Vineeta Rao
Auckland, March 31, 2025
Economic Growth Minister Nichola Willis has announced plans to drive down the cost of groceries for Kiwi families by ending the duopoly of supermarkets.
This comes as a part of the government’s mission to lower the cost of living, she said.
Amid reports that the country’s grocery prices continue to be among the highest globally, the consumer spotlight has been on the two dominant players in this space, Foodstuffs and Woolworths, which control around 90% of the market share.
Foodstuffs is a New Zealand-owned Cooperative with the Pak N Save, New World, and Four Square brands (in addition to Pams, a private label), while Woolworths, a wholly owned subsidiary of Australia’s Woolworths Group, has a chain of supermarkets branded as Woolworths, SuperValue and FreshChoice.
Price Gouging
Foodstuffs and Woolworths form a dominant supermarket duopoly.
A 2022 Report by the Commerce Commission found that both players earned $1 million a day in excess profits because of a lack of competition.
Despite an existing market survey and report conducted by the Commerce Commission, Ms Willis has established a Request for Information (RFI) process to explore what it would take for a new national-scale grocery retailer to enter the market or for existing competitors to expand. Per Willis, this will help identify the barriers that need to be removed.
“I have asked officials for advice on ways in which the grocery sector could be restructured to increase competition,” she said.
Further Reforms
The plan is to engage with potential entrants such as Costco, The Warehouse, and international retailers like Coles and Aldi, alongside investment groups, iwi organisations, and the existing major players to gather insights and solutions.
Ms Willis is seeking expert advice on ways to restructure the existing duopoly to allow competition. This includes advice on options for the ‘de-merger’ of existing brands, the potential impacts of structural separation on existing entities, and concepts for how this could be achieved.
Ms Willis said that the RFI process will move swiftly over the next six weeks, gathering crucial information on how best to drive increased competition. Thereafter, she aims to recommend to the Cabinet legislative measures required to reform the sector.
But how did we even get to this point?
Narrowing Options
From a plethora of options in 2001 to just three in 2025, the apparent narrowing of options can be attributed to mergers, acquisitions and buyouts.
In 2001, Progressive Enterprises owned Foodtown, Countdown, and 3 Guys and supplied groceries to SuperValue and Big Fresh. They eventually merged with Woolworths New Zealand, Big Fresh and Price Chopper and formed a grocery giant, marking a key moment in our supermarket history.
Initially, the merger was approved, provided that Progressive Enterprises sold three supermarkets. However, Foodstuffs Auckland challenged at the High Court over the competition measure used and won. At that time, Foodstuffs operated as three separate entities: Auckland, Wellington, and South Island.
Progressive Enterprises appealed to the Privy Council and won, leading to the merger of six supermarket chains in June 2002.
In 2005, Woolworths Australia acquired Progressive Enterprises. Some suppliers anonymously complained to the Commerce Commission, fearing reduced competition. However, the Commission found it unlikely to significantly lessen competition.
In 2013, Foodstuffs Auckland and Wellington merged, leaving two entities: Foodstuffs North Island and Foodstuffs South Island.
Supermarkets have also integrated vertically, controlling wholesale supply chains. Wholesale Distributors supply Woolworths, while Trents Wholesale and Gilmours New Zealand supply Foodstuffs North Island and Food Stuffs South Island. Given Ms Willis’s plans for new entrants into the supermarket space, the lack of independent wholesale suppliers will certainly be the first barrier.
New Zealand’s social media has not reacted favourably to Ms Wills’s announcements.
They say that the National government is spending taxpayer money unnecessarily on reports, while accusing the Labour government while in opposition.
“A Report prepared by the Commerce Commission is comprehensive,” they say.
Vineeta Rao is an Indian Newslink Reporter based in Auckland.
