Tough new rules pushed Jewel of India under, says boss

Ram Rai says his curry company found it to hard to meet the demands of new supermarket owners Woolworths, which operates Countdown. Photo / Brett Phibbs

Nine years ago, Auckland businessman Ram Rai made what he thought was a smart decision to buy a small business to package a range of popular Indian curries.

And for several years, he was proved right.

Between 2001 and 2008, supermarket shoppers voted with their wallets, and made Jewel of India's fresh and frozen curries the leader in their category.

The business more than tripled its original turnover of $1.1 million in that time, and was able to move from leased premises to its own building in East Tamaki.

But now Rai has been forced to place the business in liquidation, after being hit by what he says was a triple whammy of a slump in sales due to the recession, a harder attitude from banks, and a shake-up in the supermarket industry.

New owners have bought his company's land and buildings, but most of its 18 staff have lost their jobs.

Rai is bitter about the experience, and partly blames the takeover of supermarket operator Progressive Enterprises by Australian company Woolworths for his woes.

He claimed his relationship with Progressive, which owns the Foodtown, Woolworths and Countdown chains, was a good one before the takeover. He had contracts to supply fresh and frozen curries for its private label brands, and sales were going well.

According to Rai, his business has always been careful to comply with New Zealand food safety standards. But after the takeover Woolworths introduced new requirements, which his business struggled to meet.

It decided to phase out his private label products, and insisted he drop his prices by 10 per cent.

Its promotion of his products also changed, and it no longer allowed him to have a say in promotional decisions. It also changed its billing system, which he said he no longer trusted.

Rai has laid a complaint with the Commerce Commission about what he claims are anti-competitive practices. He said Progressive refused to allow him to increase his prices, even though his costs were increasing.

And he said many other small suppliers were upset about the changes but were too scared to speak out because they feared a backlash from supermarkets, which have reduced from three big players to two after the takeover in 2005.

In a written statement, Progressive would only say it aimed to work with all its suppliers to deliver the "best value products available".

It tried to ensure its suppliers' products were "of the highest, most reliable quality", and this included audits of its fresh and private label products to ensure they were "consistently safe".

Food & Grocery Council chief executive Katherine Rich told the Herald earlier this month she believed Progressive was working hard on its relationship with suppliers, following some "hiccups" after the takeover.

However, some of the worst examples of bullying she had heard of had come from Progressive's rival, Foodstuffs, which owns the Pak'N Save and New World chains.

Foodstuffs has recently agreed to a voluntary code of ethics with suppliers, but the council is considering whether to lobby for an ombudsman to deal with the issue.

Meanwhile, the National Distribution Union has confirmed it is seeking legal advice as to whether Foodstuffs owner/operators may be operating as a cartel, in the wake of the Government's announcement that it is considering criminalising cartel behaviour.

While he is also critical of Foodstuffs, Rai said it was sometimes easier for small businesses to deal with Foodstuffs, as they could do individual deals with each store.

Rai, who still owns the Jewel of India restaurant in Mission Bay, emigrated to New Zealand in the late 1980s.

Most of his family now live in Australia, but he is not yet ready to give up on New Zealand.

A family friend of former National Party leader Don Brash, he joined National several years ago and is the chairman of its Mt Roskill electorate. He is also considering getting into local government politics.

As far as supermarket politics is concerned, he would like shoppers to think harder about who the casualties are in the grocery wars.

"What they fail to understand is that each dollar discounted is coming from someone else's pocket.

"It could be their own family member who lost a pay increase or bonus, or lost a job," he said.