5 Sep 2022

Lotto stores in poorest half of NZ account for 70% of sales

7:10 am on 5 September 2022

Photo: RNZ/Asia King

This is the first story in a series on Lotto. Later in the week, we'll cover Lotto's money making plans and how the government plans to step in.

Nearly 70 percent of Lotto shop sales are made in the poorest half of the community.

The data was provided for an RNZ investigation into the state-owned gambling company, as one expert warned Lotto was impacting poor communities "by stealth" and that it had hid in the shadows as the spotlight went on pokies.

Even Lotto now says it accepts it has too many stores in low income areas and is closing some down.

It has set a target of reducing "the ratio of stores per capita in areas of high deprivation to below the national average" by the end of 2022.

Read more from this series

  • Lotto warned $25 million online Bingo plan could create more harm
  • Lotto data shows that just under 70 percent of retail sales come from outlets in areas ranked 6-10 on the Deprivation Index - where decile 10 areas are the poorest and decile 1 areas are the richest.

    The highest selling area for retail sales was Henderson-Massey, a decile 8 community in West Auckland, where people spent $26 million on Lotto in 2021.

    In Ōtara-Papatoetoe, a decile 9 community in South Auckland, people spent more than $24 million on Lotto last year.

    The other three areas spending more than $20 million at retail stores in 2021 were Howick, (decile 4, $24 million), Maungakiekie-Tāmaki (decile 8, $21 million) and Hamilton West (decile 8, $20 million).

    Last year people in Māngere-Ōtāhuhu, a decile 10 community in South Auckland, spent more than $16 million at Lotto retail stores.

    New Zealanders now spend $1.5 billion a year on Lotto's gambling products - Lotto, Strike, Powerball, Keno, Bullseye and Instant Kiwi - nearly double what they spent a decade ago.

    Sales for 2021 were the highest in Lotto history, up nearly 9 percent from the year before.

    Selah Hart of Hāpai te Hauora, a kaupapa Māori public health agency whose work includes reducing gambling harm, said some people in poor communities saw Lotto as a way out of poverty.

    "Who doesn't want that when they are stuck in a cycle of poverty and trying to make ends meet for their whānau?"

    Hart said that like fast food and alcohol outlets, the gambling industry looked to the demographic most likely to buy their products.

    "All of them will look to, and push, where the demand is and the demand sits within those impoverished communities that are looking for a way out."

    Hart did not believe Lotto had been directly targeting the poor but "by stealth" was having a big impact on impoverished communities.

    "I just don't think that the light has been shined on them and they've been able to hide in the shadows of pokie machines."

    While attention has focused on pokies and casinos - which problem gambling experts say do pose higher risks - Lotto has quietly been strengthening its position in the New Zealand gambling market.

    Figures compiled by consultancy Synergia for the Gambling Commission show Lotto is the only one of the big four gambling sectors to increase its market share over the last decade.

    Lotto has gone from 18 percent of gambling spending in 2010 to 28 percent in 2020.

    The pokies - officially called the Non-Casino Gaming Machines sector - have fallen from 44 percent market share to 36 percent over the last 10 years, casinos have dropped from 24 percent to 22 percent and the TAB has been steady with 14 percent.

    Total player losses for gamblers betting on Lotto, pokies, casinos and the TAB were $2.6 billion in 2021, the highest ever recorded for the four main gambling sectors, according to Department of Internal Affairs data.

    Nearly 70 percent of the population say they have gambled in the last year and Lotto was the most popular, with 59 percent of New Zealanders buying its products.

    While online sales for Lotto have surged in the last few years, more than half of its sales still come from its network of more than 1300 retail stores.

    RNZ obtained data revealing Lotto's top 10 stores - and again they are heavily skewed towards poor areas.

    Of the top 10 money making stores for Lotto, five are in the two poorest slices of the community - deciles 9 and 10. Two of the top 10 stores are in decile 8 and just one comes from the richest half of the population.

    Lotto wouldn't release the amount of money the stores turned over but named the two highest selling stores as Hornby Mall Lotto in Christchurch and Unichem Stortford Lodge Pharmacy in Hastings - both located in decile 8 areas.

