A top retail consultant derides Commerce Commission hopes for an independent wholesaler to save the day – but there is greater potential for a new retail entrant as Māori groups step forward.
For the past 30 years, Mark Fort owned and operated a Bay of Plenty orchard business that sold its fruit to Foodstuffs and Countdown.
"I employed up to 25 people, all Māori, seasonally in the small rural area of Te Teko," he says.
He also worker as a tradie – and so he saw another side of the lives of his workers and others in the community. "What was most distressing was the knowledge gained by visits to their homes as a part-time plumber, that they lacked the income to stock their fridges or cupboards with groceries.
"Most had to purchase these from the local dairy at highly inflated prices as they lacked reliable transport to travel into Whakatane 20km away. They mostly got benefits of some kind to assist them during lay-off periods between different crop harvests."
"The idea was to run supermarkets in a way that subsidises those who whakapapa to our area, giving a return to people at all levels of our society rather than just the top ones who drive around in flash cars." – Martin Wikaira, Ngāti Tuwharetoa
"The owners of these small stores could not buy wholesale and invariably got their stock from a Pak’nSave.
"During morning stand up meetings, I would tell our workers that while our nashi were selling quickly and in demand at the supermarkets, they were at over twice the price I was getting. Some struggled to understand how that could be."
It is stories like these that worry some Māori leaders; they question how in a land of milk and honey, people can't afford to buy good food. And now, in the dying weeks of the Commerce Commission enquiry into the supermarket duopoly, they are speaking publcly about how they can be part of the solution.
Māori set to invest in retail
Seven years ago, Tuwharetoa paramount chief Sir Tumu te Heuheu quietly investigated buying up New World or Four Square supermarkets across the central North Island, to better meet the needs of iwi.
The strategy was to take on the big grocery chains by buying a store in Taupō, one in Turangi, and one in Taumarunui. It didn't happen then – but now Tuwharetoa and other iwi hope their day may finally have come. "The idea was to run supermarkets in a way that subsidises those who whakapapa to our area, giving a return to people at all levels of our society rather than just the top ones who drive around in flash cars," says Martin Wikaira.
Wikaira is director of the Māori Policy Unit at the Ministry of Foreign Affairs, and a senior figure in Ngāti Tūwharetoa. He travelled around 22 of the iwi's marae to consult on that 2014 strategy and yesterday, he confirmed to Newsroom that he was one of several iwi and Māori business leaders to make submissions to the final stage of the Commerce Commission inquiry into the lack of supermarket competition.
"The broader impact of such a duopoly on communities and especially Iwi communities is both unnerving and unnecessary," he warned commissioners.
Iwi are already major players in New Zealand's forestry and fisheries industries – they own half of Sealord, whose range was slashed by Foodstuffs North Island last month, to the ire of many in the community. And they have big agriculture and horticulture holdings that could help supply a new grocery chain.
Wikaira said he firmly believed his iwi, as part of a nationwide iwi corporation, had the business acumen, nous and resources to support a Māori-owned supermarket chain that could employ Māori and provide discounts on healthy food, rather than loss-leading on junk food. "There will be some of us who will sit around the table who will always remember what our old people said about finding a healthy pathway for our people," he told Newsroom. "And now we have our young ones saying the same thing. The voice is strong."
The final submissions to the Commerce Commission, investigating competition in the grocery market, were published this week. And they reveal a late groundswell in Māori interest in investing in a new supermarket chain that they argue would serve New Zealander suppliers and consumers better, rather than just sticking te reo labels on their products once a year for Māori Language Week while sending most of the profits back to Australia.
But the interest in investing in a new business is countered by former All Black Eric Rush and other existing Māori supermarket bosses, who argue that their co-op is already serving Māori needs.
Other Māori leaders to come forward include Te Aupouri commercial director Teresa Tepania-Ashton, who is chief executive of Maori Women’s Development Inc.
She said Māori were interested in the grocery industry because it provided an opportunity to improve the health and nutrition outcomes for Māori and New Zealand as a whole, and because it gave them a chance to improve the carbon footprint and negative environmental packaging of supermarkets.
Māori farms and fisheries in supply chain
Mavis Mullins is outgoing chair of the big Ātihau-Whanganui land incorporation. "The stats tell us we are one of the most unhealthy groups in New Zealand," she told Newsroom. "And the odd thing about all of that is that we are huge producers of food. We own about 50 percent of fish, about 10 percent of milk, close to 50 percent of red meats, and yet we are the most unhealthy."
The existing supermarket chains took a superficial approach to their obligations to Māori. "They say, let's just put some Māori signs on the wall, employ some young brown faces at the checkout, and we'll be right."
Ātihau manages nine iwi sheep, beef and dairy farms in the North Island; 21,000 hectares in total. It has 730ha of forestry. It produces mānuka honey, angus beef, lamb, wool and milk. It holds about $200m in equity. Alongside other big Māori incorporations that have expressed interest in working together like Tainui, Ngati Kahungunu and some in Taranaki, it could be a force to be reckoned with.
Mullins worked with entrepreneur Tex Edwards on 2 Degrees, the telco startup that broke up the Telecom-Vodafone duopoly, and she is confident they have the capital and skills and drive to do the same to the supermarkets duopoly.
