Latest / Best of Business / Ernie Newman: grocery policy expert ahead of Nicola Willis' announcement on supermarket reform

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

• 0:09
  Speaker 1: You're listening to a podcast from News Talk sed B.
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  Speaker 1: Follow this and our wide range of podcasts now on iHeartRadio,
• 0:16
  Speaker 1: right and just under.
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  Speaker 2: In our Finance Minister Nichola Willis is set to announce
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  Speaker 2: her plan to improve competition in the grocery sector. This
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  Speaker 2: is another long running debate, isn't it just how do
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  Speaker 2: we break up the duopoly of food stuffs and Walworths?
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  Speaker 2: To chat over what might be required and what he
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  Speaker 2: would like to see from this announcement, I'm joined by
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  Speaker 2: competition consultant and grocery policy expert Ernie Newman. Thank you
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  Speaker 2: for your time this morning. Ernie, Good morning, good I
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  Speaker 2: thank you. What's your feeling about how today's announcement will go.
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  Speaker 3: I'm not particularly optimistic. I'd love to be proved wrong,
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  Speaker 3: but I feel we're in a generation of politicians who
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  Speaker 3: are much more focused on announcements with outcomes. So call
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  Speaker 3: me a cynic if you like, but as I say,
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  Speaker 3: I would love to be proved wrong. In our sign, Nichola.
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  Speaker 2: Willis is willing to give a third player the VIP treatment.
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  Speaker 2: What actually would it take do you think to get
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  Speaker 2: a third player up and running in New Zealand.
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  Speaker 3: It's very, very difficult. Indeed, the duopoly, you've got it
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  Speaker 3: sewn up to the point that you know, they are
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  Speaker 3: just not the pieces of land available for a whole
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  Speaker 3: lot of new supermarkets. There are incredible barriers that they've
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  Speaker 3: put in place. They have they've made the industry incredibly
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  Speaker 3: much of fortress. And it's a bit like the banking industry.
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  Speaker 3: You know, you've got a few incumbents there who are
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  Speaker 3: making obscene levels of profit, but they've done it not
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  Speaker 3: by competing, but by shutting out other players. Ernie.
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  Speaker 2: I've been told that if we were going to have
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  Speaker 2: an international brand establish it south here in New Zealand,
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  Speaker 2: it could take up to five years just to open
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  Speaker 2: one store. Is that about right?
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  Speaker 3: I'd love to think it would take for only five years,
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  Speaker 3: you know that to actually to actually do anything useful here,
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  Speaker 3: you need one hundred and fifty two hundred stores all
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  Speaker 3: around the country. This is you know, New Zealand is
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  Speaker 3: are not all going to you know, zooming on Hamilton
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  Speaker 3: because that's where the one new store is. Supermarkets are
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  Speaker 3: something inherently local, so you actually great to bring in
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  Speaker 3: a new entrant, but you've got to do something about
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  Speaker 3: the anti competitive behavior of the the two that we've
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  Speaker 3: got at the same time.
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  Speaker 2: Have you heard any rooms or you are aware at all
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  Speaker 2: that there is an international player who is considering New Zealand.
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  Speaker 3: There are always rumors around, and of course there's always
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  Speaker 3: local potential players as well. I mean to me personally,
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  Speaker 3: and I've got no inside information on this. To me,
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  Speaker 3: the dream outcome for New Zealand would be for the
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  Speaker 3: warehouse to go out of its general merchandise to itself
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  Speaker 3: over completely, to be a new grocery chain and work
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  Speaker 3: with the support of EWI so that the metropolitan sites
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  Speaker 3: the warehouse has would be supplemented by EWI Capital and
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  Speaker 3: potentially EWE. It's an EWE Land. But you know, whether
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  Speaker 3: that's a pipe dream or could happen, I don't know.
