A victory for Jones

February 21st, 2014 at 10:00 am by David Farrar

Stuff reports:

is claiming victory in his campaign against supermarket group , with the Commerce Commission confirming it is investigating allegations of anti-competitive behaviour.

After days of Jones making allegations about the Australian-owned company in Parliament, Commerce Minister Craig Foss suggested an investigation into the entire ‘‘supermarket sector of New Zealand’’, although the regulator later confirmed it was only looking at Countdown.

‘‘The investigation will involve seeking a wide range of information from a variety of sources, including organisations from all areas of the supermarket sector,’’ the commission said in a statement.

Jones has been calling for an investigation into supermarkets since his tilt at the Labour leadership last year, but stepped up his campaign last week when he claimed in Parliament Countdown was using ‘‘Mafioso’’ tactics, accusing it of using blackmail and extortion against Kiwi suppliers.

Jones has done well to get this issue onto the political radar, and to now get the Commerce Commission investigating. I think he is in danger of over-reaching at times with some of his language and now that the Commerce Commission is investigating – the complaints should go to them.

But while Jones may have gone too far with some of his language, my understanding is that his central assertion around Countdown demanding retrospective payments from some suppliers is well supported.

We all wait with interest the work of the Commerce Commission.

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50 Responses to “A victory for Jones”

  1. double d (225 comments) says:

    this guy is very hard to understand. he seems to be able to connect on issues that are relevant (it seems Labour politicians have difficulty in understanding what is relevant with beltway issues occupying a lot of their thinking) yet his flippant and arrogant manner neutralise the impact. he gave an interview yesterday in which he alluded to his porn watching and finished with “but Jonesy got this one right”. Third person reference to oneself? Jonesy?
    Just not hitting the right notes.
    and saw him on TV One this morning and his body language was poor – slouched, offhand and tired compared with Coolins who came across as bright, positive and energetic.

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  2. queenstfarmer (768 comments) says:

    1. I have no problem with an investigation, but I am concerned that it will descend into ignorant nonsense (if it hasn’t already) such as ‘shock revelations’ of suppliers having to pay for the best shelf space and special promotions of their products. This has been standard around the world for years, and is perfectly legitimate and legal as long as there is no collusion or other anti-competitive practices.

    2. I hope the investigation looks at the broader issue of competition in the supermarket sector, and how to reduce barriers to entry. For years, a major barrier has been incumbents (mis)using the Resource Management Act to prevent a competitor setting up nearby an existing store, or at least delay them for years. The law has been partly fixed to reduce this, but it still goes on. Now, the trick is to rally locals to oppose the competitor on your behalf (and local Green party type are always happy to do the corporate’s bidding by opposing their competitor opening a new store and increasing competition).

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  3. lastmanstanding (1,263 comments) says:

    One lives in hope that Com Com are up to it but alas wont be surprised of Com Com say “nothing to see here move on” They strike me as a weak lot who will be very easily lead and intimidated by the heavies from the legal profession that Countdown will bring in to muscle them into giving in.
    What this needs is strong forensic accounting and legals who can put the Directors CEO and senior management of Countdown under the hot lights and water board the confession out of them.
    But Com Com will politely agree with Waters and the other corporate bullies in Countdown and cave in.

    After this we need the oil companies investigated and turned over. They are a cartel and have been for decades. No NZ Government has had the balls to take them on because they always threaten to up stick and leave NZ if they are confronted.

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  4. Dean Papa (787 comments) says:

    Referring to himself in the third person. Using ministerial credit card to watch porn. What a sad little fantasist Jones is. Yet there are clowns talking him up as a possible Labour leader. Obviously Nat supporters.

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  5. Harriet (4,752 comments) says:

    “…..slouched, offhand and tired compared with Coolins who came across as bright, positive and energetic….”

    Coming across as a ‘bro’ isn’t a good look when business people and National are relatively professional in appearance. It is afterall a government/business matter.

    Jones may well overreach as DPF has said, and start to look more like Russel Norman – anti business.

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  6. Chuck Bird (4,821 comments) says:

    I think Johns did quite good. I wonder if some in Labour might be thinking they made the wrong choice of leader.

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  7. flash2846 (252 comments) says:

    MISLEAD then MSIDIRECT – That’s labour party tactics and sadly they are working.

    Jones with all his bluster has taken the focus away from the train wreck that is Cunliffe and co. We need this investigation done and dusted very quickly so Kiwi’s can look to and appreciate the real progress of this government.

