Integrity Briefing: The Supermarket showdown
Nicola Willis has thrown down the gauntlet to New Zealand’s supermarket oligopoly, and the response has been electric. In one of the boldest announcements yet from the new Government, the Finance Minister declared she’s “putting all options on the table” to fix New Zealand’s dysfunctional grocery sector. That includes breaking up Foodstuffs and Woolworths if they don’t make room for a genuine third competitor.
At first glance, it certainly feels like a watershed. Willis is threatening structural separation, vertical and horizontal demergers, and even divestment legislation if necessary. She has commissioned external advice from consultants like Coriolis — who previously told the Commerce Commission in blunt terms that “if you want competition in traditional supermarkets in any meaningful timeframe, you will need to force separation (at Foodstuffs) and/or divestment (at Woolworths)”.
For a National Party minister to reach for the “nuclear option” in one of the most politically protected sectors of the economy — one dominated by two powerful, well-connected incumbents — is no small thing. In fact, it has drawn comparisons to the Telecom separation saga of the mid-2000s, when Labour’s David Cunliffe dared to split New Zealand’s telecom monopoly to create room for genuine competition.
But despite the headline-grabbing rhetoric, it’s far from certain whether Willis will follow through on her threats — or whether she will even be able to.
What Willis has promised
Willis’s plan, at least on paper, is bold. Her approach has three main pillars:
1. A formal Request for Information (RFI) from current and potential market players (local and international) to understand what regulatory changes are needed to support a third major entrant.
2. Commissioned expert advice on structural separation and divestment, with a view to drafting legislation before year’s end.
3. Political pressure on incumbents to voluntarily restructure under section 69A of the Commerce Act—an olive branch that could stave off forced government action.
She has stated clearly: “I am not satisfied with the status quo” and that “all options are on the table” — including splitting Foodstuffs into New World and Pak’nSave entities, separating wholesale and retail arms, or forcing Woolworths to divest stores to an incoming competitor.
There is no doubt: this rhetoric is stronger than any of her predecessors, Labour or National. And it has spooked the incumbents. Woolworths and Foodstuffs have so far offered only vague “constructive engagement” and warned against unintended consequences. But their lobbyists will be working overtime behind the scenes.
Reaction from the business establishment
The early reaction? Fierce opposition from vested interests, enthusiastic approval from commentators and consumer advocates — and, somewhat ironically, accusations that National is now becoming “anti-business.”
Yes, “anti-business.” That has been the criticism hurled from the libertarian and Big Business corners of the policy world. Such sentiments also come from the New Zealand Initiative, whose research director Eric Crampton compared Willis’ interventionist stance to a “tinpot” dictatorship. It’s worth noting, of course, that the New Zealand Initiative is funded by none other than Woolworths NZ and Foodstuffs — the two corporate giants now staring down the barrel of potential structural separation.
Crampton’s sneering accusation reflects the ideological discomfort among New Zealand’s corporate and market-liberal elites: How dare a National Government — of all governments — take on Big Business? How dare Nicola Willis challenge the supermarket duopoly that’s long ruled unchecked?
Positive reaction from commentators and advocates
That Establishment outrage is likely to land with a thud outside the boardrooms. Out in the electorate, Willis’ move is politically golden. Voters are furious about the cost of living, and polling shows that the public strongly supports reforms to increase competition and bring down food prices. After years of high grocery margins, weak retail competition, and a Commerce Commission report that found the duopoly was extracting up to $1 million a day in excess profits, this is the kind of bold political action the public has been waiting for.
And it’s not just everyday New Zealanders who are applauding. Opinion leaders, industry veterans and consumer advocates have all lined up to commend the Government. Consumer NZ and advocacy groups like the Grocery Action Group have welcomed Willis’ stance, saying this is the first time in years the Government appears ready to act decisively.
Tex Edwards, the founder of 2Degrees and longtime anti-monopoly campaigner, described the announcement as “a turning point,” praising Willis for understanding the scale of supermarket market power and talking clearly about barriers to competition.
Even more emphatically, Ernie Newman, a veteran competition consultant with deep expertise in the grocery and telecommunications sectors, told the New Zealand Herald: “This undoubtedly puts Foodstuffs and Woolworths on notice that the magic days of unconstrained dirty tricks and super-profits are coming to an end.”
A Zeitgeist shift against oligopolies
This praise from some of New Zealand’s most experienced market reformers is significant. It offers political cover and encouragement for the Government to stay the course — and perhaps to go even further. If the supermarkets can be tackled, why not the banks next? Or electricity? Willis herself has hinted that these sectors are ripe for reform, plagued by “insufficient competition,” scale advantages, and cartel-like behaviour.
The core of the problem, as consumer watchdogs and economists have repeatedly stated, is New Zealand’s oligopolistic market structure. It’s not just that there are too few players in the supermarket sector — it’s that the two giants, Foodstuffs and Woolworths, hold overwhelming market power. Together, they control 82% to 90% of grocery retail and dominate wholesale distribution. Even where multiple supermarket brands appear to compete in a suburb — Pak’nSave, New World, Four Square — they often fall under the same ownership umbrella.
As a result, competition is largely illusory. Prices remain high, supplier relationships are strained, and consumer trust has eroded. New entrants like Aldi or Lidl have shown interest in New Zealand, but the barriers to entry — land access, supply chain dominance, and brand scale — are prohibitive. If real competition is to occur, it may have to be forced by government intervention, just as Willis has now signalled.
