Latest / Best of Business / Ethan Vickery: Kai Co founder and operations director on National's bid to break up Foodstuffs

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Ethan Vickery: Kai Co founder and operations director on National's bid to break up Foodstuffs · Best of Business

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  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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  Speaker 2: So the great supermarket competition debate was reignited this week.
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  Speaker 2: National has announced that if re-elected, it would separate foodstuff
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  Speaker 2: supermarkets New World, Pack and Save and Foursquare in a
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  Speaker 2: bid to drive down grocery prices. Christchurch independent supermarket Kaiko
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  Speaker 2: has responded to the plan, taking to social media with
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  Speaker 2: a post addressed to the owners of New World and
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  Speaker 2: Pack and Save. Kaiko co-founder and operations director Ethan Vickery
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  Speaker 2: joins me now. Good morning, Ethan.
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  Speaker 3: Kia ora. How are you going?
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  Speaker 2: Good, thank you. Tell me, what was behind your post?
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  Speaker 2: What was the message that you were trying to send
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  Speaker 2: to foodstuff supermarket owners?
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  Speaker 4: Yeah, I think the overall message was that, yes, we
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  Speaker 4: understand your team works really hard and you work really
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  Speaker 4: hard for your community, but they are operating in a
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  Speaker 4: system that's sort of designed– you know, so they're in
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  Speaker 4: a monopoly. And I think we have to question, like,
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  Speaker 4: is it best serving the communities? I think it will
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  Speaker 4: be okay. There's sort of, they were sort of going
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  Speaker 4: on about like, they think that prices would drive up
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  Speaker 4: massively if this happens.
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  Speaker 3: I think we just need to look a little bit
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  Speaker 3: closer to see if that would happen.
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  Speaker 2: What do you make then of the proposal this week?
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  Speaker 2: Is it a move you would back?
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  Speaker 4: I think we have to be really careful about what
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  Speaker 4: we're back and what we wouldn't. But I mean, I
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  Speaker 4: think the proposal, if you look at it, is just
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  Speaker 4: giving Comcom more power and I guess leaving it up
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  Speaker 4: to them. Yeah, I think it's a good headline from
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  Speaker 4: the National Party. But essentially what they're saying is Comcom
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  Speaker 4: will have a look at it and if it will
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  Speaker 4: lower grocery prices, then they would do it.
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  Speaker 2: So Ethan, as someone who is in the business and
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  Speaker 2: understands the way it works, would it work? Would it
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  Speaker 2: make a difference to consumers?
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  Speaker 4: Well, I mean, it's hard to tell. It's really complicated.
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  Speaker 4: But I think you have to look at it and
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  Speaker 4: be like, why is New World everyday prices more expensive
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  Speaker 4: than pack and saves? Why is Four Squares everyday prices
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  Speaker 4: more expensive than New World's? And yet they all buy
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  Speaker 4: from the same DC and they're all part of the
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  Speaker 4: same co-op.
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  Speaker 3: Um, like, yes, there might be.
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  Speaker 4: Some added, um, extra freight costs. Maybe if I get
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  Speaker 4: split up, it'll be part of a massive operation. I
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  Speaker 4: think there's still 400 stores nationwide, um, of new worlds
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  Speaker 4: and all four squares. Um, there, there are two companies
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  Speaker 4: now as well. Like there's a North and South Island
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  Speaker 4: foodstuffs and that would still be two companies. It would
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  Speaker 4: just be pack and save would be one and then
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  Speaker 4: four square and it would be the other.
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  Speaker 3: Yeah.
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  Speaker 4: So there's not as much added costs in that as
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  Speaker 4: what they're talking about. Yeah, I mean, you know, like
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  Speaker 4: four squares, I know that they will have a higher
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  Speaker 4: buying price than what pack and save does from their
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  Speaker 4: distribution center.
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  Speaker 3: And that's why their prices are high.
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  Speaker 4: Like where our everyday pricing on groceries sits somewhere between
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  Speaker 4: a pack and save and countdown on pantry goods. And
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  Speaker 4: that's with us having no buying power or no distribution centers.
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  Speaker 4: So I think they just have to ask if it's
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  Speaker 4: best suited in their communities.
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  Speaker 2: Maybe we can talk about that. What can other supermarkets
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  Speaker 2: learn from what you were doing? Why are you able
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  Speaker 2: to offer these lower prices when they can't?
