A food pricing inquiry
Sue Kedgley set off a bit of a flurry with her parliamentary line of questions yesterday calling for a pricing inquiry into supermarkets and a possible supermarket code of conduct:
Sue Kedgley: Does she agree with Consumer New Zealand that with a concentrated market dominated by a very small number of players, consumers need better information on whether the prices they are paying are fair, especially with rapidly rising food prices; and why will she not ask the Commerce Commission to initiate an inquiry, or hold a Government inquiry into grocery pricing?…
Sue Kedgley: Is she concerned that supermarkets mark up staples, even those with a relatively long shelf life, like pumpkin and kumara, by as much as 195 percent for kumara and 286 percent for pumpkin; if so, does she agree that New Zealand would benefit from a code of conduct for supermarkets, such as already exists in the United Kingdom, aimed at making sure that farmers, producers, and consumers all get a fair deal?…
Sue Kedgley: Has she seen reports that both the two big Australian supermarket companies have been accused by the Australian Competition and Consumer Commission of price-fixing practices that are “as close to being illegally collusive as we can findâ€?, and is she concerned that one of those supermarket chains is also a dominant player in the grocery industry here in New Zealand?…
Sue’s subsequent interview with Mike Hosking on Close Up is here. Note that she has the support of growers too, who also suspect they are feeling the pressure from supermarkets’ pricing practices.
One of the major supermarkets, Foodstuffs, rubbished the call for an inquiry:
“It’s just crazy to say there are only two retailers, there’s not.
“The best thing for keeping prices down is making sure you’ve got good competition and you’ve got the consumers voting with their feet,”
Hmm, well that view certainly does not seem to accord with the Commerce Commission, which is worried enough about the effects of the current supermarket duopoly that it is going through a very long court process to stop it being worsened by one of the supermarkets buying out the Warehouse. When two companies own 96% of the grocery market it can sometimes be a long way to go to ‘vote with your feet’ if there is not a nearby farmers market.
And Commerce Minister, Lianne Dalziel, has not completely dismissed the idea of an inquiry. She is waiting to see the results of the Australian inquiry before deciding on the merit or otherwise of Sue’s proposal.
June 27th, 2008 at 11:30 pm
What you have failed to consider is the effect of more specialised shops. Kedgley used the example of kumara and pumpkin; if she thinks they are so overpriced, then why doesn’t she go to the local fruit and vege shop. In Auckland, and I am sure other parts of the country, we even have chains of them. We even have chains of butchers these days.
The other thing one fails to remember is that even Australia has a de-facto duopoly on their supermarket industry; it is a battle between Woolworths and Coles with IGA having a minor role to play. I don’t think that New Zealand would be able to support more than two supermarket players; and should the Warehouse expand its hypermarket concept, I think that Foodstuffs may go bye bye, given its co-operative model weakens them somewhat.
June 28th, 2008 at 5:23 am
Have been saying a long time now that the power to confront the supermarkets lies in our feet.
if we are to lazy to use the power then we will buy into supermarket pricing.
So am with John-ston on this. We have the power by shopping at non supermarkets outlets, farmers markets and the like. We need to use it.
Quality is normally better especially meat and vege. Plus you get to see Indian, Chinese, Pacific, Vietnamese, etc. food varieties not normally stocked in the supermarkets.
And the growers need to use these outlets as well.
After having sorted out and busted the supermarket chains, will they take on the oil companies?
Becasue unlike food, we dont have an alternative supplier for fuel except the seven sisters. I would have thought that would have been a better commerce commision enquiry target then the supermarket chains.
June 28th, 2008 at 5:56 am
Another thought.
This examplifies the difference between a red-green and a blue-green.
A red-green wants the state to control pricing by shirking their individual responsibilities to shop at alternative and independently owned venues.
The blue-green takes the individual responsibility to get the lowest prices by selective shopping.
We dont need the state to do that. We do it ourselves.
June 28th, 2008 at 9:19 am
Some interesting comments from the Greens this week, it gives a pointer as to the direction of the Greens under Comrade Norman.
1. State controlled food pricing
2. Lunch Box police
3. State controlled fizzy drink distribution.
There is a name for a system such as this.
June 28th, 2008 at 11:36 am
At the end of the day, in theory, the answer is in our hands, we can shop around for the lowest food prices.
Thats the theory. In the real world, that is not practicable on a number of levels.
Lets assume I was shopping in Christchurch, since thats my nearest big town. I have the choice of several branches of all the brands of the the supermarket chains, plus Raewards (as seen on telly last night!), plus a few other specialist shops.