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  8. smttc (722 comments) says:

    He’s done well because as he has now admitted, he resorted to exaggeration and hyperbole. He’s still a pompous git though.

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  9. Kleva Kiwi (285 comments) says:

    I can’t wait for the report to come out, preferably before the election, as in right before, saying that there is nothing to see here, its just business as usual.

    I think this is a well laid trap for the Labour stooges. Can’t wait for it to backfire.

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  10. Ed Snack (1,831 comments) says:

    On what grounds is the allegation that the Oil industry in NZ is “a cartel” ? That they all charge remarkably similar prices and tend to move in concert ?

    If so, you may be surprised to hear that such practices are quite normal in a market where a number of companies are basically selling identical products into a saturated market. There are several reasonably sized independent chains who import directly and thus have separate supply chains, so if there was sufficient fat to be extracted, they would be doing so, yet there is no credible evidence that excess economic rents are in fact being extracted.

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  11. WineOh (624 comments) says:

    Actually Shane comes across as being one of the few in the Labour Caucus that passes the “good bloke” test that has made John Key so popular. Looks like someone has been taking lessons, where Cunliffe, Parker and the rest seem to be working from the wrong playbook.

    The Countdown move is smart politics too, picking an issue that plays to Kiwi themes of fair play, anti-Aussie nationalism, and for once isn’t a snide attack on a successful government. Nicely positioning himself to take on more credibility.

    Now if Shane Jones could just engineer a victory over Australia in cricket… they’d be laughing.

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  12. wreck1080 (3,859 comments) says:

    Sounds nasty, I’d hate to be a supplier. Sleepless nights, stress, payroll issues.

    Gotta say, countdown are an example of a ruthless and heartless business who use their powers to trample over people to glean an extra cent of profit. This type of company is the unfortunate reason unions are still needed. Many businesses are not fair or good at all.

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  13. BeeJay (71 comments) says:

    It’s too late!! Any evidence would be destroyed by now. If Jones had taken his concerns directly to the Commerce Commission, produced the evidence that he had instead of grandstanding in Parliament, the Commission could have swooped on the major Countdown offices and would have the evidence, if there is any to be had. The Commissions powers of search are so significant, more than most Kiwis realise, and a full search couldn’t have been averted by anyone at Countdown, that’s for sure. (I have personally viewed a Commission search in progress.) All Jones has done is give Countdown plenty of time to get rid of any incriminating evidence, transfer staff, or whatever else they needed to do to tidy up their act!! Jones, as a significant ABC player in Labour caucus, is making his own play for the leadership, but I suspect that he might also have “shot himself in the foot”!!

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  14. Chinarugby (86 comments) says:

    In a past life when I was younger and not long out of Uni I was employed as a National Category Manager at the predeccessor of Countdown – Foodtown if you recall it.

    Long story short, the way we behaved as a company to suppliers was ultimatum based – essentially do it or else. We would put companies to the wall – most especially smaller companies.

    The fees we would create were onerous to the suppliers yet a great source of income.

    Every so often an Aussie exec would be rolled in for a year or so and the blood games bagan. I believe we behaved in a borderline corrupt manner and it’s taken me years post my 20’s to realise this.

    I have wondered if I should send Jones a more comprehensive communication of my experiences.

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  15. chris (613 comments) says:

    If the supermarkets really are doing all this nasty stuff to the wholesalers (and I don’t doubt they do) then yes, they do need to stop screwing them over. However, don’t be surprised to see prices rise at the checkout.

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  16. freethinker (688 comments) says:

    I suspect Jones does have proof and is drip feeding the details to allow the Co and its CEO/Chairman to continue digging, supplying the Com Com with evidence in the form of recordings of conversations – paid cheques – e-mails-affidavits especially if there are multiple examples and if the retailers body does have records of complaints will stuff Woolworths management and label them Blackmailers & Liars, the alternative is Jones looks a complete fool. Whatever, the damage is going to be costly for either Woolworths or Labour . I was surprised at the almost categorical denial by Woolworths as it would have been more pragmatic to say it is not co policy and not something they approve of, and if a rogue buyer has been doing this we will investigate and remedy, at least this would have mitigated the issue if Jones is right. It may be that the lessons of pants down Brown, Banks and the UK News of the World saga’s have not been learned.

