H.—29A

On the question of goodwills the Commission has been able to obtain little accurate information, but from all evidence presented it is clear that very high values prevail for goodwills at the present time. In Auckland the evidence indicates that goodwill is valued at approximately £10 to £12 per gallon, and as the individual vendor's margin in Auckland is lower than in any other area it is safe to assume that this value is at least an approximation of what must be the position in the other areas. When one considers that £600 to £720 must be paid as goodwill before the cost of taking over the 60-gallon round is even considered, it will be seen that more than adequate profit margins exist. The Commission is of opinion that something should be done to control the value of goodwill on the sale of rounds, and, if possible, the Milk Councils, which, as in Auckland, should have power to purchase a round at a standard goodwill value of not more than £10 per gallon, should exercise their powers whenever it is in the interests of consolidation of existing rounds and with a view to the future organization of distribution. It may well be that the sale of future rounds should be co-incident with a reduction in the number of individual vendors and the increase of the distributing trade of the more efficient units at present in existence in that area. The question of front-gate delivery has been raised in the various areas, and the Commission is of opinion that, although this was introduced in some areas as a specific war measure, it is a practice which should be continued after the cessation of hostilities. It is not a difficult matter for consumers to arrange proper receptacles at the front gate for the receipt of milk, and it certainly results in considerable economies in distribution. Special consideration should, however, rightly be given, as it is in Auckland, to requests by invalids and nursing mothers for a delivery of milk to the front door. Savings on Distribution Economies in distribution have been achieved in each centre through the effect of zoning and front-gate delivery, but as in each case the vendors have claimed that their costs have been forced up owing to circumstances associated with the general increase in costs due to the war, and these savings have not been passed on to the consumer. Under the Commission's recommendations considerable importance is attached to the setting-up of a Central Authority to organize the proper collection of costs and other statistical data. This work should be continuous and would then indicate where savings could be made, what were adequate margins, and whether the price could be reduced to the consumer. If this were done, the consumer would then be assured that any savings made by the distributing firms, through economies effected by the consumer himself, would be passed on to him. The Commission is strongly of opinion that if the consumer foregoes any rights he should be fully safeguarded in the cost of the commodity being distributed. However, the setting-up of a Central Authority will undoubtedly have much to do with the general success of any reorganization and should result in a proper safeguard of the position of the consumer, both as regards quality and price. In the meantime the Commission is satisfied that a policy of fixing margins on a reasonably narrow basis is essential in order to enforce the maximum efficiency by companies engaged in treatment and/or distribution of milk. The Central Authority, with its continuous survey of accounts, can quite well function as an Adjusting Authority in case any great hardship has been caused by the adoption of the margins now recommended by the Commission. The proper and continuous control of collection of costs and data from the production, collection, treatment, and distribution sections of the town-milk industry will do much to control the efficiency and smooth working of the various sections. The Commission is most emphatic in its opinion that inefficient methods and waste, distrust and suspicion between producer and vendor, bargaining for prices and unrestricted competition are evils in the milk industry, which, in view of its national importance to health, must not be allowed to continue. Wholesale Prices Wholesale prices for milk vary widely between the different centres, and, whilst fixed at a reasonable level in Wellington and Auckland, a policy of cut-price competition has forced them down to a low level in Christchurch and Dunedin. The following table gives some indication of the range in prices and margins for summer and winter contracts in the four main areas :— Range of Wholesale Price to Producers, in Prices. Pence per Gallon. Auckland — s. d. s. d. d. Summer 1 3| to 1 11 10-25 Winter .. .. .. .. 1 7f to 2 3 14-25 Wellington — Summer .. .. .. 1 6 to 1 9 10-54 (approx.). Winter .. .. .. .. 1 8 to 1 11 12-92 and 19-31 Christchurch — Summer .. .. .. 1 2 to 1 8 9-00 Winter .. .. .. 1 2 to 1 8 11-00 and 14-5 Dunedin — Summer .. .. .. ..11 to 17 8-5 and 10-0 Winter .. .. .. 1 2 to 1 9 12-0 and 12-5 (Excluding milk sold for ice-cream.) From a strict accountancy viewpoint it is extremely difficult to check what is the actual cost of distributing wholesale milk, but it is clear that under a system of keen competition, trade rivalry, and the attempt to secure wholesale contracts in order to build up the volume of milk being treated to an economic maximum, firms are tempted to quote prices which leave little or no margin of profit. The cost is then borne by the retail milk, and to that extent the consumer is likely to be subsidizing, in a mild form, the price of wholesale milk. On the other hand, a system of price-fixation such as obtains in Auckland and Wellington whereby wholesale prices are fixed at a certain margin below retail prices and allowed to move up in accordance with upward movements in retail prices might possibly tempt distributors to build up retail costs as much as possible in order to extend the margin on wholesale.

5 —H. 29A.

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