Consumer concerns about the “cost of living crisis” have found a ready scapegoat in supermarkets, the greatest retail innovation of the 20th century.
Politicians and civil service regulators have been quick to pick up the vibes, targeting “excess profits” as a distraction from the role of government policies that have dramatically increased the cost of doing business over the past five years.
While the return of inflation should be covered by central bank monetary policies, as most economists have warned, and lockdown policy decisions in response to a global pandemic, rising oil prices groceries didn’t start at the checkout, nor with the Russian invasion of Ukraine.
Media reports have joined forces against supermarkets, giving advice on where to find groceries and cheaper goods. But the reality is that only supermarkets can offer low prices on a large scale. Otherwise, each small retailer would charge less rather than more.
The way supermarkets have become the source of cost-of-living mythology defies the obvious as to why customers flock there in defiance of other options. The answer does not lie in the Commerce Commission’s investigations, although these have uncovered some questionable business practices unrelated to food production.
The reason for this is demand from suppliers to cover their higher costs, a fact highlighted in a new analysis from Rabobank, which forecasts a further rapid increase in food prices over the rest of the year.
In Australia, the cheapest grocery store, Aldi, complained that it received requests from suppliers for price increases for 1,200 items, five times the normal amount, and agreed to 80%.
On the coal front
Two business briefs reflect the face of the rapidly changing consumer goods industry. In The Cereal Entrepreneur, Kaz Staples tells how, in 22 years, she built the Pure Delish gourmet brand from her home oven to a business big enough to be acquired by a consumer manufacturer.
by Brett Ashley The key to unlocking your potential is a career-based guide to self-improvement that took him from apprentice butcher to senior manager at Woolworths New Zealand, which employs 22,000 people and has annual food sales of $7.15 billion.
New Zealand business memoirs have limited value to outsiders due to the authors’ reluctance to reveal unflattering information about themselves, colleagues, friends and enemies. These two are no exception.
The Staples account is unapologetically personal, praising others for what was clearly an uphill struggle waged without access to capital, heavily dependent on the efforts of owner and staff, with most of the hard business lessons learned by trial and error.
Her homemade seasonal Christmas cakes were started to supplement the family income from her husband Dave’s own business. The product was aimed at the luxury end of the food chain.
Gourmet grocers Moore Wilson in Wellington and Farro Fresh and Nosh in Auckland provided initial support, steering Pure Delish into the breakfast market, with unique offerings such as flavored grain-free muesli handcrafted with nuts and imported nuts.
The range expanded to include cereals, snack bars, cookies, slices and snack clusters, with eventual distribution to supermarkets and a small export market. The operation survived without an advertising budget, a risk in the food business if reputation and quality are in question, as was the case when just go did a “hit job” in 2012. He alleged a child fell ill after eating a snack bar.
Staples discovered that the child was that of a friend of one of the TV show’s presenters. The boy had a history of illness and the story was aired as a “guilty before cleared” case, according to Staples. She tried to quit the show after learning the background, saying that even today she was “stripped of my integrity and I felt like everything I had worked for was on about to be destroyed…I was a total wreck, about to fall apart.”
While the company survived this blow, the outcome of a similar story told by Ashley was far more damaging. These were allegations made under parliamentary privilege by an unnamed ‘Opposition MP’ about illegal practices at Countdown. The company was later licensed, but Ashley says this resulted in a massive loss of market share.
“It took over 18 months for the Countdown brand to fully recover financially,” he says. The claims were based on complaints from vendors about Countdown’s desire to cut costs and give consumers a better deal.
Politicians are always happy to demand lower prices from retailers, but not, it seems, at the expense of suppliers or the retailer who loses sales. (For the record, the MP was Labor’s Shane Jones in 2014. The Commerce Commission investigated similar complaints as part of its 2021-22 inquiry.)
Margins are at the heart of grocery economics. Staples is convinced that its business would not have been viable if it had given in to all of the retailers’ demands for discounts, rebates and promotions. She has a message for small businesses whose margins are under attack: don’t go for scale if it means less profit.
Eventually, after the health pressures of two bouts of cancer and the fatal loss of friends and family, Staples agreed to sell the company in 2019, just months after being recognized in New Year’s honors. , background details are sparse, Tasti Products, based in Te Atatu, founded in 1935, purchasing the Pure Delish brand.
Butcher overcomes a difficult start
Ashley’s journey to business success was punctuated by a single period of business ownership. Angered by Coles Myer’s clumsy takeover of Progressive Enterprises in 1998, he quit and opened an Italian-style butcher shop in Fletcher’s Pakuranga mall.
The mall’s Foodtown began selling chicken breasts for a cheaper dollar a kilo, giving Ashley the chance to buy all the stock for the day and resell it for a profit. The price drop soon stopped and later, when Ashley was lured to Foodtown after Coles Myer sold out to Perth-based Foodland (FAL), he learned that his butcher shop was selling more than the meat division of the supermarket.
Under FAL, the task was to restore Progressive, which owned three supermarket brands, both inside and out. This involved merging three retail cultures, setting new priorities with sourcing at the top, and taking a centralized approach to the meat and seafood division.
FAL then acquired the rival operation of Woolworths, also with three brands and formerly owned by Dairy Farms International. Once again, Ashley was faced with merging store cultures, removing redundant operations, and ensuring that Coles Myer’s top-down experience wouldn’t happen again.
In 2005, FAL was taken over by Woolworths Australia, a company 10 times larger than Progressive and with abundant financial resources. Ashley points out that most of the profits from New Zealand supermarkets go to expanding the business.
When a new chief executive arrives from Australia in 2018, Ashley fears she may fall victim to another corporate shake-up. He doesn’t name her but she persuades him to change his mind and leave for at least two years.
In retirement, Ashley is working on her new business, My Purpose, which offers courses in leadership (“coaching a team on how to generate actions that will produce results”), personal life planning and establishing goals, and creating thriving business cultures and environments. .
These are outlined in the second half of the book, which will primarily appeal only to practitioners and those wishing to pursue a career in business. Ashley reveals a lot about his rocky start in life, but he overcame it with his strong ambition and wide reading.
Three books had a great impact: that of Maxwell Maltz Psycho-Cybernetics (1960), Hit! The Glenn Bland Method (1972) and that of Robin Sharma Life lessons from the monk who sold his Ferrari (1999). He now hopes that his experience can be passed on to prove, as the book’s subtitle says, that “life is not a prison”.
The Grain Entrepreneur: A Story of Courage, Courage, and Crunchy Goodnessby Kaz Staples (Ultimate World Publishing).
The key to unlocking your potential: life is not a prisonby Brett Ashley (Mary Egan Publishing).
Nevil Gibson is a former editor for NBR. He has contributed film and book reviews to various publications.
This is content provided and not paid for by NBR.
Contact the author: [email protected]