Businesses resist lifting prices, but controlling costs is a losing battle

“Those larger scale, well-resourced, well set-up businesses, with good control of their supply chains, they’re the ones that can absorb these things.

“But at the smaller end of town, which is still around 80 per cent of our economy, many of those guys have just hung on over the last two years in particular.”

Award-winning Wairarapa farmers Dion and Ali Kilmister​ breed and finish their own stock on their own farms. They sell the meat locally through their Homegrown Butcher Deli and Pantry in Masterton, and also online, to retail and wholesale customers.

Their supply chain is as short as it gets for commercial meat producers. They do not use a middle man for their stock, although they do have to send the animals away for slaughter. The cost of setting up a commercial slaughterhouse would be prohibitive.

Dion Kilmister describes the business as “farmer’s gate to plate”. They expanded the retail side and survived without the wage subsidy during Covid lockdowns. However, once the ‘traffic light’ system was introduced and the country went to red, turnover dried up by 50 per cent.

“I think there’s self-endorsed lockdown from New Zealand, the threat of higher interest rates, the fuel price, people just watching their pennies, there’s not as many [people] going to cafeterias now, so they’re not buying as much product,” he said.

The Kilmisters put prices up about three months ago, but are now sucking up a lot of costs.

“We just can’t charge willy-nilly prices, or you lose customers. You’ve got to try and produce the best product you can, and you’re competing with supermarket prices. We’re absorbing a lot of them,” he said.

“We had a price rise about three months ago ... after the last minimum wage increase, so we absorbed it as long as we can, but you’ve got to put some on at some stage."

Dion Kilmister says they increased prices about three months ago, but are now sucking up a lot of costs.
Dion Kilmister says they increased prices about three months ago, but are now sucking up a lot of costs.

They recently serviced one of their air conditioners at a cost of $3700, up from $1000 last year. Meat processing costs are up 50 per cent, and ingredients to make sausages and their other smallgoods are up 20 per cent to 40 per cent.

Their staff are all paid more than the minimum wage, but pay rates had to increase when the minimum wage increases, he said.

Rising export prices are also boosting local meat prices. 

“We don’t want to put our price up, and we feel we can’t because of consumer resistance, but the business has to return a profit otherwise we may as well just stay home and farm.

“The butchery is kind of our serious hobby, it’s not our livelihood, and we certainly feel sorry for the businesses out there that it would be their livelihood, because it’s pretty tough.”

They will absorb the increasing costs as long as they can, but margins are getting a lot tighter.

“Everyone’s hurting, so you’ve got to suck up a bit of pain yourself as well.”

Further north, Waipapa Butchery in Central Hawke’s Bay also said that despite growing their own animals and selling the meat at their own outlets, they are being hit with high costs.

She and her husband Duncan Smith​ were sheep, beef and cropping farmers on Patangata Station, 15 kilometres from Waipawa township, when they bought the local butchery. They also own a butchery in Havelock North.

“We still have to get meat trucked to the works in Hastings. Trucking costs have gone up. Everything has gone up,” she said.

Rising costs were making themselves felt right across the business, from trucking the animals to Hastings to what the abattoir charged per head for slaughtering; cleaning chemicals for the butcheries, paying for security, buying craft roll wraps for parcelling meat up; butcher bags and sausage skins; labour costs and transporting staff to work in the company vans.

There are no costs they can control, she said.

“We’re passing on costs, you have to.”