What I should do is to compile a list of items I want, and visit perhaps eight or ten outlets, at each one investigating the goods I require. I could then revisit those offering the best pricing, or best value, or best quality, or nicest looking, or select brand, or longest date, or some other variable, and collect the goods I require. However, this process would take significant time (perhaps five hours, if I got a wiggle on) and would involve significant driving, which is itself both environmentally sub-optimal, and costs money.
Not practical.
Given that we live in the communication age, I have an proposal, based on the Australian idea of fuel price transparency.
Every qualifying retail outlet is required to post on its web site no later than 4pm the descriptions, sell by dates, stock levels (just bands would do), and prices it will be charging from midnight for the next 24 hours. Then every consumer can find out what their shopping tomorrow will cost, and can optimise their shopping any way they want. People will write software tools that can analyse this data, and work out for a set of constraints where you should buy what.
There, easy.
Whats a qualifying store? Again, an easy definition: any store that sells to consumers and that has a networked POS (till) system. With such a system already in place, then adding web site reporting is a trivial and cheap exercise. Add a (mandated by law) “rat box” that monitors POS transactions, and if a price changes outside of the legal window to do so, automatically activates a penalty scheme, based on a multiple of the benefit of the price change to the cheatee.
The reason this is easy is that any store that for has a networked POS system is that 98% of the job is done already. All it needs is an upload of prices to a web site ability, which for most POS systems would just be a software upgrade of the POS software, plus a broadband line and a firewall. Big stores that do lots of price changes may want to have a couple of dedicated PCs and a resilient internet connection so they don’t get slapped for failing to comply due to equipment failure, but even so, for a store of that scale, the $10K cost is trivial.
As Gordon would say, “Done!”.
Even BB would like this, as there is no state intervention, its all in the hands of the retailers. You could even suggest that it is modeled on the changes that happened to market trading in the 80s, as the market making world went from open outcry to published pricing.
June 28th, 2008 at 11:37 am
How on earth did you come to THAT conclusion? Seriously. From this post or from somewhere else?
June 28th, 2008 at 11:41 am
If the Commerce Commission finds proof of dodgy activity, then there are consequences, same as under any government.
June 28th, 2008 at 12:00 pm
Gerrit,
Your “another thought” is the usual predictable, out of context, stirring (which is really a waste of everyone’s time). The only opinion that you reinforce is your own.
You can do better than that!
June 28th, 2008 at 12:13 pm
This comparison is easy, isn’t it?
Go to the websites of supermarkets in different countries and compare prices with those in New Zealand.
June 28th, 2008 at 12:18 pm
BTW: tinyurl.com/6xutqy
Flooded London. Cool pics, if a little fanciful.
June 28th, 2008 at 12:36 pm
Sorry eredwen, but no, it sums up the problem of having the State making every decision for you. Hence i’m in the Blue-Green camp.
Somewhere along the line we need to take personal responsiblity and if we cannot even be bothered to shop where it is most suitable for our needs and budget. We abdicate all responsibility to the state.
Once we do that we are nothing but slaves to whatever the state says.
If that is what you want cool, but it is not for me.
It goes against my Green philosophy of looking after the planet by looking after my little space on it first. What happened to the fundamental Green movement anyway. Individual alternative action seems to be forgotten for state control.
I prefer to be independent of thought.
The supermarkets cannot control us to the extent that they set prices that we “have to buy at”, if we just exercised our freedom to not shop there.
And for producrs to set up alternative distribution channels to bypass the supermarket chains. (prime example - Rivermill Bakeries in Humtly, their bread is available in most dairies in South Auckland at much cheaper prices than supermarket bread)
dbuckley, Suggest you come to South Auckland. Plenty of alternative shops within a short distance. You might even get to like Indian, Pacific, Chinese, Vietnamese, Thai, Moroccan, Middle Eastern, South African food products.
Maybe you need to break the “shop once a week” syndrome.
Everytime we go out somewhere we discuss what is needed and buy it on the way. No need to shop once.
Mind you that is my European upbringing but that is how we shopped.
Locally and often, in the cource of living life. We never went “just shopping”
The cost of your EftPos reporting system requires quite expansive (and expensive) database software (cant do that on an Microsoft Access platform), a dedicated bunch of adminastrators, web server capacity, etc.
Those cost implementation and ongoing costs will be added to your food bill. Is that not what the problem is? High food prices and you want to raise them even higher?
