Foodstuffs North Island Limited

Welcome to our loyalty podcast.

Of course, first and foremost to our listeners, but also especially a warm welcome to our two guests, Timothy Yun from Foodstuffs in Auckland and Andreas Fabricius from Playable.

Now, um, before I let you introduce yourself, guys, um, I wanna add in a little opening question, uh, that you can perhaps elaborate on as you, as you reply and as part of your, your introduction.

So naturally the question is, where does your loyalty lie? Um, and feel free to interpret that question in any way you want.

... not have, and it's certainly better than liking and scrolling.

So yeah, so we've, um, had a group of people from, you know, all over the show, uh, a couple of months ago, um, the guys at Woolworths and Foodstuffs, negotiants, a bunch of wine brands, Moore Wilson's here in Wellington, Wines and Spirits, Caros in Auckland.

These are all people that really not only want to sell wine, but they are deeply invested.

They love wine.

They, they wouldn't have control anymore of the wholesalers.

Uh, Foodstuffs and, and Woolworths, they do the same thing, so everyone's equal.

So yeah, that's a pretty good way of doing it instead of breaking up a, a business, right? You're making it equal for all businesses, big or small, to get the same price on the wholesaler, and then it's up to you to figure out your own price, which brings in competition.

So I think that's better than, than taking a business away from a, a business, right? A government taking a, a business away from, from an owner, right? You control the wholesale.

Like, I, I think we do need competition in the market.

However, people that think that the buck stops, starts and stops with supermarkets, um, that's not quite the picture because you have Foodstuffs or you have the people that kind of own the supermarket franchise, and then you have individual owners.

And then the as- the assumption would be that they have autonomy over the prices that they can make food.

But really, that's not the truth at all.

Yeah.

The, the, like, I have to...

There's, there's rules and guidelines that, you know, maybe Foodstuffs sets that as an owner I have to listen to all the vendors that have the relationship with Foodstuffs to supply the supermarkets.

I couldn't as a supermarket owner just go along to all the potatoes, you know, the potato farms and be like, "Hey, can we like cut a deal here to like make..." Like, you're literally not allowed to do that.

And I think we need to look at the history here.

Foodstuffs and Woolies have not got a great track record of being open to competition.

Look at the way they've used buy land, put a covenant on it, and then sell it again to prevent other competitors from actually going and setting up supermarkets.

So these guys play tough.

If it is the case, we move forward with it.

It may well be that Foodstuffs decides to do it voluntarily.

It may well be that we have to mandate that happening.

equally the Commerce Commission could come out with a deeper analysis, you know, given everything that we've led to, we've summarised everything this government's had and other previous governments as well, and they've said this is the best pathway forward.

So we discussed last week, we're both very aware that the supermarkets, something's got to be done about the duopoly and about the lack of competition.

Foodstuffs and Woolies have 82% of market share.

Foodstuffs I think is 50% and Woolies is 32%.

So it's massive.

So basically what the policy, they're going to do a Commerce Commission report to see, the Commerce Commission has power, so it's going to look under the lid and see what's going on.

So Foodstuffs make about 4% margin.

The OECD average I think is like 2.5%, 2.8%.

So They do make quite a high profit, since partners have done a report on whether or not to break up Foodstuffs, or break up Foodstuffs and Woolworths, because you're not wondering why they're just targeting Foodstuffs.

something different.

It's fair to say Foodstuffs isn't impressed.

Its North Island chair, Tauranga Pakansave owner Dean Waddell, says the organisation has spent a long time, quote, educating political parties about its structure.

He doesn't think it'll drive grocery prices down.

So if you're a foreign investor looking to do business in New Zealand, I think you'd be thinking twice with all these pronouncements.

You'd think, well, and would Woolworths, who are a foreign investor, think, What if our profits bounce back up? Are they going to come after us? So, yeah, it's very problematic from our perspective.

Foodstuffs is part of BusinessNZ's major companies group, so Nicola Willis thinks it's not exactly an unvested interest here.

She's taking the extraordinary move of criticising lobbying, conveniently ignoring the times the government has sought counsel from lobbyists on matters like energy and the India FTA.

But Mr Shields says that's not benefiting consumers at the moment.

None of that margin improvement that Foodstuffs North Island gained through that centralised buying was passed on to the New Zealand consumer.

It was all absorbed as more profit for Foodstuffs.

Mr Shields says if Pack and Save and New World are competing against each other, there would be more pressure on them to lower prices.