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  17. Manolo (13,517 comments) says:

    Victory? What victory?

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  18. markm (112 comments) says:

    Has Jones , or anyone else thought this through.
    Yes Countdown are clearly very tough on dealing with suppliers.
    They are in a very cpmpetitive market so need to screw the lowest price they can.
    They may well have contracts with suppliers that require their product to meet certain targets and if not , they require a further discount.

    Jones has not mentioned wether any of this ” Mafioso” behaviour is actually part of the contracts.
    Hopefully this will come out in the investigation.

    But whats Jones end game here.
    If Countdown is required to be nicer to suppliers i.e pay them more , then the consumer will be worse off , not better as Jones has claimed.

    Then of course if the consumer has to pay more , Mr Jones can ride in on his brown horse and claim nationalising the supermarket industry is the only way to go.

    Mr Jones lost me when he claimed this issue as a personal win.
    If it wasnt purely about personal political positioning , he would have claimed this as a win for small business or consumers

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  19. alloytoo (525 comments) says:

    While Jones has definitely scored this week, the goal goes to Jones and not labour.

    If anything Jones has highlighted how out of touch Cunliffe and co are.

    Imagine if Jones were to defect to the Maori Party now.

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  20. Ed Snack (1,831 comments) says:

    Wreck, if you think there’s a union representing the small business owners, then you’re sadly mistaken. In fact for small business owners to get together and take collective would probably be illegal under the commerce act.

    Actually I suggest that the “market” in which the supermarkets operate is is more like an “oligopsony” (as in a dual monopsony, which is a purchasing monopoly), and that gives the purchasing entities definite advantages in leveraging prices downwards. If there were more purchasing participants the suppliers would have more opportunity to refuse the proffered sales terms.

    Yet because the retail end of the business is competitive most of the benefit from this purchasing squeeze actually falls to the consumer. There is little evidence so far that the supermarket operators are making large profits on an asset or turnover basis. Though I would think that any retrospective demand for payments would be intended to go straight onto the bottom line.

    As Chinarugby relates and as I am also aware, this sort of heavy pressure by the supermarkets (and related chains) on suppliers has been going on for a long time. I recall my father going on at one stage about the pressures put on a local manufacturer of, I think, Aluminium foil, back in the late 60’s or thereabouts.

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  21. Chinarugby (86 comments) says:

    Hey Chris – most of the money we screwed out of the suppplier went into our bottom line – certainly not to the customers by way of lower prices I can assure you of this.

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  22. igm (1,413 comments) says:

    If Labour/Greens ever gain power we will be told how to run our businesses, what our profit margins will be, what we pay our staff, along with conditions, plus we will also be taxed on turnover . . . communism will rule once more. Jones still will not slide out of Parliamentary privilege, and won’t go into specifics, just another left-wing bullshit artist. Must be related to Winnie.

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  23. dime (9,788 comments) says:

    If they are bullying suppliers then that’s just not cool. It might turn out to be a “cry baby of the week” type thing though. To use a whale oil term..

    The bigger issue i see are the two chains using their influence to keep others from entering the market. I look at the pak n save in glenfield, it was built and then sat empty for a couple of years as countdown fought its opening via the council. thats just bullshit.

    its a shame the warehouse didnt have a proper crack at grocery. ive heard they got out as it would make them more attractive as a takeover target to woolworths.. cant see that happening though.

    Id like to know how the big two respond to new threats. is there the old “if you supply them you cant supply us” going on?

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  24. RightNow (6,962 comments) says:

    @deanpapa
    “Yet there are clowns talking him up as a possible Labour leader. Obviously Nat supporters.”

    You’re the clown if you think Nat supporters aren’t delighted with Labour’s current leader ;)

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  25. BeaB (2,104 comments) says:

    What makes me suspect Jones’s hyperbole (self-confessed) is that I cannot see the point in driving your suppliers out of business, especially in a small country like this where there aren’t a lot of options for supermarkets to choose from. They need good products and the ‘name’ products or else they would go out of business.

    I am sure that the other chain, Foodstuffs (?), employs all the same tactics and I am sorry they aren’t included in the investigation.

    Time to go and buy this weeks bargains!

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  26. Viking2 (11,338 comments) says:

    its a shame the warehouse didnt have a proper crack at grocery. ive heard they got out as it would make them more attractive as a takeover target to woolworths.. cant see that happening though.

