New Zealand First has announced a proposal to restructure New Zealand’s supermarket sector, arguing that stronger competition is needed to address persistently high grocery prices and improve outcomes for both consumers and food producers.
The policy would require Foodstuffs to separate into two nationwide co-operatives, with New World and Four Square operating as one company and Pak’nSave operating as another. If implemented, the proposal would leave New Zealand with three major nationwide supermarket operators: Woolworths New Zealand, New World/Four Square, and Pak’nSave.
New Zealand First Party leader Winston Peters said the current supermarket market is too concentrated, with Woolworths and Foodstuffs together controlling more than 80 percent of grocery sales.
“For too long, New Zealanders have faced rising grocery bills while Woolworths and Foodstuffs control more than 80 percent of the grocery market,” Peters said when announcing the policy.
He pointed to previous Commerce Commission findings that the country’s major supermarket operators were earning around $430 million a year in excess profits, equivalent to more than $1 million a day beyond what would normally be expected in a competitive market.
The policy package extends beyond restructuring the supermarket sector. New Zealand First is also proposing stronger enforcement powers for the Commerce Commission and the Grocery Commissioner, including increased penalties for serious breaches of competition law. Under the proposal, maximum penalties would align more closely with Australia’s framework, allowing fines of up to $10 million, three times the benefit gained from a breach, or 10 percent of annual turnover.
The party is also proposing changes to improve the relationship between supermarkets and suppliers. It says many growers have experienced little real growth in farm-gate returns over the past decade despite rising retail prices, while supplier fees and supermarket control over shelf access have made it more difficult for smaller producers to compete.
As part of its policy, New Zealand First says it would introduce a new regulatory framework under the Commerce Act to address competition issues more quickly and improve access to supermarket shelves for New Zealand producers.
Foodstuffs has rejected the proposal, saying a forced separation would not deliver lower prices for consumers.
The company says its co-operative model allows independently owned stores to achieve economies of scale while continuing to compete with one another and with Woolworths. It argues that splitting the organisation would require duplication across supply chains, technology systems and infrastructure, increasing operating costs that would ultimately be reflected in supermarket prices.
The supermarket operator also maintains that New Zealand’s food prices are broadly comparable with similar international markets when factors such as transport costs and taxation are taken into account.
The proposal comes as debate over supermarket competition continues. The Commerce Commission’s market study previously concluded that competition in the grocery sector was not working effectively for consumers and identified sustained excess profits among the major supermarket operators. Successive governments have introduced measures aimed at encouraging greater competition, including efforts to attract a third major supermarket entrant, although no new nationwide competitor has entered the market to date.
ACT leader David Seymour has previously criticised proposals to break up private companies, arguing that significant government intervention could discourage investment and reduce incentives for new businesses to enter the sector.
New Zealand First argues that structural reform is now necessary after previous regulatory changes failed to significantly alter the market. The party says increased competition would place greater downward pressure on grocery prices, improve conditions for suppliers and deliver better value for consumers.
The supermarket sector is expected to remain a key issue in the lead-up to the next general election as parties continue to debate how best to improve competition and reduce the cost of living.