Mullins was joined by other Māori producers and suppliers, like former TV journalist turned hygiene products supplier, Billie Jo Hohepa-Ropiha. "Having Māori-owned and run grocery businesses is a necessary part of ensuring Māori are reflected as true partners of Te Tiriti o Waitangi," said the B-Dét founder.
"This ensures a place for Te Reo Māori to be spoken and seen by both staff and customers, both in stores and online. It ensures an intergenerational grocery shopping experience where Māori see ourselves and our own economic buying and trading mana.
"By it being run by Māori, you will get a more supported structure for niche products and suppliers that would otherwise be overlooked by Foodstuffs and Countdown. Maori suppliers would be supported and nurtured within the supermarket platform and the induction and signing up process would be more transparent."
Opportunity is retail, not wholesale
Internationally-recognised supermarkets expert Tim Morris, managing director of Coriolis Consulting, has advised the Commission on the viability of its proposed solutions.
He rejected the potential to invite a new standalone, independent wholesaler into the market.
"None exist," he said. "I’ll repeat that, there are no 'independent wholesalers' (as defined) left. You need to face facts. Dinosaurs are gone. Moa are gone. 'Independent wholesalers' (as defined) are gone.
"You are currently proposing, as a solution for New Zealand, a concept that has failed everywhere. On reading your draft report, I immediately mentally replaced the phrase 'independent wholesaler' with 'magical unicorn fairy'. They don’t exist. No 'magical unicorn fairy' is going to come save the day. If one did, it would fail."
"The problem that New Zealand consumers face is that New Zealand grocery prices are too high. Anyone who has lived in or travelled to other parts of the world has experienced the absolute sticker shock at seeing dramatically lower prices elsewhere." – Tim Morris, Coriolis Consulting
Neither would it be possible for a new entrant to start up new traditional-style supermarkets and take on the big players.
However, he was more open to the potential for a new retail entrant to buy existing supermarkets, or develop a new format entirely.
"Any organic entry into conventional supermarkets will fail," he said. "The available New Zealand and global peer group evidence strongly suggests that any 'independent wholesaler' will fail if it is not owned by the stores it supplies.
"Therefore, if you want competition in traditional supermarkets in any meaningful timeframe, you will need to force separation (at Foodstuffs) or divestment (at Woolworths/Countdown)."
He argued that by capping a supermarket chain's market share to, say, 27 percent, the Government could force Foodstuffs to split into one nationwide New World co-operative, and one nationwide Pak'nSave co-op. With two co-ops and Woolworths all capped at 27 percent market share, there would be room for a new supermarket chain to buy up their divested stores and take 20 percent or more of the market.
"However, if the New Zealand Government goes through with the above and makes the effort to force competition into the sector, I believe you will have solved 'a problem', but not 'the problem'. The problem that New Zealand consumers face is that New Zealand grocery prices are too high. Anyone who has lived in or travelled to other parts of the world has experienced the absolute sticker shock at seeing dramatically lower prices elsewhere."
He agreed with entrepreneur Tex Edwards, who is fronting an otherwise faceless consortium called Northelia, that the proposed market share cap would force Woolworths to relinquish 18 percent of its sales.
Last night, Edwards said the flurry of last minute submissions to the final stage of the Commerce Commission's study suggested investors were genuinely upbeat about regulators breaking open the supermarket duopoly. "The temperature is heating up, and not just because summer is coming," he said.
Child and adolescent psychiatrist Dr Hinemoa Elder said: "As a clinician I am reminded daily that clinical services are the last port of call for improving mental health. Daily activities that promote a lived experience of Māori specific wellbeing are needed.
"The opportunity for iwi members to see the products from various iwi showcased is an important and much needed part of lifting our iwi identities in this first phase of the post-Treaty settlement era. I am reminded of a time when we did not have Māori Television, nor iwi radio stations. Now these are normal and expected parts of our landscape.
"Representation of ourselves and reflection to ourselves back as shoppers and commercial traders, at the grocery supermarket interface is a critical contributor to ongoing growth of positive identities as Māori."
But three Māori bosses within Foodstuffs North Island countered with their own arguments why their co-operative arrangement was able to serve Māori.
Jason Witehira, owner of Pak’nSave Albany and former chair of Ngapuhi Asset Holding Company, was joined by former All Black Eric Rush, owner of New World Regent in Whangārei, and the co-op's group transport manager Eddie Poka.
They said Foodstuff North Island’s cross-subsidisation policy meant higher transport costs did not adversely impact Māori and others in more remote communities. "For example, Pam's Flour has the same cost price for the Tolaga Bay Four Square as the Foodstuffs North Island supermarket in Victoria Park, Auckland."
They accused the commission of late, and rushed, consultation with Māori. "We support Māori playing a larger role in the retail part of the grocery sector – we ourselves have rewarding careers in the industry and Foodstuffs North Island has a high degree of Māori involvement."
But they warned that the Commerce Commission's mandate was only to ensure competition in the grocery sector – its ministerial remit meant its recommendations should go no further than that. "It is not the mandate of the market study to promote Maori participation in retail grocery markets more generally."
