1 00:00:00,280 --> 00:00:03,360 Speaker 1: So a twenty five billion dollar market and just two 2 00:00:03,400 --> 00:00:06,600 Speaker 1: players control eighty two percent of it. We're talking about 3 00:00:06,640 --> 00:00:11,160 Speaker 1: the supermarket sector. Finance Minister Nicholas and Nicola Willis today 4 00:00:11,200 --> 00:00:14,280 Speaker 1: reiterated her plans to encourage a third player and more 5 00:00:14,320 --> 00:00:16,680 Speaker 1: competition in the grocery sector, but she's a bit light 6 00:00:16,760 --> 00:00:19,960 Speaker 1: on the detail. She said she'd like to remove regulations 7 00:00:19,960 --> 00:00:23,320 Speaker 1: that discourage you supermarkets, and she would like to help 8 00:00:23,400 --> 00:00:26,360 Speaker 1: new entrants access land in a bid to break the 9 00:00:26,520 --> 00:00:27,320 Speaker 1: current duopoly. 10 00:00:27,440 --> 00:00:30,760 Speaker 2: Look, I am aware that we have received what's called 11 00:00:30,760 --> 00:00:35,280 Speaker 2: an unsolicited proposal. We've said to all comers, if you 12 00:00:35,320 --> 00:00:38,400 Speaker 2: want to come and invest in important infrastructure, bring us 13 00:00:38,440 --> 00:00:41,839 Speaker 2: a proposal. And I've been informed that we have had 14 00:00:41,880 --> 00:00:44,839 Speaker 2: a proposal. So what that tells me is there is 15 00:00:44,880 --> 00:00:48,280 Speaker 2: some interest, and I'm sending a very clear message today 16 00:00:49,040 --> 00:00:52,000 Speaker 2: that we should be engaging with that interest. We as 17 00:00:52,040 --> 00:00:55,440 Speaker 2: a government want to take those proposals very seriously. 18 00:00:55,800 --> 00:00:59,080 Speaker 1: So Tex Edwards used to run two degrees, he's now 19 00:00:59,080 --> 00:01:01,720 Speaker 1: the monopoly what research director and he joins you now 20 00:01:01,720 --> 00:01:06,760 Speaker 1: Helo techs Hi, Andrew, I'm good. No concrete commitments given today. 21 00:01:08,200 --> 00:01:10,640 Speaker 1: Everyone says that no one, no one ever makes a 22 00:01:10,640 --> 00:01:13,640 Speaker 1: concrete commitment. They talk about the problem, never a solution. 23 00:01:15,520 --> 00:01:19,000 Speaker 3: Yeah, I think everybody can be encouraged that you've got 24 00:01:19,280 --> 00:01:25,400 Speaker 3: ministerial focus on this. The debate and the public policy 25 00:01:25,400 --> 00:01:28,280 Speaker 3: debate of breaking up the supermarkets is quickly moving on. 26 00:01:28,880 --> 00:01:32,880 Speaker 3: I think I was personally encouraged by the minister's invitation 27 00:01:33,160 --> 00:01:38,759 Speaker 3: to listen to proposals. The gorilla in the public policy 28 00:01:38,840 --> 00:01:42,960 Speaker 3: room is a breakup of the incumbents. The Commist Commission 29 00:01:43,080 --> 00:01:48,200 Speaker 3: proved that there was an overbuild or supermarkets, and on 30 00:01:48,240 --> 00:01:51,880 Speaker 3: a square meterage basis, New Zealand has an overbuild of supermarkets. 31 00:01:51,960 --> 00:01:56,040 Speaker 3: This is called a barrier to entry and the sheer 32 00:01:56,120 --> 00:01:59,919 Speaker 3: level of scale that you need to create a price 33 00:02:00,960 --> 00:02:04,760 Speaker 3: output consumers means that you need some type of breakup 34 00:02:05,520 --> 00:02:09,640 Speaker 3: and it looks like the ministers inviting people and to 35 00:02:09,720 --> 00:02:13,400 Speaker 3: discuss how that breakup would occur with today's announcement. 