    Id like to know how the big two respond to new threats. is there the old “if you supply them you cant supply us” going on?

    ===================
    umm. Countdown/woolworths and Foodstuffs both already own some 10% each of the warehouse shares. One would think that they both own more via other means such as friendly food stuffs operators and various other identities.

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  27. chris (613 comments) says:

    I could be wrong, but I don’t think it was just a price thing that caused issues for The Warehouse, although that was almost certainly part of the issue. I think a lot of the problem was simply that The Warehouse wasn’t a supermarket and it was a bit clumsy trying to effectively put one inside their red sheds. I reckon a better approach would have been to start up standalone Warehouse Supermarkets. That might have worked.

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  28. questions (192 comments) says:

    Nationals continued attack on Jones makes it seem like they would have brushed it under the carpet if they were approached with the information (or perhaps they were?)

    There are also numerous factual errors and a large amount of inaccurate speculation, please read all the information around about this before commenting, or you will look like a fool.

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  29. Nick R (504 comments) says:

    I am very curious as to why Government Ministers have repeatedly demanded that Jones repeat his allegations against Countdown outside Parliament.

    The only reason to do this is because it would then allow Countdown to sue Jones (or anyone else who reported him) for defamation. Leaving aside the practical question of why on earth Countdown would want to do something so stupid – why does the Govt want Jones to do this? If they think Jones has been lying in the House they should take him to the privileges committee, but they haven’t done that.

    I doubt they are trying to silence him – it’s too late. But obviously they are trying to make some sort of point. If anyone knows what that point is I’d like to know.

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  30. PaulL (6,013 comments) says:

    @NIck R: Just standard practice when anyone makes allegations inside parliament. You challenge them to repeat outside to see how confident they really are. I’m not sure that it implies any knowledge or any cunning plan, just bog standard sledging.

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  31. alloytoo (525 comments) says:

    The point is Jones is grandstanding.

    He made good points early on, got multiple inquiries kick started and generally showed NZ what incompetents the rest of Labour were.

    All good things.

    He should have left it there, let the inquiries run their course and picked it up when they issue their reports.

    The problem I suppose is that this is the only labour issue that has any resonance whatsoever with the electorate.

    Jones needs to retain ownership because he knows what opportunists his party colleagues.

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  32. Dean Papa (787 comments) says:

    @RightNow

    touche

    It must be very depressing to be a Labour supporter with the prospect of these two phonies battling it out for the leadership. Whatever Shearer’s faults as leader may have been, he was at least genuine, good and decent.

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  33. lastmanstanding (1,263 comments) says:

    IMHO the duopoly that is the supermarket business in NZ makes very healthy profits on the backs of screwing the suppliers. The consumers in NZ pay way over the top. It aint a competitive market and a real and full investigation by Com Com would prove this. But they wont because the supermarkets will have told the Government try and get tough with us and we will put food prices thru the roof causing inflation that will be blamed squarely on the Government of the day who will thrown out of power at the elections.
    That’s the way both the supermarket companies and oil companies work, They threaten the Government of the day shitless and know because of the tiny market that is NZ we are price takers not price makers so they can get away with it.

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  34. lastmanstanding (1,263 comments) says:

    Watch what will happen next. Apart from shredding evidence and dumping computer hard drives as a former poster said if Com Com do their job properly and don’t fudge it a middle tier manager or several middle tier managers will be ‘sacked” That is they will paid a huge sum of money to go and Countdown will announce its own ‘independent” inquiry has found it was an isolated incident that Jones bought to Com Com and the individuals have been fired and all other staffed “reminded” of Countdowns “Code of Ethics when dealing with Suppliers”

    The so called “sacked” employees will be found jobs in another arms length operation on the quiet and well looked after for taken the rap.

    Waters and his crooked Directors and the crooked CEO will make soothing noises and attempt to polish the Turd that is Countdown.

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  35. RightNow (6,962 comments) says:

    Why hasn’t Labour released their KiwiMarket policy yet? This is prime for a single buyer model.
    You know they’re going to, Shane is just laying the groundwork. The suppliers are already getting bullied, what’s the difference if it’s by government monopoly or private duopoly?

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  36. emmess (1,416 comments) says:

    Why hasn’t Labour released their KiwiMarket policy yet? Why hasn’t Labour released their KiwiMarket policy yet?

    No, the Herald is laying the groundwork for them.
    http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=11206513

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  37. RightNow (6,962 comments) says:

    No, but the Herald is laying the groundwork.