Also makes assumptions that all transactions are by eftpos or credit card (we pay a lot in cash to get bigger “discounts”). And that all will have internet access.
June 28th, 2008 at 3:48 pm
BP, (deliberately) fanciful, yes. Another thought experiment is the ‘The World Without Us’ book.
June 28th, 2008 at 3:53 pm
Gerrit, you are sidetracking as usual.
There is a difference between a state-controlled economy and an economy where the state may interfere in monopolistic or olygopolistic situations. Given your usual salience on economics I can only conclude you’re deliberately simplifying the situation in order to stir people, which is sad and time-wasting.
I expect more.
June 28th, 2008 at 4:57 pm
Gerrit: you misunderstand what is required. This is nothing to do with EFTPOS, but to do with POS technology - Point of Sale terminals, the till.
The database needed already exists, it is there to keep the store POS systems synchronised, this is how POS systems work. All that is required is to publish that database, which is, in software terms, a trivial task. So in a very real sense, we are all already paying for this technology, only it benefits the retailer, and adds no benefit for us.
The beauty of this system is that the implementation costs are truly trivial, and requires no additional personal.
The benefit is that it puts information in the hands of the consumer. It works for the stock markets; why cant it work for supermarkets?
June 28th, 2008 at 6:53 pm
Gerrit, your argument makes some interesting assumptions.
I quote: “Somewhere along the line we need to take personal responsiblity and if we cannot even be bothered to shop where it is most suitable for our needs and budget. We abdicate all responsibility to the state.”
In the name of this “personal responsibility” argument, you advocate
traveling to get the best price (presumably in a car, which uses fossil fuel, and adds one more vehicle which must be accommodated on the roading system … or maybe you travel by public transport … ?)
At least it seems that you don’t have to take a couple of young children with you on this shopping excursion, as many shoppers do … But, in the name of free enterprise … so as not to be smothered by the “Nanny State” … etc. you advocate this for yourself. Therefore, presumably you expect/accept this behaviour from all the other Kiwi families …
You regard yourself as a Blue-Green.
I respond: “That sounds fine!” … or does it?
In the Green Party we have had serious “BlueGreen?” discussions.
When former Green MP, Ian EwanStreet, tried hard to combine the two perspectives he eventually decided to leave the Greens and work for the National Party.
The discussion at the time was about the fact that “Green” actually operates within different parameters than the traditional “left/right”.
In some ways Greens appear to be “righter than Right” and in some ways we appear to be “lefter than Left”.
This is because Greens reach these perceived “left” or “right” positions from a different philosophical base … and it is that BASE that we label “GREEN”, and it is that base that makes us, and the way we think and operate, different.
On this FINITE Planet we need to cooperate, and to share resources (which are finite.) Our Societies’ assumptions: that people have the personal right to own land and/or its resources; the way in which humans have historically done this; the assumptions that some things are “commons” which can be used (and exploited) by anyone; or that they can be privately owned (and controlled / disposed of) by certain people … or by certain Nations NEED URGENT REASSESSMENT I repeat, this is not a “left /right” debate, it is a survival debate.
In summary:
Recently Planet Earth has been giving us some rather ominous warnings:
A lot of our historical and current ways of thinking WILL HAVE TO CHANGE in light of Global Warming, Oil Depletion, Human Overpopulation, Species Extinctions, Pollution etc etc if we and other lifeforms are to survive (and hopefully thrive) on this Planet.
This reassessment includes everything we do … including the marketing and the shopping for food!
The alternative is extinction!
June 28th, 2008 at 10:54 pm
Shopping around often ends up spending a lot of time and no small amount of petrol to save $5 or $10. I shop at a place that is competitively priced and close to e fruit and veggie shop. I try to use as few “household” products as possible. They often have little real utility while costing an average of $4 / item.
June 29th, 2008 at 5:53 am
dbbuckley,
Sorry, I misread your comment. Yes that is totally feasable. Only comment I would make is that the sharemarket has some 300 listings while a supermarket would have some 3,000+.
Would need the a very user friendly interface. Bit like the ASB stock market web site where you can list the companies you have shares in, into a portfolio.
You would do the same with regular food purchases and at the click of the mouse get a view of which supermarkets has the cheapest price for either all or individual items in your food portfolio.
Mind you, the number of food outlets that run an “open till” would preclude many smaller food outlets from contributing.
Ari,
My comments are to do with individual attitude and responsibility. Not economics. It is all about exercising our individual power to not shop at supermarkets to achieve market (consumer) let pricing reform.