36 00:02:13,720 --> 00:02:16,400 Speaker 1: Yes, but her main thing was that she's had an 37 00:02:16,520 --> 00:02:20,639 Speaker 1: unsolicited proposal from a possible third party player. Do you 38 00:02:20,760 --> 00:02:23,280 Speaker 1: believe that could happen? Because we all know the difficulties, 39 00:02:23,440 --> 00:02:26,840 Speaker 1: the supply chain difficulties and the difficulties in finding somewhere 40 00:02:26,840 --> 00:02:29,080 Speaker 1: to put up a supermarket. Do you believe there really 41 00:02:29,160 --> 00:02:32,200 Speaker 1: is a concrete, unsolicited proposal on the table. 42 00:02:33,639 --> 00:02:36,440 Speaker 3: Several people have been looking at this industry, including ourselves 43 00:02:36,760 --> 00:02:41,240 Speaker 3: and our British private equity people wouldn't believe, didn't believe 44 00:02:41,320 --> 00:02:44,480 Speaker 3: that the New Zealand government would ever allow a three 45 00:02:44,600 --> 00:02:47,080 Speaker 3: to two merger to take place in two thousand and six. 46 00:02:47,560 --> 00:02:53,079 Speaker 3: That's the gorilla that created this problem. And there are 47 00:02:53,160 --> 00:02:56,840 Speaker 3: unsolicited discussions of what a third would look like. But 48 00:02:56,919 --> 00:03:02,400 Speaker 3: it's all what economists. Economists call this peric competition, which 49 00:03:02,400 --> 00:03:05,880 Speaker 3: they really mean to say pretend competition, and remember there's 50 00:03:06,600 --> 00:03:11,160 Speaker 3: there's such laser focus on the two encartments. They would 51 00:03:11,200 --> 00:03:14,680 Speaker 3: love a small four percent market share, five percent market 52 00:03:14,680 --> 00:03:18,359 Speaker 3: share perric player, pretend competitive that come with a handful 53 00:03:18,360 --> 00:03:23,000 Speaker 3: of stalls. But I think that the public policy debate, 54 00:03:23,120 --> 00:03:25,839 Speaker 3: the debate has moved on since then, and I think 55 00:03:25,840 --> 00:03:29,400 Speaker 3: what the public, the common sense denominated the public and 56 00:03:29,600 --> 00:03:34,800 Speaker 3: the common sense tests here, is actually winning is that 57 00:03:34,840 --> 00:03:37,520 Speaker 3: you need a break up at the cartel. And our 58 00:03:37,560 --> 00:03:40,600 Speaker 3: research showed Andrew that you needed at least one hundred 59 00:03:40,640 --> 00:03:44,640 Speaker 3: and forty stores, and you needed control of your own 60 00:03:44,720 --> 00:03:49,680 Speaker 3: distribution for warehouse system. And so because there's been an 61 00:03:49,720 --> 00:03:53,040 Speaker 3: over build. Unless it's a breakup, you're not going to 62 00:03:53,080 --> 00:03:55,760 Speaker 3: get what we call price competition, and you're not going 63 00:03:55,800 --> 00:04:02,120 Speaker 3: to see nutrition competition or sustainability competition. And it's it's 64 00:04:02,160 --> 00:04:06,800 Speaker 3: the devil is absolutely in the detail. And anybody's experienced 65 00:04:06,800 --> 00:04:11,400 Speaker 3: in breaking up cartels knows that it's it's problematic and dangerous. 66 00:04:11,040 --> 00:04:13,320 Speaker 1: Really capable, and it is a very big ask indeed. 67 00:04:13,320 --> 00:04:15,160 Speaker 1: But I thank you for your thoughts. That's monopoly watched 68 00:04:15,160 --> 00:04:17,720 Speaker 1: research director Text Edwards or news Talks be. 69 00:04:17,720 --> 00:04:20,599 Speaker 3: It for more from Hither Duplessy Allen Drive. 70 00:04:20,800 --> 00:04:24,200 Speaker 2: Listen live to news Talks it'd be from four pm weekdays, 71 00:04:24,320 --> 00:04:26,520 Speaker 2: or follow the podcast on iHeartRadio.