How we bought the Lotto dream

For years, Lotto pitched certain stores as “lucky”. They weren’t. In fact, the chances of becoming a problem gambler far outweigh the chances of winning a big Powerball prize.

This is the fourth story in an investigative series on Lotto. Look out for more next week.

Lotto’s corporate communications team was on a roll.

Year after year, as the Powerball jackpot ballooned out to more than $20 million, the press releases would go out and the story of the lucky Lotto stores would be picked up by media across the country.

“NZ’s luckiest stores revealed ahead of $28 million Powerball draw,” Lotto headlined its October, 2019 press release.

The Unichem Stortford Lodge Pharmacy in Hastings had “long held the title as New Zealand’s ‘luckiest’ Lotto store,” the media statement said.

“People definitely know that we’re a lucky store, and go out of their way to buy their lucky ticket here,” the store manager was quoted as saying.

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The next luckiest stores were Richmond Night ‘n Day in Tasman and two Christchurch stores: PAK’nSAVE Riccarton and Hornby Mall Lotto.

The details changed as the media releases went out over the years but the story, and the names of the lucky stores, largely remained the same.

“Luckiest Lotto stores revealed ahead of $38m Powerball jackpot,” a major news website headlined its November 2016 story, again naming the Hastings Unichem as the luckiest with PAK’nSAVE Riccarton and Richmond Night ‘n Day tied for second place.

Dozens of stories over the years, bedded in the idea of these lucky Lotto stores. Except that it was complete fiction.

“There cannot be lucky numbers or lucky stores because the whole process is totally random,” says Maria Bellringer, director of Auckland University of Technology’s Gambling Addictions and Research Centre.

“What this is doing is reinforcing the gambler’s fallacy that the outcome of something that is totally random can be manipulated through a particular strategy.”

When contacted by RNZ, Lotto said it would now no longer claim that there were lucky stores.

“We recently carried out a piece of work looking at the use of the word ‘luck’ in relation to our products and as a result of this work have decided we will not in the future put ‘lucky stores’ or ‘lucky regions’ in press releases,” head of corporate communications Lucy Fullarton said.

“A core part of our responsible gambling education programme is to ensure our players know that there is nothing they can do to increase their chances of winning and so we don’t want anything that may confuse that message.”

Fullarton said the press releases were “a bit of light-hearted fun” and never intended to suggest people were more likely to win a prize at certain stores.

But not everyone knows how odds work, Bellinger says. Not only does she believe Lotto’s media strategy was “very misleading”, it encouraged people to spend more.

“Research in other countries has shown that people go to those stores and they actually spend more money buying tickets than they would elsewhere because they think it’s the lucky store.”

When RNZ obtained a list of Lotto’s top ten money making stores we found that those Lotto named as its luckiest stores were also the ones that sold the most tickets – so were statistically more likely to sell winners.

One of those, Richmond Night ‘n Day, has consistently been named a lucky store by Lotto, a claim repeated in dozens of media stories dating back to at least 2015.

That’s been good news for co-owner David Smolenski because retailers get a 7 percent commission on every sale.

“If you sell a lot of tickets it can be lucrative,” Smolenski says. “My store does quite well, because it’s been, you know, in the community for over 30 years, sort of, pushing … when I say pushing, I mean advertising, promoting lottery products.”

Smolenski has a relationship with Lotto that goes beyond selling tickets. Lotto appointed him to its voluntary expert advisory panel.

The panel, as Lotto described it to the Minister of Internal Affairs in 2020, was set up to “provide an objective sounding board for our harm minimisation strategy, processes, materials and tools”.

The eight-member panel includes three problem gambling service providers, one lottery grant recipient, two ‘voices of the customer’ and two retailers – Smolenski and usually a supermarket rep.

Lotto documents obtained by RNZ show “the panellists’ information and Lotto NZ will be protected by a non-disclosure agreement” so it’s hard to get a complete picture of the group.

But it does mean that at least one of Lotto’s harm advisory panel also runs one of the biggest money making stores – an outlet Lotto consistently promoted as a lucky store.

Smolenski points out he has worked hard for his success, after taking the store over from his parents. He’s proud that money people spend at his store is distributed to charity through lottery grants and that his commission helps to pay his staff.

“You get the joy of selling winning tickets,” he says. “It’s a good feeling to be part of all that.”

The lucky store label has paid off, with people travelling from around the country to buy Lotto tickets at his shop.

“People do comment when they are from out of town and they do come to my store because they’ve heard about my store through family or they’ve read about it online or in newspapers or heard it on the radio.”

Or from Lotto themselves. Lotto names the stores that sell winning tickets in a section of its website devoted to the “life changing stories” of recent winners. “Auckland Grandmother Scoops $28 million Powerball Prize,” was one story from March this year.

But the chances of becoming a problem gambler far outweigh the chances of winning a Powerball prize like that.