    I’d best start hoarding toilet paper then.

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  38. PaulL (6,013 comments) says:

    Well, most of us on the left always ask the question of why so many things (like airlines) apparently need to be govt owned, but not supermarkets. Food is, after all, the most basic necessity. I look forward to that policy, and the sudden consistency in the left wing position. :-)

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  39. Richard Hurst (823 comments) says:

    I’d like to point out a few things:
    Supermarkets have to stock product which SELLS. If a product can’t meet specific sales targets then having it on the shelf is costing the supermarket money. Often these types of low selling products are from small suppliers. The supermarket can’t help it if the supplier’s product isn’t popular or if customers aren’t prepared to meet the price that the supplier imagines their product is worth. As always the market will decide. I suspect there is a bit of this involved in the complaints about Countdown. By stocking these types of products from smaller suppliers the supermarket is taking a risk. I’m really not surprised that they expect to be compensated for this risk.
    Big brand suppliers , often foreign owned like Coca-cola (represented by Coca-cola Amtel in N.Z), Nestle, Heinz-Watties, Fucor, Mars Corp (Makers of everything from Pet food Chef brand to Choc Mars bar), Cadbury etc have serious power over NZ supermarkets and defiantly use it.
    Example: A certain popular beverage company generally keeps the majority of all profit from sales of their products in supermarkets. The supermarket also still has to purchase the product from them which gives this beverage company additional profit. Funnily enough the supermarkets aren’t running and crying to the commerce commission or Shane Jones about it. Supermarkets sometimes also have to contractually stock less popular product lines from the big boys if they want to retain major brands. This is called free enterprise and each party can voluntarily negotiate agreements based on each other’s market power. There is nothing wrong with this.
    It is industry standard practice to charge for display space for various products. This usually applies to products that will be on special each week. E.g.: Displays down the aisles of value usually at the store entrance, displays on the end of aisles etc. An average supermarket might gross $20,000 a week from selling this type of display space but that won’t even cover the wages of say the grocery dept for one week let alone any other dept. Let alone the weekly electric bill from running fridges, freezers, ventilation, air-con, computers, check out, ovens in the supermarket bakery run almost 24 hours, re-charging electric reach trucks in storerooms, monitored burglar alarms etc etc etc.
    It seems to me that based on some of the comments I see here and what I’ve read and heard elsewhere that people think the very idea that a supermarket should even make a profit is somehow wrong or a crime of some sort. They are a business like any other facing unique costs and challenges and must make a profit in order to exist.
    Personally I think we enjoy some of the most competitive supermarkets in the world, certainly better than what I saw when I lived and worked overseas. They have also not driven down wages to the appealing levels as seen in the United States and provide employment to literally tens of thousands of Kiwi’s. In Christchurch during the darkest period of the quakes our city supermarkets and their staff moved mountains (sometimes literally mountains of broken stock) to keep operating to keep supplying the city with its basic needs, often taking serious losses on the chin from unhelpful insurance companies or lost trading days.
    To anyone who does’t like what I have said I challenge you to start your supermarket and see how long you last.

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  40. OneTrack (2,965 comments) says:

    “”The suppliers are already getting bullied, what’s the difference if it’s by government monopoly or private duopoly?”

    In the government monopoly, nobody would be getting bullied because there would be no incentive to keep prices down. There would also be no incentive to have more than one supplier (friend of the family, nudge, nudge, wink, wink) anyway. You only need one brand of baked beans (it is so wasteful to have choice), so the man from the ministry can choose the “approved” supplier, and the others can go home.

    So, its win-win all around – the selected supplier gets to cream it, and the others aren’t being “bullied”.

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  41. Chinarugby (86 comments) says:

    Richard Hurst – you are wrong on so many levels.

    As I mentioned previously I held senior roles within both Supermarket chains and retain close links to current decision makers in the industry.

    You have painted a wonderfully idyllic picture of how the industry operates and you are very much off the mark.

    This relationship model you allude to simply doesn’t exist. The tactic I used years ago and which are amplified many times more these days see suppliers bullied frequently and emphatically.

    Suppliers are often informed they will partcipate in end of aisle specials etc – they are instructed to pay the $10 000 fee for it and are also told the price point at which they will seLL to the chain. It matters not whether they have exhausted their sales and marketing budgets for the period – they are to pay up or ……..

