Tech entrepreneur reveals what it may take to create third supermarket group

Tuesday, 27 May 2025

Tex Edwards faced years of scepticism before he succeeded in establishing 2degrees in the mobile market, and has since led crusades against market power in a range of other industries.

The entrepreneur credited with breaking up Telecom and Vodafone’s duopoly of the mobile market, 2degrees founder Tex Edwards, has revealed what he has told the Government it would need to do to give the supermarket industry the same treatment.

The measures he says are necessary would require Foodstuffs and Woolworths to transfer two of their six distribution centres and a total of 120 stores to a new venture, in return for minority stakes in the new operator, which they would not control.

The third supermarket operator would need $1.5 billion in capital and could be expected to lose a total of $700 million before it broke even, but could succeed if it secured 18% market share, he said.

The Request for Information response was made in the name of Northelia, a policy group Edwards established several years ago to improve competition in industries including supermarkets, banking and electricity.

In March, Economic Growth Minister Nicola Willis instructed the Ministry for Business, Innovation and Employment to issue an RFI from parties interested in setting up a nationwide competitor to Foodstuff and Woolworths.

Willis appeared to make clear she was prepared to introduce legislation paving the way for a break-up of the existing players if a sufficiently credible plan didn’t emerge. Industry sources say she has been facing intensive lobbying from opponents of that plan.

Edwards released Northelia’s response to the RFI to The Post after confirming with Willis’ office that it had no objections to him doing so.

He told MBIE that Matt Truman — a former head of JP Morgan's European retail equities business and now chairperson of True, a British private equity firm with more than $1b under management — would be a special adviser and strategic investor for Northelia.

Truman’s experience included being the lead adviser to Tesco, Europe’s largest supermarket group, Edwards said.

The Government would need to force Foodstuffs and Woolworths to each divest one of the distribution centres as well as dozens of stores to enable “like for like” competition, officials have been told.

He also indicated a former chief executive of one of Europe’s “top four” supermarket groups could be expected to head up the New Zealand business.

Woolworths said earlier this month that based on research it conducted, New Zealanders were getting a good deal from supermarkets.

But Northelia told MBIE they were paying about 40% more than the OECD average for milk, cheese, eggs, fruit and vegetables, and about 5% more for other food items.

John Journee, interim chief executive of The Warehouse, confirmed it had also “responded to questions from MBIE in relation to their recent RFI”.

Edwards told MBIE that The Warehouse wouldn’t be a good candidate to become a mainstream competitor to Foodstuffs and Woolworths as it lacked the economies of scale to compete on price and range.

“Whilst their existing footprint makes them an attractive option for a ‘brown-fields investment’, the location of their stores is outside of the ideal supermarket location, meaning that they would not be able to break up the geographical monopolies,” he said.

Journee said in response that The Warehouse “remained committed to delivering great value and low prices for Kiwi families across our full range, including a wide selection of household essentials”.

The Warehouse has also “answered questions” raised by MBIE in its RFI.

Former PwC partner Tina Kilmister-Blue, who forged a relationship with British supermarket giant Iceland, had also been looking to establish a nationwide competitor to Foodstuffs and Woolworths, at one stage in conjunction with a consortium of iwi led by Waikato Tainui.

But they are understood to have recently decided not to participate in the RFI, which is now closed.

Edwards said MBIE should judge parties responding to the RFI based on their expertise, the amount of capital they could raise and their plan to reduce prices and improve nutrition.

He has argued for several years that the existing supermarket groups would need to be broken up to encourage a new competitor into the market, given the Commerce Commission had confirmed there were already quite a lot of supermarket branches for the country’s population.

“There is no business case to further exacerbate the overbuilding of supermarkets,” he said.

However, his focus on the significance of distribution centres has increased.

If Foodstuffs transferred its distribution centre in Palmerston North and Woolworths its distribution centre in Christchurch to the new entrant, all three firms could then be expected to invest in a further one each to bring their total number of distribution centres up to nine, he said.

“The key lies in bold regulatory intervention, independent infrastructure and a capital-backed team with ‘done it before’ experience’,” Northelia’s response to the RFI states.

“For decades large amounts of money have been invested in building barriers to entry, particularly in scale, logistics and geographic dominance.”

Simply splitting off Foodstuffs’ Pak’nSave supermarkets from its New World brand would not work because the big stores were local monopolies, Northelia told MBIE.

“The barriers to competing inside the geographies of the Pak’nSaves would become impenetrable.”