Supermarket competition push welcomed, but doubt Willis has the fix

Thursday, 13 February 2025

Finance Minister Nicola Willis pledges to break the supermarkets' oligopoly power.

Competition advocates lobbying for more competition in the supermarket industry have applauded a promise from Finance Minister Nicola Willis the Government would be on shoppers’ side and “dial up the pressure”.

But many voiced doubts that the types of actions Willis had signalled were possible would be sufficient to shift the dial.

Willis said consumers were getting a raw deal and the Government was ready to act to support a new player in the industry.

She indicated that would involve removing regulatory hurdles and “red tape”, and further developing a regime originally put in place by the Labour government that requires Foodstuffs and Woolworths NZ wholesale groceries to rivals and treat suppliers fairly.

Willis also made brief reference to the Government potentially helping a rival supermarket firm attract capital, but said it would not set up a competitor.

Competition advocate Ernie Newman said he was “really heartened” Willis’ had made competition issues the centre of her speech to the New Zealand Economics Forum in Hamilton.

“I got the feeling she definitely had her heart in wanting to do something about this. The question, in my mind, is whether she has an appetite to go far enough,” Newman said.

“She talks about removing regulation and ‘land banking’. We're way past the stage where that sort of thing is going to fix the problem.”

As a former head of the Telecommunications Users Association, Newman played a key role advocating for the break-up of Telecom in the early 2000s, and has more recently turned his attention to other sectors.

Sue Chetwin, a former head of Consumer NZ who now chairs the Grocery Action Group, said Willis’ focus on getting a third major supermarket competitor was welcome and “long overdue”.

“Just tackling red tape may not be enough.

“Nevertheless, this is the first plain indication the Government is prepared to act,” she said.

National’s coalition agreement with NZ First states they will explore options “to address the lack of a third entrant”.

The National Party’s coalition agreement with NZ First committed the Government to exploring options to “address the lack of a third entrant” in the industry.

But Commerce Minister Andrew Bayly cautioned last year that while the Government could make the conditions more attractive for a potential competitor, it “couldn’t actually dream up a competitor”.

Grocery commissioner Pierre van Heerden indicated last year the Commerce Commission could consider enabling Foodstuffs’ franchises, such as Four Square stores, to operate with more independence from their parent co-ops, in a bid to boost competition.

But competition advocate and 2degrees founder Tex Edwards has previously argued that the only way to attract a new like-for-like third operator into New Zealand would be to force Foodstuffs and Woolworths NZ to sell off some of their stores.

Edwards said today he still “absolutely” held that view.

About 140 supermarkets would need to be relinquished to a rival as well as some of Foodstuffs and Woolworths’ distribution centres, he said.

Willis’ initial suggestions – looking at the Overseas Investment Act, Resource Management Act, local government regulations and any other red tape or regulatory hurdles -- fell far short of what was required, Edwards said.

“New Zealand is over-supplied with supermarkets. We have more per capita than other OECD nations. You can’t mount a business case to build a new chain.”

But Edwards said he was encouraged Willis had asked for proposals on improving competition.

“As an experienced veteran of monopoly breakups, these things aren't done overnight,” he said, describing the tone of Willis’ speech as “commendable”.

Responding to Edwards’ renewed call for a supermarket break-up, Commerce Minister Andrew Bayly said Edwards had proposed “one solution, which is right at the far spectrum of actions that the Government could take”.

Anti-monopolist Tex Edwards says a forced sell-off of some Foodstuffs and Woolworths NZ stored is necessary to attract a new like-for-like rival.

“There are other actions that we are taking at the moment to try and improve the situation.”

Raewyn Bleakley, chief executive of the Food and Grocery Council, said it had long advocated for a well-functioning grocery market.

It awaited the next steps in a review of a code of conduct put in place by the former government governing supermarkets’ dealings with their suppliers and an inquiry into the current wholesale regime, she said.

Labour commerce spokesperson Arena Williams brushed off Willis’ comments as a case of her “stealing Labour’s homework”.

Willis had put the supermarket groups “on notice, just like we did” but her comments contained no new ideas, no deadlines, and no clear policies, she said. “She’s three steps behind.”

Foodstuffs said in a statement that it would continue to engage constructively with the Government to ensure any changes “deliver real benefits for New Zealanders while supporting a strong and resilient grocery sector”.

New Zealand now had the lowest rate of food price inflation in the OECD, it said.

“We’re committed to ensuring New Zealanders get a fair deal at the checkout. That’s why we’re focused on being as productive as possible, investing in efficiency, and keeping prices down for customers,” its statement said.