'Over-Recovery Of Costs' In Beer Price Increases

Press, Volume CX, Issue 32361, 29 July 1970, Page 32

'Over-Recovery Of Costs' In Beer Price Increases

(New Zealand Press Association) WELLINGTON, July 28. The beer drinker is being asked to subsidise losses incurred on spirits sales and accommodation in hotels, according to a witness at the Price Tribunal hearing today.

The director of the Consumer Service Division of the Department of Industries and Commerce (Mr C. E. Beard) was being examined by Mr J. D. Dalgety, counsel for the Federation of Labour and the Combined State Services Organisations.

B. Cooke, Q.C., representing the Hotel Association of New Zealand.

partment of Industries and Commerce that profits from brewery-owned hotels were generally low. “Although the brewery operations were rather more profitable, there was much evidence that even in their over-all operations the brewery companies were not obtaining a satisfactory return in 1968-69,’’ he said. “No-one is likely to suggest that in general privatelyowned hotels are in a stronger financial position than brewery-owned hotels. “The association will call evidence indicating that the increases which it recommended in the face of increased costs in December, 1969, were in fact less than would have been justified to bring the hotel side of the industry to a level of profitability comparable with other industries in the wholesale resale field. “However, it is not necessary for the association to go as far as that for the purposes of this inquiry. The over-riding points for present purposes are simply that a new price structure was necessary and that the one recommended was manifestly reasonable.” Mr Cooke said the retail part of the tribunal’s inquiry was of more significance for the public because the ultimate question was whether the prices charged to the public were reasonable. It was common ground shared by all parties that, as a result of increases in the price from breweries to hotels, and other increased costs, the price of beer th the public bad to be increased at the end of 1969. After outlining the maximum prices recommended by HJLN.Z., Mr Cooke said that obviously the prices of the smaller sizes of glass, includ-

l ing the Boz glass, could not i have been increased by less s than Ic. “The increases of 2c and 3c - in the other glass sizes were 8 commensurate and can fairly 1 be regarded as necessary to r ensure that the effect of the Boz increase was not lost ■ through changes in consumer 1 preferences. “At the same time, the new !• price structure continued the ■ tradition of ‘concession’ rates • for the much large quantities 1 bought in jugs and flagons. In principle there can be no 1 magic or hard and fast fore mula for calculating a price structure, but it is submitted 1 that the basis adopted by the e association was reasonable e and practical,” he said.

Mr Cooke, in opening submissions for H.A.N.Z. in the second phase of the tribunal's inquiry—the increase in the retail price of beer—said that in the first part of the inquiry, which dealt with the wholesale price increases, it had been accepted by the De-

Mr Dalgety asked whether the wholesale beer price increase by breweries in December represented a substantial over-recovery of costs incurred by the breweries. Mr Beard replied that there had been an over-recovery of costs in relation to the 196869 accounts of the breweries. Mr Dalgety: It is quite manifest that the sale of beer is being asked to subsidise heavily the accommodation side of the hotel industry, which is clearly unprofitable from a general point of view? Mr Beard: That certainly appears to be the position, but we eannot quantify the amount of subsidy involved Mr Beard agreed with a further suggestion by Mr Dalgety that the beer drinker was being asked to subsidise a loss on hotel spirits sales. Mr Dalgety: Would you agree that it is probable that 85 per cent of those who drink beer as a regular habit would rarely use the accommodation side of the hotel business? Mr Beard: I would have no idea of the proportion. I would think it would be a pretty high percentage, but I have no figures. A new price structure for beer was necessary, and the one recommended as manifestly reasonable, said Mr R.