Three years of reform, zero movement
The Commerce Commission’s third Annual Grocery Report, published last week, confirms what anyone paying attention already suspected. Foodstuffs North Island, Foodstuffs South Island, and Woolworths still hold 82% of the national grocery market by revenue. Retail food prices rose 4.6% in the year to December 2025. Structural barriers to entry remain firmly in place.
New Zealand passed the Grocery Industry Competition Act in 2023. It introduced a supply code, annual reporting, and a regulatory framework designed to prise open a market the Commission itself called a comfortable duopoly. Three years on, the needle has not moved. The question worth asking is not whether reform failed, but what mechanism keeps the market locked in place.
The answer is sitting in your wallet.
The $7.50 illusion
In its 2025 Supermarket Survey, Consumer NZ found that supermarket loyalty schemes return just $7.50 cashback on every $1,000 spent, among the stingiest loyalty returns the organisation has measured. Nearly two in five consumers told the survey they questioned whether loyalty cards offered any genuine benefit.
Shoppers are right to be sceptical. Consumer NZ has previously found that 75% of special loyalty prices at New World and Woolworths could be found cheaper elsewhere, including at Pak’nSave or The Warehouse. The “specials” are not special. They are a framing device, and one that works particularly well when household budgets are tight.
A Newsroom analysis from March 2026 examined how supermarkets deploy this framing, pointing to geographic distance and GST to justify prices while presenting themselves as community benefactors. The Commerce Commission’s own data showed retail prices had risen faster than supplier costs between 2019 and 2023, with retail margins also increasing.
The real product is the data
For business readers, the loyalty card is not a consumer savings story. It is a data capture operation that doubles as a competitive moat.
Every scan builds a continuously updated map of consumer price sensitivity, promotional responsiveness, and basket composition. That intelligence is worth vastly more than the $7.50 per thousand dollars handed back. Consumer NZ’s Jon Duffy has described loyalty schemes as creating “the impression of great deals while hoovering up customer data that is repackaged and sold by supermarkets to increase earnings from shopping activity.”
Gemma Rasmussen, Consumer NZ’s head of research and advocacy, has warned that supermarket privacy policies allow data sharing with tech providers, advertisers, social media platforms, and search engines including Google. Supermarkets can track shopping habits alongside personal information including name, address, and date of birth.
The mechanism is self-reinforcing. Woolworths has disclosed that members who activate personalised Everyday Rewards boosts receive seven times more $15 vouchers than members who just scan their card. The more data you provide, the more “value” you receive, which incentivises deeper data sharing.
Suppliers are paying the bill twice
The data moat does not just lock out new retail entrants. It squeezes suppliers.
Rasmussen has described supermarkets as “clipping the ticket twice”. Suppliers pay promotional fees to be featured in loyalty specials. The data generated by those promotions is then used by the retailer to negotiate harder in the next supply round. The supplier funds the intelligence gathering that weakens their own bargaining position.
Lisa Asher has identified algorithmic pricing as the next frontier, where software automatically monitors competitors’ prices and matches them in real time, effectively facilitating collusive behaviour without explicit coordination. British and EU regulators are actively addressing this. New Zealand’s Commerce Act reform has not caught up.
For a new entrant, replicating this data ecosystem would take years. It is a structural barrier to competition that the Grocery Industry Competition Act does not address and the Commerce Commission has not recommended reviewing.
Australia is about to make this harder to ignore
From 1 July 2026, Australia introduces a specific excessive pricing regime for very large supermarkets, banning prices considered excessive relative to supply cost plus a reasonable margin. Penalties reach A$10 million, three times the benefit gained, or 10% of turnover. Consumer NZ has called for a similar regime here, citing survey data showing 87% of New Zealanders would support one.
The Commerce Commission’s 2024 report noted the grocery Food Price Index peaked at 14% in June 2023. Prices have moderated but remain well above pre-inflation levels. The structural conditions that produced those increases are unchanged.
In three weeks, Australian shoppers will have a legal backstop against excessive grocery pricing. New Zealand shoppers will have a loyalty card worth 0.75 cents on the dollar and a market study that changed nothing. The card is not saving anyone money. It is funding the infrastructure that keeps the market exactly where it is.
Sources
- Commerce Commission: 2025 Annual Grocery Report (2026-06-02)
- Consumer NZ: Survey shows shoppers sceptical about supermarket specials (2025-05-12)
- Commerce Commission: 2024 Annual Grocery Report (2025-08-06)
- Newsroom: How supermarkets use frame game to deflect attention on profits (2026-03-26)
- RNZ: Consumer NZ warns of pitfalls of supermarket loyalty schemes
- RNZ: Third of New Zealanders need help with food
- NZ Herald: Who are the winners and losers of supermarket member pricing?
- NZ Herald: Supermarket law changes – the need for tougher Commerce Act grocery reforms
- RNZ: Supermarket price warning issued by Consumer NZ
- Consumer NZ: How to fix NZ’s broken grocery sector