I dont believe we need to leave anything for the state to do if we can do it ourselves. If we abdicate that responsibility to the state than before long you become a slave to the state as it simply takes all your responsibilities away.
I dont live to meet your expectations. Just my own.
eredwen,
We dont travel out of our way to get special prices. We shop during the course of our normal running around. Actually saving petrol as we dont do an individual trip just “to go shopping”.
We shop on the way to and from work, on the way to football, with grandchildren (or previously with our children) on an activity. We dont especially look for cheaper prices, just to shops (not supermarkets) that stock the food we need.
And yes we take children along shopping but in a way where they are involved in the process. So that they learn how to manage time, food and money.
For example we have to make a trip to take “johnny” to football (round ball type) practise and the household just happened to be low on vegetables.
We would involve “johnny” in the decision making process by together making up a shopping list for vegetables, and at the shop we both shop for what we need. You can start as early as 3 year olds to do this. To many parents find that kids are unruly at shopping time because they dont include them in the decision making process. They get bored and figity (the kids).
I guess it depends if you see your kids as a burden to be dragged up, or a joy to have along and teach them life skills so that they grow up a functioning member of society.
Greens left and right. Unfortunately the Green party that you think support is no longer “left of left” and “right of right”. It is decidedly left of left. Have a look at the socialist leanings of the MP. With Nandor gone and Jeannette on the way out the left have take over off the greens will be complete.
Which per se I dont have a problem with except I cannot vote for the Greens in this state. Its pragatism in being “right of right” and “left of left” to achieve environmental protection has gone.
You and I have a different attitude towards the future. I believe we have a great future as people and species. We have not even began to exploit (word used in a positive tense) the 3/4 of the planet underwater. Nor the space around the planet.
We have no idea what infinite resources are availalbe. All we know is what the lifespan of known resources are.
I believe that we will discover these resources and how to turn them into energy, food, etc. for the poeple to use.
I totally agree with you that everything will have to change, you and I just disagree on the manner.
June 29th, 2008 at 8:26 pm
Having prices up on the net is a great idea.
It would also stop all those trees being shoved into my mailbox with this weeks specials emblazoned upon their corpses.
A boon for the aged & infirm who also need to shop & eat.
Taking personal responsibility is not always an equal opportunity type option.:-)
June 30th, 2008 at 1:04 pm
*shrug* All our expectations matter, or none of them do
Right, so something is wrong with our individual attitude when it’s anti-competitive for us to be watching out that big companies aren’t unfairly profiteering on select commodities?
While I agree individual responsibility is important, I don’t believe it’s practical as the complete basis for a social system. Sometimes you need someone to watch your back. The world’s that complicated, and we’re not always able to stand up to everything that’s wrong on our own.
Besides, if we find out there are duopolistic practices going on, we don’t have to force price drops. We could split one or both of the companies in order to create more competition, too. How would that be inconsistent with your philosophy?
As for Dbuckley’s idea of prices being on the internet: It sounds great for the consumer at first, until you realise that people that set the prices ALSO have access to this information. Suddenly you are on your way to informal price fixing. The advantage of the price being hard to find out is that it makes collusion a lot less practical. The only time direct price comparisons DON’T become anti-competitive is when people are actually selling you different products, or different levels of service, that they are unwilling to change. This is not necessarily the case in our current supermarket dynamic.
June 30th, 2008 at 1:38 pm
Ari,
“We could split one or both of the companies in order to create more competition, too. How would that be inconsistent with your philosophy? ”
Absolutely inconsistant. What gives the state the right to tramble on individual property rights (in this case company shareholders)?
Oh I forgot, in the socialist/communist system current being practised by the Labour and Green government this is OK. As witnessed by the AIAP and Telecom fiasco where individual property rights were trambled on for the sake of the state.
Lets say you split the supermarket chains into 4 competing entities.
Food prices would rise as at least two would need adminastrative and distribution channels to be set up. Costing?
That is not to say that the two existing supermarket chains would not just pick up their infastructure and leave New Zealand.
If that occurred the tax payer would need to set up the state funded food distribution channels (four SOE’s?). At what cost? And would the producers sell to the state owned supermaket chains? Maybe you would need to confisgate their businesses as well? To ensure supply?
Maybe that is the socialist/communist end game.
And why they are not keen on the independent shopkeepers and producers (hence the “environmental” attacks on farming) selling direct to the consumer.
Mugabe comes to mind here.
The answer is still so simple Ari, shop at independent shops and the supermarket market control will be broken. How hard is that?