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Image: Archi Banal/The Spinoff
Image: Archi Banal/The Spinoff

PoliticsJuly 29, 2021

NZ supermarket giants warned: Change your ways or face break-up

Image: Archi Banal/The Spinoff
Image: Archi Banal/The Spinoff

New Zealand’s two grocery giants have been warned by the government’s guardian of free markets to allow significantly more competition into the sector – or parliament will be told to break you up. Justin Giovannetti reports.

The conclusion that New Zealand’s grocery bills are among the world’s most expensive won’t come as a surprise to many shoppers, but today’s study from the Commerce Commission explaining how food got so expensive makes for bleak reading.

The country’s grocery sector is effectively broken, the commission found. It’s a duopoly, split between two grocery giants that squeeze their suppliers, control food prices by dominating wholesale, don’t compete for customers and then offer misleading specials to keep them confused. In the end, Foodstuffs and Woolworths pocket excessively high profits, the study concluded.

The market study, only the second undertaken by the commission, was ordered by the government last November into the $22 billion grocery sector. Today’s draft report will be followed by a final set of recommendations in November.

The clock is now ticking to make the grocery sector competitive again.

Commission chair Anna Rawlings outlined a number of voluntary actions the two food giants could take to create new competition in a sector where they’ve virtually eliminated it. If they choose not to act or take it too slow, she’ll advise the government to consider breaking up the companies.

The report concluded that New Zealand’s groceries are the sixth most expensive in the OECD, a group of rich countries. The price isn’t solely due to shipping and local labour costs. Instead, the commission found that much of the increase was going into what it found were “excessive” profits.

The commission expected the two retailers to make, at most, a 6% return on the capital they invested. Instead, it found that Foodstuffs had a nearly 24% profitability rate, while Woolworths was at about 22%.

Foodstuffs, which owns the Pak’nSave, New World and Four Square brands, said it was looking at the “wide-reaching implications” of the report, but said the commission’s calculation of its profitability was inaccurate. It did not offer a revised figure.

There are similarities to the commission’s first study, of the fuel market. It concluded at the end of 2019 that consumers were getting a rotten deal at the pump, with the prime minister saying they were “getting fleeced”.

While petrol prices haven’t moved much yet, Rawlings said there’s a delay between finding the problem, drafting legislation, implementing it and seeing prices come down. New fuel regulations are about to take effect.

There could be a similar delay for the grocery sector. “You can expect that any intervention that depends on the recommendations might take some time,” said Rawlings. However, she said she hopes some measures might be implemented voluntarily.

The commission looked overseas to find examples of similar grocery sectors that were concentrated between so few companies but were made competitive again. It found none. “New Zealand’s issues appear to be unusually difficult,” said commissioner John Small.

Commerce minister David Clark said he’s waiting for the final report in November, but the government is prepared to act. “We are determined to ensure that Kiwis get a fair deal,” he said.

Clark repeatedly mentioned a “fair deal”, over a dozen times, in a 10-minute press conference. He wouldn’t say whether the government would be willing to legislate an end to the duopoly.

There are some easy fixes that could take place almost right away. With the two companies controlling both retail and the wholesale market, they could allow small competitors more access to wholesale prices. They could compete more on prices internally to drive them down.

The companies could also sign codes of conduct with suppliers. Right now, the commission found that the two companies push far too much risk and uncertainty onto suppliers. Citing a “power imbalance”, it said the giants force suppliers to accept difficult terms or threaten to cut them off completely. They demand up to two months to pay suppliers and there have been cases where they’ve stockpiled items, purchased at discount prices for specials, only to sell them later at full price, pocketing the difference.

One of the report’s suggestions is that the government could create an independent wholesale operation – either a new company to compete with the existing chains, or by separating the wholesale businesses from the existing giants.

If those measures fail, the commission said that a third large retailer in New Zealand could help reduce prices. The competitor could be created either by requiring both companies to sell off a number of stores across the country, or by providing incentives for a completely new company to rise.

According to Rawlings, the commission isn’t sure yet whether the new competitor would require government support to start. She said there could be a similarity to the move to break up the telecommunications monopoly of Telecom, which included spinning off Chorus to control the network infrastructure across the country. Chorus then needed government support to build new broadband. 

Countdown, a division of Woolworths, said in a statement that it was still looking at the report, but “some of the recommendations would have significant implications”.

It also warned that “New Zealanders will have strong thoughts and feelings about the report and would ask that they keep it kind when shopping in our stores and treat our teams with respect”.

Asked about the statement, Rawlings said she was surprised by the company’s warning that its staff would becoming a target because of the report. “I’m stunned by the suggestion that a local checkout operator should be treated poorly as a consequence,” she said.

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Photos: supplied
Photos: supplied

PoliticsJuly 29, 2021

Chris Bishop: Five ideas to improve New Zealand’s vaccine rollout

Photos: supplied
Photos: supplied

As the delta variant spreads around the world, the importance of our vaccination programme only grows. And it needs to be better, writes the National Party spokesperson for Covid-19 response.

There are few things more important right now than the efficient and effective rollout of Covid-19 vaccines to New Zealanders. It is likely the single most important thing the government will do in the life of this parliament. The vaccines work and we need as many people as possible to get jabbed as soon as possible.

National has been critical of the government’s efforts to date. We were slow to sign contracts with the manufacturers of vaccines. Then we were slow to actually order Pfizer doses and we didn’t order enough. As a result, New Zealand has the slowest rollout in the developed world, behind Australia, behind South Korea, behind Japan, and behind Colombia.

