Ernie Newman: grocery policy expert ahead of Nicola Willis' announcement on supermarket reform

One expert has voiced concerns ahead of the Finance Minister's announcement to improve competition in the grocery sector.

Nicola Willis is set to detail the next steps in the Government's moves to create more competition in the sector - and she's voiced support for a third player joining the market.

Grocery policy expert Ernie Newman explained why he's not feeling too confident this will lead to real change.

"I feel that we're in a generation of politicians who are much more focused on announcements without guns - call me a cynic if you like, but I'd love to be proved wrong."

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Sunday Session podcast with Francesca Rudkin
from News talks 'b.

Speaker 2 (00:12):
Right and Just Under. In our Finance Minister Nichola Willis
is set to announce her plan to improve competition in
the grocery sector. This is another long running debate, isn't
it just how do we break up the duopoly of
food stuffs and Walworths? To chat over what might be
required and what he would like to see from this announcement,
I'm joined by competition consultant and grocery policy expert Ernie Newman.

(00:34):
Thank you for your time this morning. Ernie, good morning,
good Thanks. What's your feeling about how today's announcement will go.

Speaker 3 (00:43):
I'm not particularly optimistic. I'd love to be proved wrong,
but I feel we're in a generation of politicians who
are much more focused on announcements with outcomes. So call
me a cynic if you like, but as I say,
I would love to be proved wrong. In our sign Nikola.

Speaker 2 (01:00):
Willis is willing to give a third player the VIP treatment.
What actually would it take do you think to get
a third player up and running in New Zealand?

Speaker 3 (01:10):
It's very, very difficult indeed, the duopoly, you've got it
sewn up to the point that you know, they are
just not the pieces of land available for a whole
lot of new supermarkets. There are incredible barriers that they've
put in place. They have they've made the industry incredibly

(01:30):
much of fortress. And it's a bit like the banking industry.
You know, you've got a few incumbents there who are
making obscene levels of profit, but they've done it not
by competing, but by shutting out other players. Ernie.

Speaker 2 (01:43):
I've been told that if we were going to have
an international brand establish it south here in New Zealand,
it could take up to five years just to open
one store. Is that about right?

Speaker 3 (01:52):
I'd love to think it would take for only five years,
you know that to actually to actually do anything useful here,
you need one hundred and fifty two hundred stores all
around the country. This is you know, New zealand Is
are not all going to zooming on Hamilton because that's
where the one new store is. Supermarkets or something inherently local.
So you actually great to bring in a new entrant,

(02:15):
but you've got to do something about the anti competitive
behavior of the the two that we've got. At the
same time, have you.

Speaker 2 (02:21):
Heard any rooms or you are aware at all that there
is an international player who is considering New Zealand.

Speaker 3 (02:28):
There are always rumors around, and of course there's always
local potential players as well. I mean to me personally,
and I've got no inside information on this. To me,
the dream outcome for New Zealand would be for the
warehouse to go out of its general merchandise to itself
over completely, to be a new grocery chain and work
with the support of EWI so that the metropolitan sites

(02:50):
the warehouse has would be supplemented by EWI Capital and
potentially EWE. It's an EWE Land. But you know, whether
that's a pipe dream or could happen, I don't know.
But to me, that's the kind of disruptive entrant that
we really need international player as well. You know, you've
got Costco. They are essentially more a wholesale than a retailer,

(03:12):
and you don't hear much about them. You know, Soupie
had to go. They were a local company. They could
hack it. Despite a lot of enthusiasm there, it's a really,
really hard market to get into because the duopoly has
made it so and of.

Speaker 2 (03:25):
Course everybody uses the example of Aldi in Australia, but
it took them twenty years to each scale to become
a major.

Speaker 3 (03:30):
Pauer, didn't it. Yeah yeah, And I mean the Australians
complain about their lack of competition just as much as
they do. I think their two major players have got
sixty something percent of the market, whereas our to have
got well over eighty, so they've got nothing to complain about.
But it is it is a game that requires time.
But I come back to the point that unless you
actually do something about the totally anti competitive way our

(03:55):
duopoly has developed. You know, from twenty or thirty years ago,
we had five or six genuinely competing supermarket chains in
this country and it's been consolidated to a ridiculously narrow group.
They're not interested in competing with each other for market share.
All they are concerned about is maximizing their profits.

Speaker 2 (04:15):
Having a third player in the market is a sort
of a long term solution, isn't it. But if we
wanted a shorter term solution, I mean, isn't the way
to get competition quickly to break is to break up
the two major current entities in the sector.

Speaker 3 (04:30):
I believe so, yes, and it's a courageous thing to do,
but it is the right thing to do. You know,
we have very weak competition law, what they call anti
trust law in this country. More to the point, we
don't really, I think, have the political will you know,
we've got the influence of the far right there, I
would say, would argue that, you know, I would send

(04:51):
a bad signal to other businesses if the government intervened.
In fact, the reverse is true. If the government intervened
and broke up the duopoly, that would be a very
powerful signal of encouragement to small and medium enterprises all
over New Zealand, because they are suffering from this just
as much as consumers are.

Speaker 2 (05:09):
Okay, So what would you like to see Nichola Willis
announce this morning?

Speaker 3 (05:14):
I'd like to see her announce that one or both
of the duopolists is going to be broken up through legislation,
so that for example, you know, Pack and Save and
four Square and the New World genuinely compete against each
other and instead of being controlled by the same mister
Big did I with Wilworth and or will tend to

(05:36):
be split into separate wholesale and retail operations. I think
anything short of a decisive breakup of what we've got
is going to be a thirty year plan and not
a five year plan. But I'd love to be proved wrong.

Speaker 2 (05:50):
Franchisca, do you think the government is being realistic when
it comes to the grocery sector and where it's currently at.

Speaker 3 (05:57):
Ask me that in an hour?

Speaker 2 (06:00):
Fair enough, Ernie loving to talk to you. Thank you
so much for your time this morning. That was Ernie
new We shall wait and see, as we said, Nichola
Willis will be making her announcement around ten am this morning.
It is twenty past nine.

Speaker 1 (06:13):
For more from the Sunday session with Francesca Rudkin, listen
live to News Talks at B from nine am Sunday,
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