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  Speaker 3: Yeah, I think our strength is fresh food.
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  Speaker 4: We knew that we're entering a market that is dominated
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  Speaker 4: by two players.
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  Speaker 3: So how can we have a big point of difference?
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  Speaker 4: So we offer, we basically operate like a, produce shop
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  Speaker 4: our produce department so our manager goes down to the
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  Speaker 4: markets he talks to growers and he does that every
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  Speaker 4: day and so you know we were kind of like
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  Speaker 4: well if the produce shop down the road could be
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  Speaker 4: cheaper than a supermarket why can't we so that was
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  Speaker 4: our philosophy with that and in terms of butchery we
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  Speaker 4: operated we built our butcheries even though our shop's not
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  Speaker 4: huge our butchery department is the same size as probably
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  Speaker 4: at pack and saves um and we buy bulk um
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  Speaker 4: and And we, yeah, we can allow that. Well, that
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  Speaker 4: makes us a lot cheaper than what the supermarkets are
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  Speaker 4: because we don't have all that infrastructure and stuff behind it.
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  Speaker 4: So we're a lot closer to the food and where
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  Speaker 4: it originally comes from. And then in terms of grocery, yeah,
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  Speaker 4: we can buy direct from actually some, well, a lot
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  Speaker 4: of suppliers we buy direct from now, but also Woolworths
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  Speaker 4: distribution centres, quite competitive as well.
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  Speaker 2: Would this policy may have an impact on you as
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  Speaker 2: an independent supermarket? and competitor?
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  Speaker 3: I think it might, like indirectly.
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  Speaker 4: I mean, to be completely honest, business-wise, we're happy with
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  Speaker 4: the supermarkets doing what they're doing because they're not competing
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  Speaker 4: on price, which allows us to compete on price and
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  Speaker 4: have a really big point of difference.
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  Speaker 3: But that's not really what we're about. I think we
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  Speaker 3: want to see more competition.
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  Speaker 4: We want to see a lot of grocery prices for
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  Speaker 4: the consumer, and that's why we sort of got into
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  Speaker 4: business doing what we're doing.
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  Speaker 2: And I know that you're only in Christchurch, but have
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  Speaker 2: you seen the impact of you providing competition to foodstuffs
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  Speaker 2: and Progressive? Have they been forced to react?
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  Speaker 3: Yeah, definitely. It's really funny.
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  Speaker 4: It's hard to imagine that me and my dad would
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  Speaker 4: open up a shop and force a giant Gilema down
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  Speaker 4: the road pack and save to lower their prices. But yeah,
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  Speaker 4: we did a Facebook post and some price comparisons and
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  Speaker 4: the pack and save near us was 20% cheaper on
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  Speaker 4: produce items than the pack and save, um, and, uh, that, uh,
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  Speaker 4: 20 minute drive away, which was really interesting. Um, and then,
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  Speaker 4: and then we've also, we've competed on them on these
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  Speaker 4: specials as well. We've had, we've had, we've had good
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  Speaker 4: competition with them, um, where we've both advertised specials and
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  Speaker 4: then they've lowered their price of their special and we've
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  Speaker 4: lowered it and then they've lowered it and then we've
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  Speaker 4: lowered it again and it's ended up being 20% cheaper
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  Speaker 4: than when, they started advertising.
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  Speaker 2: There we go. Doing your bit.
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  Speaker 4: Yeah.
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  Speaker 3: Love it.
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  Speaker 2: You've been in operation around nine months now. Is expansion viable?
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  Speaker 2: Is that the plan?
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  Speaker 3: A hundred percent.
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  Speaker 4: Um, we have to be really careful, um, um, about like,
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  Speaker 4: how do we grow bigger without losing sort of what
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  Speaker 4: makes us special and not ending up operating like how
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  Speaker 4: they operate. Um, we are, um, our second lease is
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  Speaker 4: very close to being signed, which is very exciting.
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  Speaker 3: Um, Because we don't have.
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  Speaker 4: Massive startup costs like a supermarket, we can fit that
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  Speaker 4: cool niche and go into places that maybe have been
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  Speaker 4: underinvested in by the current duopoly as well.
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  Speaker 3: So it's really exciting.
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  Speaker 2: Fantastic. Ethan, really appreciate you joining me this morning. That
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  Speaker 2: was Kai Ko, co-founder and operations director, Ethan Vickery.
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