Does this matter, when New Zealand has no community transmission of Covid, and we are safe locked away in our hermit kingdom? Yes. As public health experts have noted, we are sitting ducks for the highly transmissible delta variant of Covid, and the possibility of delta rampaging through our largely unvaccinated population (like in New South Wales and elsewhere) is real and frightening. That alone is reason enough to do whatever we can to speed up the roll out. But we also need to reconnect to the world – we can’t sit in splendid isolation forever.

National has led the charge on a range of sensible ideas to improve our response to Covid-19. For example, the following things were once dismissed by the government but are now either government policy or are being actively looked at: pre-departure testing for travellers to New Zealand, purpose-built quarantine facilities, saliva testing in MIQ and at the border, and separating higher-risk arrivals in MIQ from lower-risk arrivals.

In the spirit of constructive criticism, here are five ideas for improving the vaccine roll out.

Set a national target for the percentage we need vaccinated

It’s obvious that many people are keen to get vaccinated, which is great. But the challenge isn’t getting to 50% of the population. The big challenge is getting from 50% or 60% to 80% to 90% – and quite a lot turns on whether we can do that. Modelling by Te Punaha Matatini suggests we need around 80-85% of the population to be vaccinated before we could completely relax controls against the alpha strain of Covid-19. The number is 97% for delta, which will be very challenging indeed.

We urgently need to set a target for how many people we need to be vaccinated, and what that level means in terms of border restrictions. The government’s current line is just that “we want everyone to be offered a vaccine by the end of the year” which is superficially appealing but meaningless: what if that results in just 60% being vaccinated? The government needs to outline an ambitious target – and also what it will mean when we get there.

Setting a target in and of itself will make a difference. Kiwis are good at getting behind national campaigns and striving collectively to reach a goal: think telethons, America’s Cup red socks, even buying a beach. Let’s put the “team of five million” to work and get in behind a national effort to reach a goal.

Change the language: what are the benefits of vaccination?

At the moment, our vaccination communications campaign is almost solely focused on the idea of protection: protecting individuals against Covid-19, and protecting the community. Don’t get me wrong, that’s extremely important. But a lot of people sit back and think: “I can go to Six60, or I can go and see Fur Patrol (a better choice), I can go out to dinner, I can have mates around for drinks – not many other places can do that. Why do we need the vaccine?” A lot of people just don’t see the urgency for the vaccine because we don’t have Covid-19 in New Zealand, and we’ve done a pretty good job of keeping it out so far.

Try flipping things around the other way. Once we have a high level of vaccination coverage, New Zealanders can likely begin to travel offshore, visit family and friends, (and return) a lot more easily. For a lot of people, that is probably a motivator to get vaccinated. Vaccination means freedom. But the government, from the prime minister down, talks very little about what New Zealand will look like once the vaccination campaign is over. We’re told there’s lots of work going on around what our border will look like, but precious little has been shared with the public. The sooner that changes the better. We deserve to have a roadmap out of the hermit kingdom. A bit of hope is a powerful motivator.

Let’s try vaccine incentives

There are lots of people out there who are a bit reluctant to get vaccinated, or a bit worried. Education is one way around that, but why not design an incentive system to give people a nudge to get vaccinated? Other places are making use of positive incentives like payments to get people to get vaccinated. West Virginia is paying $100 to everyone aged between 16 and 35 who gets jabbed, for example.

There is good logic to this. A vaccine is a public good. A vaccinated population will mean the government avoids costly lockdowns, and mean we have more ability to begin to open our country up to the rest of the world. Just like we pay businesses a wage subsidy to lockdown and avoid community transmission, we could pay people to vaccinate.

The aim is all about behaviour change. Why not get our country’s top behavioural experts to devise an incentive system. Perhaps all those who book an appointment in the next 2 months, and then turn up to that appointment, receive a payment, or a voucher, or maybe enter a lottery for a big prize (and grandfather in everyone who’s already got one). Whatever it is, if it increases our vaccination uptake it will be cheaper than a lockdown.

Partner with civil society

The system at the moment is sterile, officious, and way too “one size fits all”. As Councillor Efeso Collins has noted, it’s driven by Ministry of Health bureaucrats, not by communities. Bureaucrats are generally good people. Heaps live in my (former) electorate. But they’re generally not good at grassroots organising from the bottom-up. The government should be considering partnering far more with what we used to call civil society to get jabs in arms.

DHBs should be connecting with churches, mosques, temples, and sports clubs and arranging for vaccination opportunities. Offer to help pay for food, drinks, and marquees. Make vaccination events actual parties and community gatherings. There are hordes of Rotarians and Lions Clubs members out there just waiting to help out in a national community vaccination campaign. We should be doing whatever it takes to get people there, and get jabs in arms.

During the Covid-19 lockdown I helped set up over 100 community Facebook groups driven by local “street captains” who took responsibility for making sure everyone was looked after on their street. Why not try a whole series of street parties where neighbours come and get vaccinated together, and share some fellowship at the same time? You never know, we might end up with a more cohesive and safer community out of it too.

Go door-to-door

At the end of the day, nothing beats going door-to-door. We saw this with the botched census – sending emails and text messages just can’t compete with a face-to-face interaction.

Before the end of the year we will need to ramp up door-knocking to get to the hard to reach parts of our communities. If we can do this for the census then we can do this for the vaccination campaign. It is just as, if not more, important.

The government needs to be putting in place the mechanisms now so we can target houses or areas with low vaccination. We could even try nurses offering on the spot vaccinations, or volunteers organising appointments. As every good MP will tell you, nothing beats face to face contact when you’re trying to persuade people.


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