    The chains deeply manipulate consumers and suppliers by simple tactics such as to where products are placed.

    Example:

    Colgate branded toothpaste products usually sit at the consumers eye level – why? – one its a well branded product but more importantly they have a favourable financial relationship (favourable to the chain that is) which rewards the chain for ‘eye level is buy level’ – Colgate can spread the cost over many categories and other parts of it’s business (better still their finance people will do this that and the other to minimise taxes paid etc – so they claw dollars back somewhere).
    Have a look at which brand sits on the bottom shelf and collects dust as few people even look there – it’s probably a local brand and it is probably Red Seal. This brand has a decent product range and as probably as good as say Colgate BUT they can’t pay the ‘fee income’ required by the chain – result poor sales and a piss poor negotiating position. Red Seal is somewhat less expensive than Colgate as well as it doesn’t build huge marketing budgets into its pricing.

    I travel very very extensivley for work and it takes me to many country’s supermarkets and I can tell you categorically Richard Hurst that NZ supermarkets are not as you claim ‘some of the most competitive supermarkets in the world’ – that simply is not the case. Doupolies do not produce competitive markets.

    Perhaps if prices did rise, as some have lamented here, then that may encourage a third player into the market as unlikely as that is.

    Also supermakrkets do not only stock lines that ‘sell’ large volumes as you claim. Consumers of full service chains demand full range options – these consumers may only make up say 15 – 20% of the overall shoppers but they are high yielding and dramiatically more profitable than the consumers driven by price who seek out established brands.

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  42. Chinarugby (86 comments) says:

    sent message by error…..last point to Richard Hurst:

    You challenge someone to openm a supermarket and see how long they last….well in part due to the exclusion of so many local suppliers from the duoploly chains (most especially Countdown) we have seen just that – heard of Farrow Fresh and Nosh by chance?

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  43. chris (613 comments) says:

    Interestingly, the Farro Fresh just down from where I live is almost always very busy. The produce is usually far superior to the New World a few doors down (and the nearby-ish Countdown) and also usually cheaper. The other products they stock are generally pretty comparable price-wise, but they lack a wide enough range to be able to do all your shopping there.

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  44. BeaB (2,104 comments) says:

    Good for you Richard Hurst. It’s so boring reading about nasty supermarkets when most of us can’t afford the prices at farmers markets or corner dairies.
    Has anyone else been into the dingy, dark, grubby supermarkets in Australia and the USA?
    We are very lucky to have bright airy spacious supermarkets selling us a great choice of products.
    I think Jones should bugger off before the so-called poor find food is even more expensive – all thanks to him and his absurd demagoguery.

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  45. Chinarugby (86 comments) says:

    Beab – I agree our supermarkets are better maintained and cared for in general – these are peripheral and not connected to the issue at hand. People aren’t saying supermarkets are evil or nasty etc . the issue is their behind the scenes behaviour and whether they are or are not extorting suppliers.

    I am confidant any inquiry will result in nil changes – its a powerful duopoly – and duopolies don’t have much of a history of customer first – they don’t need to.

    BTW – Our supermarlets look great in part due to the tidy profits being made.

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  46. Richard Hurst (823 comments) says:

