
haven't pulled their socks up. They aren't actually delivering anything
(03:11):
materially better to New Zealanders. A year on from when
these regulations were first brought in, and the first grocery
Port review is pretty sobering reading. It points out that
despite all of the good intentions, things actually haven't gotten better.
So I can sit back and say, oh, well, I'm
going to cross my fingers and hope that aldi turns up,
(03:32):
or I can take action, and I'm choosing to take action.
I'm actively pursuing a third entrant, and I'm preparing for
a scenario in which that doesn't happen.
Speaker 1 (03:41):
Can we just be clear for people who listen to
this type of retrick and we've had it from previous
Ministers of Finance and prime ministers saying we will rain
them in, will make it better. Can we just be
clear about how much we're being ripped off by? So
it's a million dollars a day, so you know, three
hundred and sixty five million a year. If you divide
by the population of New Zealand, we're talking about a
(04:02):
dollar forty a week I think per person.
Speaker 2 (04:05):
It's the number I'm focused on is the fact that
when you compare us with other advanced countries and the OECD,
we're paying about nine percent more on average for our groceries.
That's a worry. That is hundreds of dollars every year potentially.
And what I'm also worried about is that with a
lack of competition, you don't get the choice that you
(04:26):
see in other markets. If you're in Australia and many
communities you actually have the choice to go to an ALDE.
Now it has more limited stock, but it's cheaper, and
I know a lot of New Zealanders just want that choice.
Is there a cheaper option, a different option, and right
now our market and most parts of the country doesn't
have that. So competition is about price. It's also about
(04:48):
variety and choice. It's about innovation because there's evidence that
our supermarkets aren't innovating in the same way that you're
seeing overseas because they don't have to. There's not huge
amounts of competitive pres share on them. I believe in
markets ryan competitive markets. I'm a backer of business and
private enterprise, but for that to deliver the dividends, it
has to be truly competitive. And the evidence is pretty
(05:12):
clear that here in New Zealand we have a functional duopoly.
We have the effects of market power, which is that
the big providers don't need to provide the price pressure
or have the relationships with supplies they would in a
competitive market.
Speaker 1 (05:26):
We asked the former managing director at Costco, Patricknon this afternoon,
what are the main barriers to getting into New Zealand
government regulation.
Speaker 3 (05:35):
I suppose real estate prices was a massive barrier and
is a massive barriers just not a lot of retail
space available to be purchased or a rent, so I
think that's a huge barrier, and then logistics as well,
getting stuff into the country at a nice timely manner.
Speaker 1 (05:55):
By far and away, the biggest issue was lands owning.
That's got.
Speaker 2 (06:01):
Absolutely and we are tackling that by replacing the RAMA
at the same time. Ryan Right now, according to the
Grocery Commissioner, the supermarkets are holding at least forty six
properties which they haven't used for retail for more than
twenty years. So that to me suggests that the current
incumbents are land banking. They are bastily holding sites so
(06:25):
that others well they are, but and the Grocery Commissioner
is looking into progress on that. But there are still
sites that they hold and traditionally, of course they used
covenants and other tools, but we sought to block out
new entrance.
Speaker 1 (06:38):
We sorted that out, didn't we. I mean, that's part
of what.
Speaker 3 (06:40):
They are now.
Speaker 2 (06:42):
We've now banned the use of covenance. But my point
is there are still land holdings which the Grocery commission
is looking into because they want to know do they
own them for a real reason or are they owning
them to block out the competition. So that's one of
the issues that we need to look at. But I'm
a big believer too. We need to get rid of
the zon owning laws and requirements in the RMA that
(07:03):
have made it too hard for all kinds of industries
to develop and expand I'm absolutely on that agenda. Let's
get that red tape out of the way.
Speaker 1 (07:11):
Okay, fairies. Winston Peters was on the show earlier, So
basically you had an option which was following the advice
of the Working Group, which didn't include rail. Can you
let us in on what the price difference was between
the no rail option that you didn't go that Cabinet
hasn't gone with and Winston's option with rail.
Speaker 2 (07:34):
All I can tell you is that this deal that
we've done is going to deliver a far far more
affordable option than was being proposed by the past government.
And you'll understand that revealing our budget to third parties
that would usually be a pretty poor strategy for give
value for bablock money.
Speaker 1 (07:53):
So we're not going to be remarked Minster. That's not
what I'm asking you to do. What I'm asking you
is to tell us the difference in price between what
you had proposed and what you've gone.
Speaker 2 (08:02):
With, Well, that's yet to be determined because it rests
on the negotiations which are now going to occur, both
for the purchase of ships and for infrastructure development proposal.
Let me we've been.
Speaker 1 (08:14):
Out to stay. Let me be more specific. Can you
tell me the price difference an estimate between the two?
Speaker 3 (08:21):
No?
Speaker 2 (08:21):
I can't. What I can tell you infrastructure side? No
I can't, because actually we want to do a good
commercial deal. We're not going to have the will pulled
over our eyes like the last guys who allowed you
the price to be read without because they knew the
taxpayer was on the hoop.
Speaker 1 (08:36):
Yea, But this number is different.
Speaker 2 (08:38):
I'm not going to put them in jepidy.
Speaker 1 (08:39):
But you're not telling us the number that you've got
available to spend, just the difference between what you're not
spending and what you are spending, which is not telling
them anything.
Speaker 2 (08:48):
But that number is yet to be determined because it
depends on the results of the negotiations.
Speaker 1 (08:52):
The place I'm moving on because getting boring for people?
Do you think are you let me ask you this.
Speaker 2 (09:00):
A boring ryme? May you sometimes ask boring questions?
Speaker 1 (09:05):
With having Winston around the cabinet table. Do you do
you appreciate having someone like that? I mean he didn't
quite say that he was, you know, the old smart
man in the room, but he's sort of implied it
is it nice to have someone around the table like that.
Speaker 2 (09:21):
Look, I get along well with Winston. He's obviously got
a different perspective online. I'm a forty four year old
woman with four kids. He's a man who's almost eighty.
We've got different perspectives and different experiences to bring to
the table, and I think that's a good mix. I
think what we've demonstrated over the past few months is teamwork.
Speaker 1 (09:39):
Very nicely pot Minister, never boring, Appreciate your time, Nichola Willius,
who's the finance Minister. For more from Heather Duplessy Allen Drive,
listen live to news talks. It'd be from four pm weekdays,
or follow the podcast on iHeartRadio.
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