Latest / Best of Business / Pierre van Heerden: Grocery Commissioner on the Commerce Commission's annual report criticising lack of competition in the sector

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Pierre van Heerden: Grocery Commissioner on the Commerce Commission's annual report criticising lack of competition in the sector · Best of Business

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  Speaker 2: The first annual Commerce Commission report into our supermarkets has
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  Speaker 2: found no meaningful improvement in competition. It has been now
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  Speaker 2: more than two years since the ComCom and the government
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  Speaker 2: first started cracking down on supermarkets, but instead of things
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  Speaker 2: getting better, they've actually got worse. Per Van heerden is
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  Speaker 2: the Grocery Commissioner, Hope heer hi Ever, you've said that
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  Speaker 2: they're ripping us off. How are they ripping us off?
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  Speaker 3: Well, when we look at the report, their margins have
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  Speaker 3: actually increased over the last period, the profitability is still high,
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  Speaker 3: and they've still got major dominance in the industry. So
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  Speaker 3: when we combine all of those things, we can see
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  Speaker 3: that competition isn't working the way it should be.
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  Speaker 2: So are you saying that they are extorting us.
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  Speaker 3: I wouldn't go as far as saying extorting, but that
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  Speaker 3: are making more margin.
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  Speaker 2: Yeah, So is that ripping us off by making more
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  Speaker 2: money off us?
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  Speaker 3: Yes? I believe in competition. If they are making more
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  Speaker 3: than is accepted overseas, that Kiwi consumers are paying too
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  Speaker 3: much and Kiwi consumers deserve better.
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  Speaker 2: How much more are they making off us than is
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  Speaker 2: accepted overseas.
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  Speaker 3: I don't have the figure with me right here, but
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  Speaker 3: from memory, the return on assets is about eleven percent
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  Speaker 3: versus five and a half six.
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  Speaker 2: Overseas, so it's like double.
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  Speaker 3: Yes, it is quite a significant difference between what others
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  Speaker 3: overseas are making where there's more competition than what's happening
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  Speaker 3: in New Zealand.
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  Speaker 2: How much of the margin's gone up by.
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  Speaker 3: The margins have gone up by about three percent when
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  Speaker 3: we look at the different ones. Fruit and veggies has
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  Speaker 3: gone up about zero point four percent from memory, So
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  Speaker 3: overall they've gone up. And when we say the margins
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  Speaker 3: have gone up, this is the difference between what the
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  Speaker 3: suppliers are charging to the supermarkets with their inflation and
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  Speaker 3: what the supermarkets have increased their prices by. So that
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  Speaker 3: margin has increased.
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  Speaker 2: Ah, So it's not as so the suppliers are getting
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  Speaker 2: a certain amount of money and yet we as consumers
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  Speaker 2: are getting priced over and above that, and that's going up.
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  Speaker 2: That gap is going up.
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  Speaker 3: That is correct, okay, because we do have inflation and
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  Speaker 3: we've got to recognize that. But you know, in a
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  Speaker 3: competitive market, you'd expect that those margins are constrained now.
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  Speaker 2: Peer The problem is this ist no surprise to me
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  Speaker 2: at all, because when the government did the crackdown on supermarkets,
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  Speaker 2: it was never going to work, right it was. It
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  Speaker 2: was too lily lived, it was weak. So it hasn't worked.
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  Speaker 2: It's not going to work. What are you going to
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  Speaker 2: do to change things?
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  Speaker 3: We're doing is we've got quite a few powers that
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  Speaker 3: haven't been unlocked yet, and we want to make sure
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  Speaker 3: that we unlock all of those once. Once we've used that,
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  Speaker 3: then we can say to the government, this is where
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  Speaker 3: we're at, and then they can make a decision what
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  Speaker 3: they want to do from there.
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  Speaker 2: What are those powers?
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  Speaker 3: For instance, if I take the wholesale side of things,
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  Speaker 3: we've got to do a Section fifty six inquiry in
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  Speaker 3: order to unlock what is called the backstops, so where
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  Speaker 3: we give a report to the minister and the minister
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  Speaker 3: then says to the wholesalers that you've got to supply
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  Speaker 3: to other wholesalers at the same price that you supply
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  Speaker 3: to your own stores. That's one one of the backstops
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  Speaker 3: on the supply code. What we're doing, it's been in
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  Speaker 3: force now for five months we see it's not working
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  Speaker 3: the way it was intended to. There's some advantages already,
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  Speaker 3: but we've taken early actions. So with all of these
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  Speaker 3: we're actually get ahead of the game and starting early
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  Speaker 3: to make all of the improvements to the system. There's
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  Speaker 3: no one silver bullet. If there was, it would be
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  Speaker 3: very easy. There's no one silver bullet, so we've got
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  Speaker 3: to use all of these different tools to their maximum
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  Speaker 3: effect to try and get change within the injury.
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  Speaker 2: How long will it take you to get this stuff done?
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  Speaker 3: Well? When we look at overseas, Australia and Finland. In
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  Speaker 3: Australia without a regime like we have, it took Ald
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  Speaker 3: ten years to get to ten percent of the market share.
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  Speaker 3: In Finland, Ledal was also ten years to get to
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  Speaker 3: ten percent. I don't believe we have ten years. No
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  Speaker 3: one is wanting to sit around, and no consumers specifically
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  Speaker 3: wants to sit around for ten years. We have a
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  Speaker 3: unique situation and that we've got a world first in
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  Speaker 3: this grocery regime that we want to use to pull
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  Speaker 3: all those levers, see what we can get done and
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  Speaker 3: see if we can get another player in the market.
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  Speaker 3: Improve competition, and I think when we look at geographic
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  Speaker 3: areas like Auckland, there's actually been a decrease already in
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  Speaker 3: the concentration of the major grocery supermarkets by about four percent.
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  Speaker 3: So it shows me that if competition is working and
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  Speaker 3: even the smaller and slightly bigger like Costco come in,
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  Speaker 3: they can have an impact and I believe we can
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  Speaker 3: change things within our industry.
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  Speaker 2: You can't let the merger go through at foodstuffs with
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  Speaker 2: the stuff going on, can you.
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  Speaker 3: Well either you know, I can't comment on that at
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  Speaker 3: the moment. We are in the process of reviewing it
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  Speaker 3: and the decision on that will come out on the
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  Speaker 3: first of October.
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  Speaker 2: All right, Pier, thank you, I really appreciate your time.
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  Speaker 2: That's Pvnhead and the Grocery Commissioner. Now a lot of
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  Speaker 2: the power will lay in the hands of Andrew Bailey,
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  Speaker 2: the Commerce Minister. He's with us after six.
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