maniacalmanicmania
Australian PoliticsLegitimate question; all three of the biggest supermarkets in Australia (Coles, Woolies & Aldi) are publicly traded companies - anyone can see their quarterly/annual P&Ls.
All three post net profits of less than ~3%; so out of every $100 they earn, 97% goes towards paying suppliers, staff, utilities and covering other operating costs.
Having the Government run ~200 stores isn’t going to drastically cut prices to make things more affordable, not without underpaying staff or suppliers?
My understanding was that Mamdani’s plan to open City-run supermarkets was to help address food deserts, where the only other options end up being the equivalent of convenience stores? That’s not nearly as big of a problem here in Australia.
Why would a nationalised industry be concerned with making profits? It's a public service and would have the purpose of providing fair price to producers and consumers. Even if it operates at a loss if it saves Australians money and provides financial security to Australian farmers than its providing well worth economic, strategic and social benefits.
I think you're under-estimating the the amount o food 'deserts' we have in this country. But in our case, its literally because some of it is an actual desert. Think of the regional towns, outback towns, far north cape, indigenous communities, islanders like cocos. These places can have a pretty hard time getting food deliveries sometimes, let alone freah food. Extending Australia's food delivery system would be a valuable project to undertake. The Fair Go Supermarkets plan doesn't address that though in any meaningful way though.
Instead of buiding Colesworth-style supermarkets and competing with their duopoly, they could focus on warehousing shelf-stable, non-perishable essential items:
- UHT Milk (dairy and otherwise)
- Bulk bags of pasta, dry grains and legumes
- Flour, sugar, cocoa and similar basic baking supplies
- Cordial/Juice/etc
- Cookies/Biscuits/Crackers
- Nuts and seeds
- Canned/Jarred/Dried veg and fruit
- Toilet paper, soap etc
That way they don't have to worry about refrigeration or freezing in their supply chain and can just store things. They can set up shop anywhere not having to build a massive building with cold rooms and elaborate air conditioning like regular supermarkets. They could even send things out through regular post or delivery, not having to use refrigerated trucks and time-dependent systems like Colesworth do.
Below is the actual report, its eight pages, and really undercooked. Its more like a university report than any kind of plan.
At best, and I mean at absolute best, this is a conversation starter, not a plan. My worry is they haven't gone into enough depth for such a big policy that the 'serious' stakeholders in this area will laugh it off and easily dismiss it with industry based arguments those familiar with the industry may know.
My critiscism.
In its current form a plan like this will fail, and the cost will be hung over the neck of a Greens led government going forward.
- 5 years to build out a system of ~600 new supermarkets would be a herculean and unnecessary effort. I don't believe it would be done in anywhere near that short a time period, which would blow the report's revenue assumptions.
This is a massively expensive investment in new and seized fixed capital with large ongoing maintenance costs that at best adds a 'slow lane' to the Australian food network's 'food delivery highway'. There are smarter ways to achieve the results wanted without causing supplier induced demand.
For those who are interested, supplier induced demand.
It will lead to farmers over producing, or higher levels of imports, to satisfy the demands for vegetables from established grocers and the added Fair Go supermarket chain. We've seen this with Aldi's introduction to the Australian grocery chain landscape.
It will be required for all supermarkets to remain at a decent level of stock, while that level may be lower than before. And there is always a level of wastage at store level, that level of wastage will be increased by these added supermarkets.
The Fair Go chains will be used by farmers as a dumping ground for their poor quality produce, which is great for them, but increases the cost in the cost/profit ratio to those Fair Go stores. This would force the government run stores to cutback in increased areas lessening the accessibility of those stores in incremental but important ways. This leads to a medium term negative feedback spiral, having a noticeable effect on the customers' engagement with that store. Old, poorly looked after IGA's are an example of this, people won't shop there due to the 'ick' factor. The only salvage would be they cheaper, but will yhey be cheap enough for the perceived quality? Spudshed may be a positive indicator here, but they have a measure of vertical control over their fresh food. I think this problem will lead to an unexpected decrease in this plans expected revenues due to reinvestment in the stores becoming more diffficult as time goes on.
The last two paragraphs are about ongoing burdens that could only be shaken off by becoming more competitive, but that would mean sacrificing profitability (likely no longer pay for themselves with their own revenues) to maintain the 25% price discount. There are existing examples in each paragraph that demonstrate the resulting problems the Fair Go stores would create and face.
What we're talking about is a market design problem. First thing I think we should do as a nation is call Alvin Roth for help. ;)
But now for a few of my suggestions,
##Food Vouchers##. Its boring, but they can work. The aim is actually to increase access to fresh, healthy food, not to be a competitor to ColesWorth. The delivery system is already established, but the access to that is quarantined by the width of your wallet. Food vouchers could be triggered automatically by the ATO by flagging a combination of things like location, income, number of dependents, etc, in the yearly lodgements.
Food Vouchers could appear as a direct transfer payment at regular intervals (weekly, monthly) across the course of the financial year based on the expected cost difference that tax payer, in their situation, would be paying for the average basket of fresh healthy produce.
The above design is fairly liberal and places faith in the recipients to spend the money in the intended way. Other methods such as welfare cards that can only be used at certain kinds of stores have been trialled in indigenous communities that have had alcohol abuse issues, those may be another, more conservative, road to go down. And I'm sure theres other less onerous safeguards and nudges for wise spending that could be employed.
