The government has renewed its push to increase competition in the country’s grocery sector, with Economic Growth Minister Nicola Willis declaring she is prepared to “pull out all the stops” to bring a new supermarket player into the market.
Speaking at the New Zealand Economics Forum, Willis said that Kiwis were paying some of the highest grocery prices in the OECD and that the dominance of Foodstuffs and Woolworths had led to limited competition, high profits, and restricted product variety. She said allowing a third major retailer into the market would create “massive gains for Kiwi shoppers.”
Regulatory Changes to Attract New Entrants
Willis outlined a series of steps the government is considering to help new entrants establish themselves. These include removing barriers within the Overseas Investment Act and Resource Management Act, which have previously delayed or blocked new supermarket developments. She also signalled a willingness to address land access issues, particularly the practice of land banking, where the two dominant supermarket chains hold onto unused land to prevent competitors from entering the market.
“If a new grocery chain opened up here it would deliver massive gains for Kiwi shoppers. So I’m up for actions needed to help make it happen,” Willis said.
International supermarket chains and local investors have already expressed interest in entering the New Zealand market, according to Willis, though she declined to name them for commercial reasons. She also suggested that a locally-backed competitor could emerge, potentially partnering with a foreign supermarket brand.
Calls for Structural Reforms and Increased Oversight
The push to increase competition follows years of scrutiny of the supermarket sector. A 2022 Commerce Commission report found that New Zealand’s grocery market was one of the most concentrated in the world, with Foodstuffs and Woolworths controlling 70-80% of the market, and up to 90% of what consumers consider their “main shop.” The report recommended easing zoning restrictions, preventing anti-competitive land covenants, and regulating wholesale supply access for smaller competitors.
More recently, the Commerce Commission has taken legal action against the duopoly for alleged misleading pricing practices, adding to the pressure on the supermarket giants.
Competition advocate Tex Edwards, who helped break up the country’s mobile network duopoly, said Willis’ comments were encouraging but that more aggressive action may be needed. He argued that allowing a third competitor to organically build a store network from scratch could take two decades. He suggested that the government may ultimately need to force Foodstuffs and Woolworths to divest some of their assets.
“The third operator has to fight their way into the market,” Edwards said, estimating that at least $2 billion in capital would be needed to create a viable competitor.
Scepticism From Opposition and Industry Players
The Labour Party criticised Willis’ announcement, calling it vague and lacking new ideas. Commerce spokesperson Arena Williams said the government was simply making “more vague promises” rather than delivering concrete policy changes.
“When Labour was in government, we took bold action to break up the supermarket duopoly. We banned restrictive land covenants, enforced mandatory wholesale access, and introduced a Grocery Commissioner to hold the industry to account. We didn’t just talk about competition, we legislated for it,” Williams said.
Consumer groups and independent grocers also expressed cautious optimism but warned that regulatory changes alone might not be enough to force meaningful change.
Meanwhile, both Foodstuffs and Woolworths responded by defending their role in the market. A Woolworths spokesperson pointed to the recent entry of Costco and The Warehouse’s grocery expansion as evidence that competition had increased. Foodstuffs, New Zealand’s only locally owned supermarket chain, said it was already working hard to keep prices competitive.
“We’re committed to ensuring New Zealanders get a fair deal at the checkout,” a spokesperson said.
An Uncertain Path Forward
Despite government efforts to open the market, significant hurdles persist. Even if regulatory barriers are removed, a new competitor would still face the challenge of establishing a viable supply chain, securing land, and competing with two well-established giants. The New Zealand Initiative, a think tank that supports competition but opposes intervention in private savings, has also warned against using KiwiSaver funds to support new supermarket investments, calling it a “risky precedent.”
The government is expected to monitor the Commerce Commission’s mid-year report on the wholesale grocery market before making further moves. Willis, however, insists that action is coming.
“The supermarkets will fight back, I’m sure,” she said. “It’s a fight worth having.”