Nicola Willis unveils radical supermarkets plan: get a third player or break up current ones

Sunday, 30 March 2025

Minister of Finance Nicola Willis says the Government will call for an official “requests for information” from any potential third players in the supermarket industry. Failing that, she has asked officials for advice on how “the grocery sector could be restructured to increase competition”, potentially paving the way for a break up of Foodstuffs and Woolworths.

Willis in February announced she would be taking on “the supermarket lobby” and trying to inject more competition into the sector, currently dominated by Foodstuffs and Woolworths.

The pair hold roughly 90% of market share for consumers between the two of them, according to a study into the grocery sector by the Commerce Commission in March 2022.

“The purpose of the RFI is to identify the regulatory and legislative steps necessary to facilitate increased competition in scale,” Willis said.

“The document sets out the conditions in which the participants take part. I'm hopeful that people who have said things to me behind the bike sheds about some of the things that go on in the supermarket sector take this opportunity to tell us formally that those things are happening and spell them out.”

In unusually lengthy introductory remarks, Willis laid out the case for change, saying that inaddition to the RFI, she was “concerned” that more action would need to be taken.

“I am concerned more significant action may be required to foster genuine competition. Therefore, I have commissioned specialist external advice on ways in which the existing supermarket duopoly could be restructured to improve competition.”

But ACT leader and Minister for Regulation David Seymour was considerably less enthusiastic about any potentially heavy-handed regulatory or legislative intervention.

'Politicians seek advice all the time, that's very different from it being Government policy, especially in a coalition,' Seymour said.

'One obvious concern is that if your Government is trying to attract overseas investment, threats to restructure their businesses in New Zealand might have the opposite effect,' he said.

Earlier, Willis outlined why she believed the action was necessary saying New Zealand grocery prices were high by international standards.

“Kiwi shoppers are being poorly served by a market effectively dominated by just two major players - Foodstuffs and Woolworths. This lack of competition is the result of a series of mergers that have occurred over the past 30 or 40 years.”

Willis said that either horizontal or vertical separation could be on the cards. Horizontal separation refers to potentially breaking up the current supermarket brands, vertical integration would involve breaking up wholesale and retail functions.

Options included “advice on options for a ‘de-merger’ of existing brands, the potential impacts of structural separation of existing entities, and the concepts for how this could be achieved”.

The first move, however, was to try to get a third competition into the market and identify what barriers were stopping them expanding or getting into the market. Willis said she wanted to carefully consider how such moves would make shoppers better off.

“I think it will be important that it does go through a parliamentary process to provide feedback on it.

“I am talking about potentially massive changes. We have to get the detail right,” Willis said, saying that if some sort of structural separation were to occur, she would expect legislation to be introduced this year.

She also said that any new potential players or investors would likely have different views on both market structure and barriers to entry.

“I can imagine that a potential competitor could have very different views on what the market structure should be,” she said.

“Some might say, wholesale vertical’s - wholesale separation’s - the right way. Some might say split up the existing brands. Some might call for regional investment. I can imagine that there are a range of views on that.”

“I think that looking at them thoroughly is important before leaping to one conclusion.”

'We support competition that delivers great value for Kiwi shoppers. There’s a lot to work through in today’s announcement, and we will be constructively participating in the Government’s Request for Information, a spokesperson for Foodstuffs said in a statement.

“Any changes need to deliver real benefits for customers and strengthen the grocery sector through a clear cost-benefit analysis for consumers,”

Woolworths New Zealand said it would not be giving any interviews but that it would consider Willis’ statement.

“We note the Minister’s announcement today. We’ll consider in detail and continue to work closely with the Commerce Commission and Government,” Woolworths New Zealand interim managing director, Pieter de Wet said in a statement.

“Our absolute focus is on giving our customers more value, convenience and a fantastic shopping experience - and we’re committed to getting on with that.”

Sue Chetwin, chair of the Grocery Action Group, said the Request for Information she announced today would probably not throw up anything new.

“But it will allow for potential domestic and international operators to show their hand, and to outline the commercial and regulatory barriers that are stopping them from proceeding.”