Foodstuffs posts world-leading profits as Kiwi grocery costs stay high

Wednesday, 6 August 2025

The pre-tax earnings and profit percentage earned by Foodstuffs North and South Island in 2024 remained higher than almost all global competitors including Walmart, Tesco, Kroger, Sainsbury and Carrefour, as reported in the Annual Grocery Report released today.

This was even after margins made by Foodstuffs supermarkets reduced fractionally across 2024.

Overall the report, which tracks a range of key measures of competition, found the duopoly (Foodstuffs and Woolworths) had maintained their market position and continued to hold an overwhelming proportion of the grocery market share, accounting for 82% of the $27 billion trade.

The figure is unchanged from 2023 and has declined only modestly in the past 5 years, and the market remains largely uncompetitive.

The Grocery Commissioner believes small positive movements contained within the report show the tools in his arsenal - such as a recently proposed ban on secretive rebates and payments supermarkets extract from suppliers - are making a small difference to the situation.

But it’s not enough, says Pierre van Heerden. And what is contained in the report is likely to increase the pressure on Economic Growth Minister Nicola Willis to at least consider more drastic action - including, as some propose, the structural separation of the supermarket duopoly.

A more firm idea of where the Minister is going is expected at the end of August or in September.

Highly lucrative

In the meantime, groceries remained expensive for Kiwi consumers on a global basis and highly lucrative for the duopoly in 2024, even if slightly less so than before.

“In 2024 retail grocery prices appeared to have stabilised after years of significant growth, which was reflected in a slowing of the major supermarket’s gross margin growth,” van Heerden said.

“However, grocery prices remain higher than the OECD average, and recent data shows retail prices increasing again in 2025, highlighting that prices were easing, there is more work to be done to improve competition.”

In the bigger cities like Auckland, there was more competition and the duopoly’s share of the grocery trade was about 71%, “but consumers in smaller towns and rural areas typically have minimal to no choice within their locality, with some stores in small towns functioning as a localised monopoly”, van Heerden said..

The top of the South Island, West Coast, Otago, Waikato, and Taranaki are regions where the major grocery retailers continued to have the most dominance.

The report reinforced that the duopoly continued to wield their power over smaller suppliers, and the wholesale market was not supportive of new entrants to compete against the major supermarkets.

Costs, profits

From early 2022 New Zealand experienced a period of high inflation. The consumer price index (CPI) and grocery food price index (FPI - measuring fruit and vege, grocery food, meat, beverages and ready-to-eat food) both soared - annual CPI peaked at just over 7% during the second half of 2022 and annual grocery FPI peaked at 14% in June 2023. This resulted in higher costs for consumers across a range of expenses.

While inflation eased in 2024, the price of groceries didn’t reduce dramatically, albeit they stabilised in 2024, and fruit and vege dropped dramatically from a spike in prices after Cyclone Gabrielle. Food prices have since grown 4.6% in the year to June 2025.

Consumers are now paying between 27% and 36% more for grocery products in 2025 compared to 2016, and between 21% and 27% more than 2021, the report found.

The ratcheting up of pressure on household finances saw 2024 have the lowest spending growth since the Covid pandemic, but Pak’n Save, owned by Foodstuffs, benefited from this new focus on low-cost buying, growing its share of the market from 23% to 25%.

The country’s supermarket duopoly has often been criticised for the amount of money it makes from the grocery trade in New Zealand, which is high by international standards. Today’s report shows gross margins (what companies report making on a product after paying the supplier, but not including the aforementioned undeclared rebates and other payments suppliers have been found to make in return) decreased by 0.17% on grocery items across the duopoly, with Foodstuffs North Island Pak’nSave and Countdown/Woolworths seeing gross margin decreases of more than one percentage point. They saw a decrease of 0.10% - 0.20% on fresh food.

In contrast, the Foodstuffs South Island banners experienced an increase, at just under one percentage point for groceries and a slight uptick of about 0.23% on fresh food.

The report also looked at profitability of the duopoly. In 2020, Foodstuffs North and South islands were at the top end of profit-earning amongst international grocery retailers. Since then, the Foodstuffs banners have remained relatively high while the earnings margin of Woolworths New Zealand has declined significantly.

By 2024, Foodstuffs North Island remained the most profitable grocery retailer, making 7% in pre-tax earnings (more than Coles, Walmart and Tesco as well as all its local competition), while Woolworths New Zealand had the lowest pre-tax earnings at 1%.

Competition lacking

On the whole, regulated grocery retailers (RGRs) have maintained their market position in the past year and there has been no change to national retail market concentration, with the duopoly holding 82% of the total market in 2024, unchanged from 2023.

“In 2024, we saw continued growth among other retailers, such as specialist and independent supermarkets, convenience chains, clearance stores, and online platforms—especially in Auckland,” the report said.

“While this growth is promising, it has not yet reached a scale that significantly affects the overall market position of [the duopoly]”.

Barriers remain to competitors for entry and expansion into retail grocery, the report found.

On the positive side, it finds “no evidence of land banking at scale” by the duopoly, as was found in years past, and the commission said it was”cautiously optimistic” the duopoly was taking “genuine steps” to ensure it did not hold on to sites suitable for supermarket developments that they do not need or acquire sites earlier than is necessary.

But as far as the wholesale trade went, “behavioural change” from the duopoly and some of its suppliers was needed, the report said, so other retailers can gain access to cost effective groceries: “access to an adequate range of groceries at competitive wholesale prices remains a key barrier to entry and expansion in the grocery industry.”

Specifically, and as reported previously, some $5 billion in rebates, discounts and promotional payments paid by suppliers to supermarkets “disadvantages competing retailers who cannot negotiate similar levels of support due to their weaker buying power”.

The report also took a swipe at the still-extensive use of price-based promotions to drive sales, giving a general impression of cost savings regardless of the reality.

“[The duopoly] constantly use[s] high-low pricing which makes it hard for consumers to accurately assess the value of competing offers or judge the claims [supermarkets] make that their pricing is low, special, or extra low. These marketing practices …make it confusing for consumers and difficult for them to work out how to make significant savings over a basket of goods.

“Consumers would be better off if large suppliers and [supermarkets] reduced their reliance on promotions and specials so that prices of more products can be consistently lower and more stable … this would make it easier for consumers to compare prices and judge where a ‘special’ price is in fact a good bargain.

“More stable but lower wholesale prices will also assist new entrants to get a competitive price through the wholesale market.”