00:01Yeah, so this is actually driven by higher gross margin on which has grown ahead of their
00:08revenue.
00:09So what this means is they're making more profit per, possibly per transaction or at
00:15least per basket than they were a year ago.
00:18So what would be driving this would be either increased rebates from their suppliers, so
00:24their suppliers are giving them greater discounts and they're not passing those on to customers.
00:29Also, I'm a greater investment, which they signaled in their investor report of Own Brand,
00:36which delivers higher profitability for them, but it also for us as customers.
00:40It comes at the price of us being able to buy the brands that we know and love because they've
00:45been deleted and replaced with Own Brand products, which are more profitable.
00:49Yes, so I was going to ask you about the Home Brand products.
00:53I'm presuming they're cheaper.
00:55Would they be better alternatives, especially at a time of higher cost of living?
01:00They are an alternative which is owned and controlled by the retailer.
01:05And so what that means is they have greater control over the procurement, supply and specifications.
01:11So it's not to say that it's better quality or it's cheaper, but they will be making, generally
01:16speaking, more profit from it, but private label is good in a category if it's actually got other competitors
01:23against it.
01:24But once private label moves from the budget to the mainstream and then also into the premium
01:29part of the category, we actually see proliferation of private label across these three different
01:34categories, three different areas of the category, and then we lose choice.
01:39So the brands that we know and love are deleted and replaced with brands that the supermarkets
01:44have the discretion to put on their shelves.
01:47Right.
01:47And we have minimal choice.
01:49And customers have no choice, obviously.
01:51Now, profits, as you say, listen, they're justified.
01:54The bottom line matters, particularly for shareholders.
01:57But the optics, really, not that great, particularly on the back of this inquiry into possible price
02:03gouging.
02:04We must say, however, that the inquiry did not find any evidence of such a practice.
02:09But in the court of public opinion, these profits are rubbing the wrong way, aren't they?
02:13Well, certainly.
02:15It goes to show that they are prioritizing their shareholders over their customers.
02:19So we've moved from being their customer to just literally being the product to monetize.
02:25And so when there are things like everyday rewards, they are capturing all these different
02:31data points about our spending habits and being able to utilize that to be able to make
02:37more money from it.
02:38And so we could go to a different store if we wanted to.
02:43But realistically, shoppers choose based on location, then price, then assortment.
02:49So they get us every time on location.
02:51And as they expand their stores and their store network, we have less and less choice
02:57with the independents.
02:59And it increases barriers to entry for greater competition from any new entrants.
03:05Now, I wonder then, is it up to the customer or is it up to the industry or is it
03:11up to
03:12the government to be able to break up this dominance that these big supermarkets have?
03:19That is such a good question.
03:21And I'm so I'd say that the regulator has over time and the acquisitions and mergers and acquisitions
03:28that have occurred have resulted in what we have now.
03:31So when Franklin's left the market at the turn of the century, we haven't seen that level of
03:37competition return despite Audi coming in.
03:39And so we haven't really seen a proper price war since the early 2000s.
03:45And so or late to late 90s, sorry, to the 2000s, when dairy farm exited the market and Franklin's
03:51was broken up and sold off largely to Coles or Woolworths and some to IGA's.
03:55I'm so can it's not for the regulator to do it would be for the government, but that's
04:02a they're not doing anything illegal, but they're playing within the law, but it's not
04:07working for us anymore.
04:08And it hasn't for a couple of decades.
04:11So there's only a tipping there.
04:13We have to have a different solution and we do need more competition.
04:16I'm so I guess the question is, will they do something about it?
04:21I'm I know the New Zealand market has got some real challenges worse than us.
04:25I'm and they may have to do something sooner because a lot of people cannot afford food
04:30anymore.
04:31And is that what we need to get to?
04:33I'm or can there be a solution that perhaps the government can come up with to kickstart
04:38more competition?