The woman who spent $100,000 on Instant Kiwi

Jess is only a few seconds into her story when the tears come.

Her children don’t want her to use her real name. Her parents don’t even know it happened.

“I was spending a lot of money and it got to the point I was just not going home and the money was just going and I hit rock bottom.”

It’s three years ago now but the anguish is raw, as she recalls her addiction to Lotto’s Instant Kiwi tickets, which sometimes saw her scratching them in the car and then driving to another store to gamble again.

“We had a family meeting and went through my bank statements and realised I had a problem. I didn’t really think about it before that but I just saw the harm done to my family,” she says. “I’m labelled an addict and I hate that.”

Jess won $1000 a few times but doesn’t see them as wins now.

“I think that really was a bad thing because it kept me going back and I definitely spent more than I actually won.”

Jess spent about $100,000 over a decade on Instant Kiwi, money her partner says they could have put towards the future. “He says we could have had another house.”

For Jess it started out feeling normal. There were Lotto outlets everywhere and they weren’t dingy gambling dens but stores that sold food and other necessities.

That is no accident. As one of its key performance indicators Lotto tracks its “supermarket penetration” which rose from 85 percent in 2016 to 89 percent in 2020.

Lotto ploughs millions into advertising its gambling products, spending $23 million on “promotion and retail support” in 2021.

The Lotto signs say “Play Here,” pitching it as a game – a game you play to help your neighbour. In 2019 it launched Kiwis Helping Kiwis as a platform for “sharing emotionally engaging stories in order to raise awareness of the link between the purchase of Lotto NZ products and community funding”.

The challenge for the 1340 Lotto retailers around the country is that they have no information about the financial circumstances of their customers.

They are trained to look for signs of problem gambling. Lotto documents show retailers are encouraged to use a Problem Gambling Envelope – “a discrete form of information that a retailer can pass to a customer” to minimise “conflict or embarrassment on behalf of either party”.

But there’s another type of conflict here – one that goes to the heart of why Lotto exists.

Under the Gambling Act 2003, Lotto was set up to “maximise profits” for distribution by the Lottery Grants Board, while “ensuring that the risk of problem gambling and underage gambling is minimised”.

Lotto chief executive Chris Lyman
Photo: RNZ / Cole Eastham-Farrelly

Minutes of a Lotto stakeholders meeting from June 2022 note how chief executive Chris Lyman described that dual mandate to staff.

“The biggest challenge is balancing return to community with the potential for harm from gambling – (the) need to manage the necessary tension between selling and harm.”

Lotto retailers are at the nexus of this “necessary tension”.

In its information guide for retailers Lotto says: “Retailers are paid 7 percent commission on their gross lottery sales. This in effect means that the opportunities for growth are limited only by the retailer’s ability to increase their sales volume.”

Lotto paid out $68.9 million in commission in 2021 (including transaction fees for its MyLotto digital platform).

Jess says staff at some stores knew how much she was spending but she was never asked if she was OK. She never got the envelope.

“There are so many Lotto shops now that if you go from one to the other, how do the people know what you’re going to spend?”

Buying Lotto with credit cards

Lotto tickets can be paid for with credit cards
Photo: RNZ/Asia King

Instant Kiwi is Lotto’s highest-risk product and the only one with an age restriction. RNZ obtained the risk profile for Instant Kiwi, as assessed by the company GamGard, in June 2021.

The GamGard score for Instant Kiwi was 51, placing it in the middle of the “medium risk” band, where above 60 is high risk.

The main risk factors are the ability to play continuously with “unlimited purchases allowed per transaction” and that gamblers can pay by credit card.

Gamblers can use a credit card to buyLotto online too, although there are signals that might change.

Britain banned the use of credit cards for online gambling in 2020 and Internal Affairs Minister Jan Tinetti says New Zealand could follow suit.

“I think that that is wrong. We should not be able to use credit cards for online gambling,” Tinetti told RNZ.

Lotto’s Chris Lyman says the company will be guided by the government. “I don’t think I could impose that on our customers. I don’t think that they would see that as fair and reasonable.”

Lyman says Lotto has the highest safety rating with the World Lottery Association, for measures such as online spending limits and restricting online gambling hours.

“I’d stand it up against anybody else in the industry, whether that’s locally or internationally.”

The store that sees food sales go down when jackpots go up

After James McLean, the general manager of Simply Fresh grocer in Northcote, had worked in the store for a few years he noticed a pattern. When the Lotto Powerball jackpot went up, food sales dropped.

“Our average sale is probably around the $30 to $40 kind of mark and when Lotto gets up past about $15 million, then we start to see a retraction of that.”

Lotto documents confirm that sales spike when the jackpot is high. The Powerball jackpot is the main driver of sales, accounting for about 86 percent of Lotto revenue in 2020.