This would largely solve the problem for areas with existing ease of physical access to fresh, healthy food. But there are lots of communities without fair access to cheap, fresh, healthy food.
##Fair Go Shelves## these hard to reach areas are low access because Australia's food delivery system isn't built for them. But we don't need to reinvent the wheel by establishing a whole new system of distribution and supermaket centres. The distribution centres are there, the shops are there, its the incentive to extend the system to get the fresh, healthy food to those shelves that isn't.
Fair Go Shelves could be the PBS for our food, basically a subsidy scheme for putting that extra pallet of fresh food on the truck or plane to the hard to reach areas and then selling them at metro prices.
A mix of these two ideas could likely have better results than ~600 new stores could, it is also a kore dynamic solution that lends itself to alterations more easily.
However, it is also more easy to phase down, or completely remove were a hostile government to be elected. The only solution I could offer there are the political costs detering hostile governments from that course of action, meaning it would need to be a policy thats broadly popular, and well liked in the electorate.
So i'll try to conclude,
I've spent a couple hours on my sofa finding three points of failure in the Fair Go Supermarkets Plan. I'm sure, unfortunately, there are many more that others may highlight.
- Adds an unnecessary and wasteful initial budgetary outlay for a 'slow lane' to the Australian food delivery system highway.
- Supplier induced Demand. Farmers and importers will be incentivised to deliver more produce to market at a more varied quality than before due to the price floor. 25% lower than ColesWorth. Increasing operational costs.
- 'Ick' factor, due to cost cutting will decrease revenue. Rich and poor alike want to shop in a nice place where they have ease of access to the food ranges they want.
On the other-hand, if the Fair Go Supermarkets plan is simply meant as a conversation starter about our supermarket and food delivery system. Then the Green Institute has been wildly successful with me, as evidenced by this long commentary on their plan.
Then I've identified the crux of the solution that the Fair Go Plan failed to identify,
##Its a Market Design problem##
I've had a quick go at some alternative suggestions,
- Automatic Food Vouchers based off combination of the annual tax lodgement details.
- Fair Go Shelves, a PBS for Outback greens... and other fresh foods. (The 'Green' marketing writes itself for this one).
Finally, now we know the problem, (market design) seriously we should contact the professionals. Market design is an undervalued part of the solution to so many of our problems. Whether its in democratic delivery, food delivery, or money markets, most of the problems we could largely solve by redesigning and maintaining the markets delivering these inputs to our complex liberal democracy.
My only criticism is critiscism
It would be cheaper and faster to build supermarkets than trying to force Colesworth to sell their stores. They'd drag the acquisitions out for years in the high court, arguing the compensation for their stores, and that they'd need to be compensated enough to build new stores to replace the ones they lost to the government. And they'd probably win.
If new supermarkets are going to be built either way, the government may as well get the new ones.
I don't see how it would be faster to build than to buy. Supermarket builds take several years.
Legally I think the problem goes away when you considee market saturation.. You have a certain amount of buyers in a given area, and once there are enough shops to serve those buyers then adding any more shops would cause market saturation.. Nobody makes enough profit, bad times. So, the suggestion to buy out an established shop, rather than trying to set up a shop in an area that would saturate the local market and mess with multiple businesses is not a bad one.
Yes, Coles/woolworths could sue them if they used eminent domain or similar to force a buyout. But the duopopy would be just as likely to sue if the govt built a brand new shop in an area that existing retail already served (which would be the whole point). So.. Sued by 1 business in scenario A, or sued by multiple in B..
It will come down to how corrupt a government is vs. how willing it is to get in there and get stuff done. The WA government has just finished building 72km of rail lines, two tunnels under the river, several train stations and a whole workshop to build trains in ~7 years. As a project, building 200 supermarkets would be similar in scale. Wollies recently bought a property not far from me, knocked it down and replaced it with a store in less than two years. So on an individual level, we'd see stores coming online in 2-3 years, and the rollout finishing in under 10. The government can make stores fairly identical.
If the government told Colesworth "Hey, nice thing you have going there - we'll take it.", they are of course going to fight that tooth-and-nail. Even assuming you managed to get the legislation to pass (that in itself would face massive resistance from the business community), you can't just buy the stores themselves. You need to them for the lost revenue, costs to replace their lost stores and you'd be buying stores of different sizes/shapes/state of upkeep. These legal proceedings would drag out for years - and I think Colesworth would have a decent chance of either winning, or forcing the Government to pay more money than just building stores would have cost. Once the government got its hands on these ex-Colesworth stores, they would not all be standard. They would have different layouts, different building ages/states of upkeep. Fitout and maintenance would be a far bigger problem to solve than if the stores were purpose-built new.
I would be building too but not a carbon copy of commercial supermarkets which are expensive to build and designed to make you buy a lot of rubbish.
If we're going to dream, I'd build an alternative structure from the ground up. It'd be a warehouse type affair built from top-quality Australian pre-fabricated components. Would cut down building time and provide manufacturing employment. It could still be architecturally attractive.
The location would be in a more industrial area as long as there was parking. This would also cut costs.
The interior design would not have to be a gigantic overlit, bels & whistles, overstocked supermarket. A bit more like Aldi, not fancy but still easy on the eye. Would also cut costs.
It would carry all essentials emphasising nutritious food.
I'd love for something like this to become a reality.
Going to be difficult to get that one through when he wasn’t re-elected. Maybe next time
Looks like Shoebridge is supportive so I guess it just needs to go to the members and then on to the reps. No need for Max to run again.
