New World

so the analysis that I'm referring to is coming from the latest Commerce Commission report on the supermarket sector.

So there it says that Woolworths are earning a 1% EBIT margin and Foodstuffs, which is the pack and save and New World brand, they're earning between 6% and 7%.

between them.

The average is probably somewhere in that kind of 3% to 6% based on the charts that I can see.

Well, they're not...

Okay, I'll go to Rupert quickly on that, because

I... particularly because Delmaine, I love their sun-dried tomatoes and I can't find them in either Woolworths or New World anymore.

And I'm going, what the hell's going on? Okay, I get you, I get you.

I think they gazumped Labour by a matter of minutes with the Labour's own announcement about removing price gouging activity from large companies.

The government came out and said, "Well, we're gonna break up Pak'nSave, New World, uh, Foodstuffs cooperative, and, um, divest out of that, and that's going to help solve the problems about high food prices." But, um, it seems it's interesting when we jumped into this a bit further and talked to some in the indus- the food growing and producing industry, it's kind of a case of, might be a case of careful what you wish for.

I had a good conversation with Simon Berry from Whitestone Cheese down in Oamaru there, home of some great cheeses.

He did sort of raise that slightly, and I think we all probably get it a little bit, a little bit of an icky feeling about breaking up a business that's been maybe built up by a family who started with a small grocery, maybe a Four Square grocery store, and built it up, and ended up with a Pak'nSave that they worked their way through to own.

And I, I think we all do value that cooperative system, which Foodstuffs is, and it's kind of breaking up a cooperative, as, as Simon said, it does sort of feel a little bit...

I don't know how well it sits with all New Zealanders, just on [laughs] on that sense, yeah.

You know, when I think about that sort of Four Square to New World path, it's quite well known.

You know, you've got, like, in Palmerston North, near where I live, you had, um, Chris Martin, the, um, former Black Caps bowler, he, he, he'd done that, and so I think there are a few former All Blacks who have taken that path.

It's a trolley being pulled apart.

One half is Peckinsafe yellow, and the other part is New World red.

And that's exactly what it's about.

It's about the proposed splitting of foodstuffs into New World and Foursquare and Peckinsafe.

So let's talk about the Sense Partners report.

So they are saying that the welfare, this is over a 10-year period, will be somewhere between $920 million and $4.1 billion.

And apart from that, what the Prime Minister also said in his interview with Mike Hosking this week was...

And Nicola Willis said the same later with Heather de Plessis.

We can come back to that as well.

So from a starting assumption that foodstuffs sets prices centrally for its pack and save banners and its new world banners with one eye looking at the other banners profits and they then get some benefits from separation.

So how does that work? If you think that pack and save is avoiding cutting prices if it thinks it's going to steal customers from New World, and New World will avoid cutting prices if it thinks it's going to steal customers from pack and save, then splitting those banners would mean that they would no longer have reason to care about the other banners' profits and they might price more sharply or they might decide to open up stores next to each other.

So that's the mechanism through which they get these benefits while holding a lot of other things fixed.

They also recommended an awful lot of sensitivity tests that they didn't have time to undertake and that I think really ought to have been undertaken before anybody threatened to break up the supermarkets.

So when you assume...

Okay, let's step back a little bit.

The magnitude of the reduction in profits that they expect to happen as consequence of tighter price competition between New World and Pack and Save and then with Woolworth following suit.

So, um, this is the Labour plan.

La- uh, National have put forward a plan, um, a few days ago, which, uh, essentially breaks up, um, uh, Foodstuffs, uh, into Pak'nSave and another group, which would be New World and Four Square, and leaves, uh, Woolworths unchanged.

Um, why do you think, uh, Labour's policy would work and National's wouldn't?

We looked at that model and a number of other models that have also been subject to Commerce Commission inquiry and work by groups of economists in New Zealand for many years.

We'll take into account things like cost to service, but it should be about the same price if you're running a small, uh, grocer, a small independent Bernard Hickey's shop, and a small Four Square that is trying to make the same offering.

Those two shops should be able to buy from the wholesaler at about the same price.

But one of the reasons people go to a Pak'nSave or a New World instead of a Four Square or a, uh, more local shop is that simply the, the big box stores have much wider ranges and the ability to have their own butcheries and their own bakeries, which those local stores could never have.

Do you really think the small stores can compete with the big box stores?

A concerted campaign from foodstuffed supermarket owners is now underway.

Claire Gallagher is the owner of New World Kaurau and joins me now.

So supermarkets, a lot of tension on supermarkets right now.

You obviously posted on Facebook about the situation.

So we can support and we do support as many local growers and suppliers as we can.

It's never an issue.

And National's policy to break up foodstuffs have New World and Foursquare on one side, Pack and Save on the others.

You've owned a Foursquare, you own a New World now.