H.—29 a

The only other claim to co-operative enterprise in processing and distribution comes from Auckland, but this company is registered under the Companies Act and its chief claim to being a co-operative company lies in the fact that all shareholders are or have been suppliers to the company. The company is liable for taxation, and dividends are distributed on shares as in the ordinary manner. As these shares are, however, held for the most part by supplier shareholders the company considers it is entitled to regard itself as a co-operative company. Again the evidence of efficiency within this company is not sufficient to enable the Commission to draw any favourable comparison of successful co-operative enterprise as against private companies. These considerations do not by any means militate against the favourable consideration of the introduction of co-operative enterprise into the treating and distributing trade. The inherent principle to be observed is that the profit motive, as such, should be reduced as much as possible. The relative non-success of the present co-operative companies in achieving high standards is to a limited extent due to the severe competition they have had to face and their inability to build up large reserve funds in order to obtain the plant and equipment which would have secured them the means of providing milk of high standard to consumers. There is little doubt, however, that Dairy Farmers' Co-operative Milk Supply Associations properly organized, and with adequate funds, would result in a better relationship between the processing and vending institution and the producer then can exist under present circumstances between a proprietary concern and its suppliers. (3) Proprietary Companies.—The Commission had the opportunity of examing the operations and equipment of at least six proprietary companies concerned in the processing and distributing trade. (The term " proprietary company " is used to distinguish from co-operative companies.) Only two of them have reached a stage of high efficiency in the processing of milk. These two have very modern plants and both are capable of turning out supplies of high-standard milk. In the case of at least one of these companies, however, the general organization of collection is such as seriously to counteract any efficiency in the processing of the milk. The Commission was also confronted with evidence in the case of one of these companies that the relationship between the company and the producers was not entirely satisfactory. The introduction of a Dairy Farmers' Co-operative Milk Supply Association would, however, overcome to a considerable extent the type ot dissatisfaction existent, and under circumstances of reasonable public control there is little doubt that private enterprise can perform the functions of processing and distribution with a high degree of satisfaction. (4) Private Vendors and Producer-vendors. —The distribution of milk by private vendors and producer-vendors remains a somewhat difficult problem. It is a noticeable feature in each centre that the average gallonage per round by private vendors is much less than would be delivered by roundsmen employed by treating-houses. Consequently, until the average round for such vendors is stepped up to that obtaining for the treating-houses, it is obvious that complete economy and efficiency of distribution is not likely to be achieved. It is for this reason that the Commission has recommended elsewhere that one of the functions of the local Milk Council should be to consolidate existing rounds at a more economic size. The private vendor also creates a problem in respect of the organization of distributing all bottled pasteurized milk, but the Commission is mindful of the fact that the private vendor has played ail important part in the building-up of the distributing trade, and his claims for consideration cannot be lightly over-ridden. The Commission is of opinion that any change to be made should be gradual and should make full allowance for the welfare of efficient private vendors. Zoning has created an additional problem in this respect, and it is one to which the Central Authority should give special attention. By allotting a particular vendor the monopoly of a given round circumstances are created under which the dissatisfaction of any individual customer can find little or no outlet, aud he must be content with the. quality of service given by the private vendor. The competitive phase under which he could turn from one distributor to another no longer exists and in its train there has undoubtedly come much dissatisfaction with those vendors who do not take all possible care in seeing that the consumer receives the type of milk which he requires and to which lie is entitled. It was the opinion of witnesses before the Commission and of most of the consumer representatives that the principle of zoning with its undoubted economies in distribution should be continued after the cessation of hostilities, but it is equally certain that consumers generally do not wish the round to be restricted to only one vendor. In the absence of the vending of milk of a uniform quality, such as bottled pasteurized milk, it would certainly appear that at least two vendors—viz., one vending bottled certified raw milk and the other bottled pasteurized milk —would be necessary in each zone. In Wellington the nearby farmers compete within zones with the Wellington City Council, but distribute loose raw milk. The Commission is not qualified by reason of the limited nature of its inquiry to select any type of organization as being the type which should operate in all centres and under all conditions. We have expressed our opinion on the merits and demerits of the types of organization as we have seen them, but the question of change from one type of organization to another is one which involves careful consideration and much greater attention to the implications of such change in the industry itself than the Commission has been able to give. The matter is essentially one for consideration by the Central Authority, and the Commission is of opinion that it is improbable that major changes can with adequate reason be imposed in anv centre except where conditions are such as to necessitate and demand immediate large-scale reorganization. Under proper control by the local authority and guidance from the Central Authority it is probable that future changes in any area can be gradually and effectively directed towards the type of organization giving the greatest advantages in efficiency and standard of service. CHAPTER B.—PRICES AND MARGINS A specific task of the Commission is to ensure an adequate supply of milk of high standard at reasonable ■prices. The determination of reasonable prices must of necessity be related to the service and quality of the commodity supplied. It must also take into adequate consideration all circumstances attending the costs of production, collection, treatment, and distribution. Yet the final result must ensure that the price to the consumer is strictly a reasonable price. The Commission's task was to investigate precautions and safeguards to be taken in production, collection, treatment, and distribution necessary to ensure that the consumer receives adequate supplies of milk of high standard, but it is

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