    RugbyChina– you are wrong on so many levels.
    Firstly your claim to “holding senior roles within both Supermarket chains and retain close links to current decision makers in the industry” carries no weight- you are an anonymous person making unproven claims. Making these claims does not give your opinion any authority; it just makes your claims dubious.
    Next $10,000 for a single display in one supermarket??? Mate if that was the case supermarket operators would be handing out free booze on the streets as the average supermarket (a Countdown or a Paknsave) may have as many as 80 separate special displays a week. Generally the most you could expect for a prime display at the entrance of single store in this country at one supermarket is around $400-$450 or so for the week. Of course if your talking about a nationwide or regional deal which say countdown might do then it could be around $10,000 to cover several supermarkets.
    Yes, of course consumers are manipulated by where products are placed- if you knew anything about retail you’d know this is retail 101 for any shop or retail chain anywhere selling anything. It’s no big secret nor is it crime or exploitation or extortion or anything else you want to claim.
    Yes some suppliers do their best to make their product as profitable for the supermarket as possible (Example: The liquor industry have been absorbing the tax increases on their products for years rather than passing it onto the retailers like supermarkets. They even boast about it in trade publications. If you read one you might learn something.) And they will get treated better also if you’re a major brand you’ve got a very strong negotiation position over the retailer. Do you think a supermarket that didn’t stock Coke products would survive for long??? No, and Coke know this as do many big brands. Imagine a supermarket without Hinez-watties products: dead in the water.
    Let’s take a hypothical situation outside retail:
    Let’s say a chef wants to open a restaurant in the CBD selling an exotic style of cooking that would really only suit the market in the CBD. The chef goes to the landlord and asks to rent a place. The landlord tells him 1 year rental is a million dollars. This is too much for the chef and therefore has to open his restaurant elsewhere or not at all. Is this extortion? No it’s the free market.
    As for Colgate/Red Seal- well let’s take their toothpaste- Red Seal have 6 lines , a lot less than Colgate and Red Seal costs a lot more than Colgate as it’s based on its “ health premium” and higher manufacturing costs here. Understandably they are not going to have quite the same ‘push’ on the shelves as Colgate whose relationship is more important to the supermarket as Colgate covers a huge variety of products and will for years to come whereas who knows what will happen to privately owned Red Seal when the couple who own it choose to retire? Also if the supermarket is trying to emphasize their prices are low they are not going to give prime shelf space to a high priced alternative. How is this ‘extortion’ or a bad thing? Its business.
    I never claimed supermarkets “only..stock lines that sell large volumes”. Only you are claiming this. Misquoting me is not a good argument. I said supermarkets have got to stock products that sell well and if a product doesn’t meet a target eventually it may be dropped. If it does then it stays. Less popular lines tend to be from smaller suppliers but if they prove popular or good earners with good return as you say then they stay. Again how is this a bad thing? An average supermarket however is not going to kick a line of say colagate off a prime position and give it to Red Seal and risk hurting a relationship with a global conglomerate. That would be insane.

    Managing who gets what space on a shelf is a constant battle to try and get the best profits for the supermarket without pissing off suppliers big or small so I’m not surprised there have been complaints. As I said before and I’ll say for the last time: Supermarkets must make profits in order to survive just like any other business- making profit from selling food is not a crime- if so then the whole of NZ will have to be arrested.
    The commerce Commission investigation will be an unfortunate waste of time- it will be impossible for the CC to decide what is extortion or unfair business practice and what just good, profitable business practice. What are they going to do- declare supermarkets may only make “X” amount of profit a year? They must stock this number of NZ manufactured products and give a set number for every single product range which will be sold at a govt set price and displayed in a govt mandated area of the store? Of course not. Total waste of time.

    BTW: Supermarkets along with any other retail outlet need to look great to bring in customers to make tidy profits, not look great because they make tidy profits.- common sense really.

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  47. Chinarugby (86 comments) says:

    The $10 000 was for regional/national exposure – I should have been more specific.

    As for red seal its promotes a health premium sure that doesnt translate into a price premium.

    Red Seal average selling price (via Neilson via a buyer at Foodstuffs North Island – 6 week rolling average to week ending 19 Jan) was $2.63 per unit – no premium carried.

    I feel no need to provide any credentials – if you choose to disbelive my involvment in the industry then thats fine.

    Seems the topic has died a natural death for now.

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  48. Swampy (273 comments) says:

    Chinarugby looks to be right on the ball to me.
    Countdown used to stock Kraft Singles cheese slices which I used to buy regularly until about a year ago when they disappeared completely. I wonder why one of the world’s biggest food companies wouldn’t be able to sell their product in NZ supermarkets (never been available in Foodstuffs’ stores).
    When I used to buy 2 minute noodles made by Maggi I could not understand why the local PaknSave was selling a three pack of these for more than the cost of three single units.
    The fact is there is a limited range of brands in most supermarkets and most people would find it credible that this is because the supermarkets sell shelf space to the highest bidder (probably in a closed tender process) so some miss out.
    The Commerce Commission should go much further and investigate whether the fuel discounts being offered by most supermarkets nowadays are an abuse of market dominance power. Even if I do not drive a car, I am still paying in higher food prices for these vouchers whose core function is to squeeze smaller retailers out of the marketplace.

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  49. KH (694 comments) says:

    We need these monopolies busted. But it seems the National Party doesn’t believe in actual markets.

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  50. Swampy (273 comments) says:

    The National Party believes in funnelling wealth to its supporters by whatever means possible. Therefore we have the debate that these tactics may be “legal” even if they do represent an abuse of power by a dominant player.

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