Splitting Foodstuffs buys shoppers a rounding error, not cheaper groceries

The grocery break-up policy has a numbers problem, and the numbers came from the government’s own consultants. Advice from Coriolis, reported by the NZ Herald today, found that splitting Foodstuffs would cut grocery prices by only 1-3%. Coriolis director Tim Morris presented the work to Nicola Willis, then Economic Development Minister, back in April 2025. It also pointed squarely at strict biosecurity rules, heavy regulation and high labour costs, particularly the minimum wage, as bigger drivers of New Zealand’s expensive groceries than the duopoly itself.

That is an awkward finding for a policy that was sold to voters as a cost-of-living fix.

The campaign promised more than the modelling delivers

National’s 2026 platform proposed splitting Foodstuffs into two entities, creating three national chains in Pak’nSave, New World/Four Square and Woolworths. Its own modelling claimed prices 3.5% lower after one year and 5% lower after six, with Willis, then Finance Minister, putting household savings at up to $1,320 a year.

Run the arithmetic. If $1,320 represents a 5% saving, the implied household grocery bill is about $26,400 a year. At Coriolis’ 1-3%, the saving shrinks to somewhere between $264 and $792, before anyone accounts for the cost of actually doing the break-up. University of Auckland senior marketing lecturer Drew Franklin said in September that downward pressure on prices “isn’t going to happen in a hurry”.

The duopoly is real, it just is not the whole bill

None of this means the supermarkets are blameless. The Commerce Commission’s 2022 market study found New Zealand was the fifth most expensive grocery market in the OECD on 2017 data, with major supermarkets earning returns on capital more than double a normal competitive benchmark. Its first annual grocery report in 2024 found the majors held 82% market share in 2023, and that retail margins on non-fresh categories had risen 3.1 percentage points since 2019. The commission published a third annual report in June 2026, and concentration remains the defining feature of the market.

But excess profit is a slice of the price, not the price. As one University of Auckland economist told RNZ, “I don’t think supermarket reform is the answer” to the cost-of-living problem. Even halving supermarket profits would barely register on the total checkout bill.

The original business case was always thin

The Coriolis figure is not an outlier. The 2022 Sense Partners and Cognitus cost-benefit analysis prepared for MBIE found its preferred divestment option delivered a central net benefit of just $0.5 billion over 20 years, within a range running from a $4.6 billion gain to a $3 billion net cost. That central benefit amounted to 0.15% of supermarket sales. When the plausible outcomes include losing billions, that is not a business case, it is a coin toss.

The New Zealand Initiative’s Dr Eric Crampton made the same point in September, noting the gains equalled only 1.1% of grocery revenue over 20 years and could vanish if supply chain costs ran above assumptions. He also flagged a risk that should worry every board in the country. Forcibly dissolving a voluntary co-operative sets a precedent for similarly structured businesses in fuel, building supplies, banking and electricity, and could lift the cost of capital across the economy.

Two brands built for different shoppers

There is also a practical question about whether a split creates rivals at all. A University of Auckland commentary in October noted that New World sells localised convenience at a premium while Pak’nSave chases fill-the-boot shoppers, so separating them may not produce much head-to-head competition. Oligopolists in mature industries are also adept at “live-and-let-live” arrangements that survive structural reform.

Fix the costs government actually controls

The uncomfortable truth in the Coriolis work is that many of the biggest grocery cost drivers sit in Wellington’s own lane. Biosecurity settings, regulatory compliance and minimum wage policy all feed straight into shelf prices. So do zoning and consenting rules that make it hard for a new entrant to open a store.

Crampton’s alternative is cheaper and more honest: “Make it legal to build supermarkets, then find out whether anyone wants to come.” Simplify consenting, alcohol licensing and labelling for newcomers, and stress-test the pricing assumptions before drafting a bill.

For suppliers, the stakes are a years-long restructuring that would tie up their two biggest customers in legal and operational upheaval for a payoff the government’s own advisers rate at a few cents in the dollar. Whoever forms the next government faces a clear choice. It can spend political capital on a break-up that looks decisive and delivers little, or on the duller work of lowering the costs it imposes itself. With the Commerce Commission still reviewing whether a split leaves shoppers better off, the Coriolis report should be the end of the slogan, not the start of the legislation.

Sources

• NZ Herald: Foodstuffs break-up would cut 1-3% off grocery prices – biosecurity, labour costs bigger factors, Coriolis report (2026-11-09)
• RNZ: Splitting up Foodstuffs – would it actually drive down grocery prices? (2026-09-16)
• RNZ: Has New Zealand’s supermarket duopoly created higher prices? (2026-09-22)
• Commerce Commission: Market Study into the Retail Grocery Sector – Final Report (2022-03-08)
• Commerce Commission: First Annual Grocery Report – Executive Summary (2024-09-04)
• Commerce Commission: Annual Grocery Report monitoring page (2026-06-02)
• Sense Partners/Cognitus: Provisional Supermarket Divestment Cost Benefit Analysis (2022-10-04)
• New Zealand Initiative: Breaking up is hard to do… and a bad idea (2026-09-22)
• University of Auckland: Supermarket shake-ups won’t solve cost-of-living crisis (2026-10-07)