    Countdown Manukau City Mall and PAK'nSAVE Dunedin, both in decile 10 areas, were the sixth and seventh biggest selling stores in the country.

    Bayfair Lotto in Bay of Plenty, Richmond Night & Day in Tasman and Pak'nSAVE Whangārei - all in decile 9 communities - also made the list of the top 10 stores for Lotto sales.

    The only store in the richest half of the community to make the top ten list of Lotto retail outlets was PAK'nSAVE Riccarton, based in a decile 5 community in Christchurch, which was Lotto's No 3 store.

    University of Auckland's Edmond Fehoko, a public health academic who has researched gambling in Pasifika communities, says Lotto retail outlets are highly prominent in South Auckland supermarkets.

    "Enter the supermarket and they see the Lotto pop up store. They have two things going on in their minds: one, to either continue their shopping to meet their everyday needs, or two: buy a Lotto ticket to see whether they can make some extra money from it."

    Lotto CEO Chris Lyman, who spent 15 years at Lotto building the retail network before becoming CEO, conceded that Lotto stores had been more highly concentrated in poorer areas.

    "If you compared it to a high wealth area, there would be maybe one or two stores more. We're saying 'that's not okay, we should make sure that it is a level playing field and we do not want to be over-representing'."

    Lyman said the reduction in retail stores - the numbers have fallen to 1340 stores, down from 1530 a few years ago - was also being driven by growth in online sales.

    "So stores are coming out of wealthy suburbs as well. But more stores will be coming out of vulnerable areas."

    Documents released to RNZ under the Official Information Act show Lotto knew for some time that it was causing harm by having too many stores in poor areas.

    The documents include minutes from Lotto's expert advisory panel, which told the company in September 2020 that "harm minimisation for retail sales is all about location, particularly for the more deprived communities".

    The panel also told Lotto that the "challenge for retail store operators is they have no information about the financial situation of their customers".

    At that meeting the company also received a presentation from the Problem Gambling Foundation, which included how much low income communities spent on all forms of gambling - not just Lotto.

    "People in poor communities spend three times more on gambling products than those in affluent communities," the presentation said.

    Lyman said the data Lotto provided to RNZ had limitations because it showed where people bought Lotto tickets but not necessarily where they lived.

    Lotto itself used the data to help decide where stores should be located but said it was imperfect because even within zones categorised as 'high deprivation' there may be pockets of wealthier areas.

    The data also only captured retail sales, not the 45 percent of sales Lotto now made online.

    Lyman denied that Lotto was getting a large proportion of its sales from people who couldn't afford it.

    "I classify it very much as a product predominantly for middle New Zealand. Poor communities do buy our products, obviously, I'm not disputing that. But everybody does."

    Lotto said it now had a screening process for retailers wanting to join the network, "including the location of a store and particularly whether it is located in an area of high deprivation".

    Fehoko said that Lotto was not seen as a 'game' in some Pasifika communities but as a chance to earn much needed income.

    "We are now in a situation where the cost of living is on the rise and everything else is increasing as well and so gambling is seen as an avenue to try and make extra money."

    Lyman said Lotto was offering people the chance to dream rather than a realistic chance of winning.

    "This is an opportunity to dream of winning big, of changing your life," he said. "Most people understand they are probably not going to win that life-changing dream."

    The odds of winning big are very small - one chance in 3.8 million of winning first division Lotto and one chance in 38 million of winning the Powerball Jackpot.

    "They're buying that chance to have that emotional release - the imagination of winning a big prize," Lyman said. "For a lot of our customers, it's that interaction that they have, particularly in retail, to pick their favourite numbers or what they may perceive to be lucky numbers or numbers that are important to them."

    He rejected the idea that, given 'lucky numbers' don't exist, this was offering people false hope.

    "I don't believe it's false hope," he said. "We're very clear about what the game is. It's very transparent."

    Lyman also stressed that Lotto returned 100 percent of its profits to the community.

    But Fehoko said Lotto was insidious because people could spend a few dollars each day which could add up to thousands of dollars over several months.

    "It's one of these silent epidemics that are taking place within our communities that a lot of people don't take into consideration as a serious issue and that's because we can't physically see the harms of gambling."