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  Speaker 3: But to me, that's the kind of disruptive entrant that
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  Speaker 3: we really need international player as well. You know, you've
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  Speaker 3: got Costco. They are essentially more a wholesale than a retailer,
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  Speaker 3: and you don't hear much about them. You know, Soupie
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  Speaker 3: had to go. They were a local company. They could
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  Speaker 3: hack it. Despite a lot of enthusiasm there, it's a really,
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  Speaker 3: really hard market to get into because the duopoly has
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  Speaker 3: made it so, And of.
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  Speaker 2: Course everybody uses the example of Aldi in Australia, but
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  Speaker 2: it took them twenty years to each scale to become
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  Speaker 2: a major.
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  Speaker 3: Pauer, didn't it. Yeah? Yeah, And I mean the Australians
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  Speaker 3: complain about their lack of competition just as much as
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  Speaker 3: they do. I think their two major players have got
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  Speaker 3: sixty something percent of the market, whereas our to have
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  Speaker 3: got well over eighty, so they've got nothing to complain about.
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  Speaker 3: But it is it is a game that requires time.
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  Speaker 3: But I come back to the point that unless you
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  Speaker 3: actually do something about the totally anti competitive way our
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  Speaker 3: duopoly has developed. You know, from twenty or thirty years ago,
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  Speaker 3: we had five or six genuinely competing supermarket chains in
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  Speaker 3: this country and it's been consolidated to a ridiculously narrow group.
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  Speaker 3: They're not interested in competing with each other for market share.
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  Speaker 3: All they are concerned about is maximizing their profits.
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  Speaker 2: Having a third player in the market is a sort
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  Speaker 2: of a long term solution, isn't it. But if we
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  Speaker 2: wanted a shorter term solution, I mean, isn't the way
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  Speaker 2: to get competition quickly to break is to break up
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  Speaker 2: the two major current entities in the sector.
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  Speaker 3: I believe so, yes, and it's a courageous thing to do,
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  Speaker 3: but it is the right thing to do. You know,
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  Speaker 3: we have very weak competition law, what they call anti
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  Speaker 3: trust law in this country. More to the point, we
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  Speaker 3: don't really I think, have the political will you know,
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  Speaker 3: we've got the influence of the far right there, I
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  Speaker 3: would say, would argue that, you know, I would send
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  Speaker 3: a bad signal to other businesses if the government intervened.
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  Speaker 3: In fact, the reverse is true. If the government intervened
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  Speaker 3: and broke up the duopoly, that would be a very
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  Speaker 3: powerful signal of encouragement to small and medium enterprise is
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  Speaker 3: all over New Zealand, because they are suffering from this
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  Speaker 3: just as much as consumers are.
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  Speaker 2: Okay, so what would you like to see Nichola Willis
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  Speaker 2: announce this morning.
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  Speaker 3: I'd like to see her announce that one or both
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  Speaker 3: of the duopolists is going to be broken up through legislation,
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  Speaker 3: so that for example, you know, Pack and Save and
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  Speaker 3: four Square and the New World genuinely compete against each
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  Speaker 3: other and instead of being controlled by the same mister
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  Speaker 3: Big did I with Wilworth and all will tend to
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  Speaker 3: be split into separate wholesale and retail operations. I think
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  Speaker 3: anything short of a decisive breakup of what we've got
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  Speaker 3: is going to be a thirty year plan and not
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  Speaker 3: a five year plan. But I'd love to be proved wrong.
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  Speaker 2: Franchis, do you think the government is being realistic when
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  Speaker 2: it comes to the grocery sector and where it's currently at.
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  Speaker 3: Ask me that in an hour?
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  Speaker 2: Fair enough, Ernie lovely to talk to you. Thank you
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  Speaker 2: so much for your time this morning. That was Ernie Newman.
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  Speaker 2: We shall wait and see, As we said, Nichola Willis
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  Speaker 2: will be making her announcement around ten am this morning.
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  Speaker 2: It is twenty past nine.
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