In August 2020 a $50 million Powerball ‘Must Be Won Draw’ saw the company sell 2000 tickets a minute in the runup to the draw – and 2.5 million tickets overall.

The more people spend, the more they worry about their gambling.

Lotto documents show that weekly online visits to its responsible gambling pages surge when a big jackpot is up for grabs.

In 2019 the average number of visits to Lotto’s responsible gambling pages was 71 per week but during times when a $20m-plus jackpot was on offer it spiked to 198 per week.

The hidden addiction

Problem gambling is a silent giant in New Zealand.

According to the Ministry of Health 22 percent of New Zealanders aged 15 years or older are affected at some time in their lives by gambling – whether their own or someone else’s.

Problem Gambling Foundation’s Andree Froude
Photo: RNZ / Cole Eastham-Farrelly

Andree Froude, spokesperson for the Problem Gambling Foundation, says it’s a hidden addiction.

“You can tell if somebody’s had too much to drink, or if somebody’s taken drugs, but with gambling it’s easy to hide it away. I think people just don’t understand the extent of it in this country.”

The four big players – Lotto, the TAB, the pokies and the casinos – contribute to a levy to provide help for problem gamblers.

This year the gambling levy was set at $76 million to cover the cost of the harm over the next three years.

Each of the big four operators contributes to the levy, based on the amount of money spent on their products and the number of gambling addicts who name those forms of gambling as part of their problem.

Between 2012 and 2020, 5690 people who turned up for help with their gambling addiction said Lotto products were a source of their problem, according to the Gambling Commission.

The number of gambling addicts citing Lotto peaked at 820 a year in 2016 and has been in the low 500s for the past three years.

In 2020, 513 people named Lotto as a source of their gambling problem, representing 12 percent of those seeking help, ahead of the TAB (10 percent) but well behind the casinos (21 percent) and the pokies (57 percent).

These are only the people that show up. About 90 percent of people with gambling problems don’t seek help, according to the Ministry of Health.

Froude says while Lotto is lower risk than the pokies or casinos, many people still spend too much.

“If somebody spends more than they can afford – if they can’t pay a bill, because they’re putting more money into Lotto than they can really afford – then there’s harm,” she says.

“We just don’t see the people often until they’ve got themselves to a place where they might have lost their relationship, they might have lost their homes, they might have committed fraud, they might be suicidal – that’s really the point they get to, before they will seek formal treatment.”

The staff spending $5000 a month on Lotto

It’s not only customers at risk of developing gambling problems.

“We have a greater duty of care to our retailers in that respect,” Lotto chief executive Chris Lyman says. “Because they are standing behind the counters.”

The company developed an ‘At Risk Retailer’ programme, which was initially designed to look for fraud but was expanded to monitor high staff spending at Lotto outlets.

Staff are supposed to press a staff purchase button when they buy a ticket. (If they don’t do this Lotto can refuse to pay out a prize, although it can’t provide examples of this happening).

The documents also show that, at some stores, staff are spending more than $5000 a month on Lotto products and sometimes more than $500 in one transaction. Lotto says if this happens they email the store automatically.

According to a 2019 evaluation Lotto considered 5 percent of its retail stores at “high risk”.

Why does Lotto allow staff to gamble at all? “They are at higher risk,” Lyman says. “But still, you’re talking about a very small percentage of people that do experience harm and these are people who want to play the products. So we would struggle, I think, to have a retail network at all, if we didn’t permit them to purchase products that they want to purchase.”

David Smolenski, co-owner of the top-selling Richmond Night ‘n Day store, says the figures are muddied by the fact that a Lotto retailer gambling at someone else’s shop has to declare it as a staff purchase.

“I’m a lucky store. I have staff from other stores buying tickets at my store,” he says. “I’ve always told them that I’d like there to be more definition on that staff spend. So then they don’t call me and say, ‘hey, your staff spend is up’ and I’m like, ‘well, it’s a $30 million jackpot and I’ve had store people from around wherever.'”

He doesn’t see himself at risk of gambling harm. “I don’t see it as a problem. But then again, I’m not somebody that is on my own in a store, and potentially that can always lead to trouble.”

‘I have still got the shame’

For Jess gambling was always a solitary experience. But her recovery is a group project. And it’s ongoing. One of the people in her support group has been going to sessions for ten years and she figures she’ll be the same.

Jess walks past the Lotto signs outside the stores now. She sees the TV ads and doesn’t feel tempted, just a little angry about what she feels is a con.

Her message to others is simple: “You’re not going to win.”

Jess has her own little victories now. She’s got money in the bank and bought a new car last year.

“One of my kids really took it hard and he said to me the other day, ‘look, mum I forgive you,’ and you know, ‘let’s start afresh’. But that’s taken three years and I’ve still got the guilt and I have still got the shame.”