This puts New Zealand in step with a wider international shift. Across the Tasman, supermarket reform has become a key battleground in Australia’s upcoming federal election. Prime Minister Anthony Albanese has launched an election-year crusade against Coles and Woolworths, promising to legislate against supermarket price gouging and ban land banking. “Families are being taken for a ride,” he declared, adding that he would go as far as breaking up the supermarkets to restore competition.
This cross-Tasman supermarket crackdown reflects a more profound mood shift against corporate oligarchy and economic concentration — not just in Australasia, but globally. Whether it’s Big Tech, Big Energy, or Big Food, governments are finally acknowledging that decades of laissez-faire competition policy have entrenched monopolies and widened inequality. The public is demanding change, and increasingly, governments are responding.
In this light, Nicola Willis’ supermarket reforms represent not just a necessary domestic intervention, but also a signal that the current Government may be willing to side with consumers over corporate donors, and with competition over consolidation. For a National-led Government — traditionally more aligned with business interests — that’s a remarkable development.
But good intentions and bold words will mean little if they’re not followed through with real action. This Government now faces a choice: to make history by breaking up one of the most entrenched oligopolies in New Zealand, or to blink and let the supermarkets’ lobbyists — well-funded and well-connected — preserve the status quo.
Beware the Lobbyists: The Coming battle
It would be naïve to think that the supermarket giants will roll over. The lobbying machine is already moving. Woolworths and Foodstuffs have issued carefully worded statements, pledging to “constructively” engage with the Government. But behind the scenes, their lobbyists and PR teams will be pressing MPs, shaping the media narrative, and trying to whittle down Willis’ proposals into something more palatable — and less threatening.
These are some of the most politically connected and cashed-up businesses in New Zealand. Woolworths’ Australian parent is a corporate juggernaut. Foodstuffs operates with a co-op model that cleverly cloaks itself in small business credentials while wielding consolidated power at a national scale.
Their lobbyists will argue that reform will increase costs, undermine efficiency, hurt family businesses, and lead to job losses. They will lobby Cabinet ministers. They will whisper to backbenchers. They will threaten litigation. And if history is any guide, they may get their way.
The fact that the Commerce Commission’s 2022 report pulled its punches—and the current one underway is likely to be met with heavy pushback—shows the scale of political capture.
This is where Willis’s resolve will be tested.
A Major test for the Coalition Government
It’s also unclear whether Willis has full backing within her own Government. Prime Minister Christopher Luxon has been vague about whether Act, National’s coalition partner, would support supermarket divestment. Act has expressed concern about sovereign risk and government “overreach.” David Seymour has even raised that old scare tactic of the 1980s that Willis’ threatened state interventions might “deter investment”.
That tension could become a serious obstacle to reform unless Labour and the Greens provide bipartisan support — something they’ve suggested they might do, despite grumbling that Willis is moving slowly.
Nevertheless, this is a moment of opportunity. The public mood is anti-oligarchy. The evidence is on Willis’ side. And the Minister has already taken the first bold step.
What’s needed now is resolve. If the Minister of Finance holds her nerve — and if the Government is willing to stare down the supermarket lobby — it could not only transform the grocery sector, but set a precedent for tackling market failures elsewhere.
In an era of political timidity and policy capture, this is good news for a change. Let’s hope it lasts.
New Zealanders deserve cheaper groceries, fairer competition, and a market that works for consumers — not just for shareholders in Sydney and franchisees in Remuera.
Dr Bryce Edwards
Director of The Integrity Institute
With one exception, the word that was notably absent from your briefing was cooperative.
In contrast my letter to Labour's Arena Williams suggested she give consideration to supporting the establishment of a cooperative retail supermarket
"Farmers in New Zealand are particularly well served by the Farmlands cooperative
There would be huge support from retail consumers were they able to buy groceries from a cooperative supermarket.
"Full cooperatives redefine market functioning and accord consumers benefits that are unavailable in an investor-driven market. By ensuring returns go to materially benefit consumers rather than investors a cooperative supermarket would materially and positively redress the social contract and wealth inequality.
"Retail cooperatives have a well-established track record including those in South Australia (see Barossa), Spain’s Mondragon region and the Emilia Romagna region of Northern Italy, which has one of the highest concentrations of cooperative businesses in the developed world.
"The value of cooperatives will be the subject of one of the workshops at the Post Capitalist Aotearoa conference (23-24 April, Wellington)"
Am I naïve? How is it inferred that the introduction of a third player is going to reduce prices? I’d seriously like to know.
This is surely based 100% on the assumption that the new player decides to provide a lower cost option. What are the odds that they will do so? What if the new player enters in gleeful anticipation of the much higher prices they can charge Kiwi consumers, because everyone else is doing it, and so the market simply divides into three, and doesn’t change a thing?
In 2022, the Commerce Commission reported that the two big chains were taking an excess of a million dollars a day in profit, a markup of 12%, whereas 5.5% should be anticipated. It’s a very attractive trough unless a government or watchdog with teeth is able to monitor margins and control them down. So that is totally impossible? Also, does this assume that the big two are going to relinquish sites in shopping centres to let a new player trade there, or does the new player have to bring $billions to develop new sites? It seems chaotic to me, and curiously unlikely.