Labour laws killing hotels—magnate

Press, 23 November 1988, Page 41

Labour laws killing hotels —magnate

By

NEILL BIRSS

Rogernomics must continue until the labour market is deregulated, says Mr Douglas Myers, who a decade ago would have been a most unlikely supporter of a . Labour Finance Minister.

The present employment system is pricing hotels out of the liquor market, says Mr Myers, whose family has been in the business in New Zealand since the Europeans colonised it.

The managing director and largest shareholder (20 per cent) of Lion Nathan, Mr Myers controls the merged liquor interest of Lion Breweries and the merchant activities of L. D. Nathan. The company owns more than 300 hotels.

The hotels compete in the liquor market against restaurants and clubs.

“We have significantly higher wages under a different award. Worse than that, we have significantly less flexibility. We are hedged around with all sorts of restrictions: you cannot do this and you cannot do that.”

Clubs often get a deal from a local council on rates. “And where they do employ labour, they have an advantage and so do restaurants.

“How do you compete if you have a 20 per cent to 30 per cent disadvantage in something as important as labour? You can’t do it.”

Hotels are being priced out of the business, he says.

Women are disadvantages under the rigid labour system, he believes. Many with children want part-time work, or job sharing, but unions are blocking this. “They are still trying to make us staff it as if it were a nine-to-five, Mon-day-to-Friday business. It isn’t. It is a 24 hours, seven-days-a-week business.”

Labour restrictions are also hindering the economic recovery in the South Island, he believes. Wage flexibility would allow industries to be attracted by lower wages to the South Island, he says, pointing out that living costs are lower here.

“If you want to get

regional development, get rid of all the restraints — the rigidity of our national craft unions.”

He opposes the forming of large unions. They are favoured, he says, because people fear companies will become fewer and larger. But the large companies are mainly shedders of labour. It is small firms that create jobs.

Mr Myers has been in Christchurch this week for the opening of the company’s Bush Inn shopping centre. This is a result of the merger: land that belonged to both Lion and Nathan’s has been used for the centre. It features a DEKA store. The name embraces the Big City, Mark II (formerly Woolworth’s variety stores) and Maximart stores of Nathan’s.

The name is only part of the change in the company’s food business. There will be more brand orientation, and emphasis on fresh products and health foods rather than tinned and frozen goods.

Lion Nathan will not meet the invasion from Australia of the Coles Myer K-Marts front on. The market is big enough for both groups, says Mr Myers. “Our stores have been refocused ... moving away from head-on competition. There are areas of the market where we can compete successfully. We have a new and better name, and a clearer focus.”

Mr Myers, just turned 50, runs the company from a refurbished office in the Nathan building in Fort Street, near Customhouse Quay, Auckland. It is quite modest amid the SIOOM construction projects in the city. He graduated from Cambridge with a degree in history and stayed in Britain working until he was 26, when he returned to New Zealand and joined the liquor business.

One reason for the merger must have been the Myers view of the world liquor market. “Around the world there is not much — if any — growth in liquor,” he says. Opportunities remain. The earnings from the

breweries side of the business have been lifted four or five-fold in the last eight years. But this has been by increasing market share.

“It is the same in hard liquor, and hotels are becoming increasingly competitive. So it is probably unrealistic to expect overall growth in the market.” However, opportunities remain in productivity, branding, and “moving upmarket.”

Lion Breweries could have expanded overseas rather than merged with Nathan’s, Mr Myers agrees.

The company had reservations because of the lack of competitiveness in

New Zealand. It questioned its ability to “waltz off overseas and add value to companies that were a long way away and probably operating in a more competitive environment.”

The frequent publicity about Steinlager sales overseas does not indicate potential for a large export industry. Lion Nathan exploits niche markets for this excellent beer. Beer exports are not highly profitable. The company makes more from exports of hard spirits, such as Southern Comfort for Australia, which it makes under licence. The freight is about the same on a bottle of spirits as on a

bottle of beer, but the profit margin is much higher on the spirits, of course.

The alternative to overseas expansion was to look around in New Zealand for a company that had a fit: and Nathan’s was it.

"Though we didn’t get a bargain in terms of what we had to pay for it I think we did get a bargain in that there is a significantly higher earnings potential out of the businesses.

“They (Lion and Nathan’s) were dominant in the industries they were in. None of the brokers seems to have touched on the strategic

significance of that. “Also, we were allying a significant property resource of ours — ownership — with a resource of theirs — management — to add value to that ownership.”

Lion wanted to consolidate its base in New Zealand.

“That has been done: we are now a significant company.” Lion was already in the retail business.

"We had about S3OOM worth of retail liquor sales. I wouldn’t say we were the greatest operators, but we were in that business, and we were looking for some skill transfer from Nathan’s

into our own retailing. That has happened.” Banks are leaning over backwards to lend to Lion Nathan, Mr Myers said. About SUSIBSM has been borrowed overseas, and the loans are subordinated to all other debt. That is, if Lion Nathan were to collapse, the overseas lenders would be at the back of the creditors’ queue.

The cash will come in handy. Among the investment needed will be about SIOOM for improving the Auckland brewery in five or six years. About S3OOM worth of investment property held To next page