buy nz made - before it's all gone

I had a chance to speak to a local manufacturer today who sells into both Australian and New Zealand supermarket chains. His experience of late has confirmed what many had fared about the buyout of Progressive Enterprises by Woolworths Australia - that NZ based suppliers are fucked. In an environment where the price grocery retailers pay for their goods have remained relatively static, suppliers here are now forced to match terms with Australian products or lose access to supermarket shelves. In theory, there's opportunity for NZ suppliers to gain access to Australia, but the reality is that the margins they get from NZ supermarkets is low, and a lack of cashflow for the smaller suppliers to invest in equipment to be able to ramp their output serving four million people to output serving six times that number makes quick expansion impossible. The same lack of liquidity prevents manufacturers from acquiring horizontally - meaning business that are in trouble simply disappear, rather than being bought by another NZ operation.

All the while, the Woolworth's Australia has made a very nice profit, reporting in the latest half year that
- EBIT was up by 31.5% to $A902.4 million.
- Supermarket (Oz&NZ) sales up $A2.4 billion to $A16 billion.
- NZ Supermarket sales up 4.3%
- Food inflation was 1.5-2%

The cost of doing business was also down (read: squeezing suppliers), with

80% of these cost savings were reinvested in gross margin with the balance going to increase EBIT margin.

(PDF here)

So we - the consumer - is left with little choice in what we buy, even if we are swayed by the Green's Buy NZ Made Campaign. It's starting already - you may have noticed your favorite Basics product replaced with the Oz made home brand. Little wonder we're flocking to Australia, pretty soon we'll be left without any food.