Fact and Fiction; Sense and Hysteria – Thoughts on The Proposed Supermarket Breakup

20 September 2026

The saying “a week is a long time in politics” was well illustrated this past week. A week ago neither of the major parties had announced an election policy to deal with market failure in our grocery distribution sector. Suddenly both have tabled dramatic and ambitious plans to do so. For years surveys have consistently shown “cost of living” as the preeminent concern of consumers while politicians have focused on their own more esoteric issues; all of a sudden politicians have remembered that they have to reapply for their lucrative and prestigious jobs and had better take note of what the public - their employers - are thinking.

Party Positions

Lets look at the solutions on offer:

National has promised to “pursue” the structural separation of Foodstuffs into two genuinely competing nationwide grocery groups – one a standalone Pak’nSave group, and the other a combination of New World and Four Square. This is subject to the Commerce Commission reporting back within six months on the detailed implementation.

Labour is promising to require both Foodstuffs and Woolworths to split their wholesale operations from retail, and to allow smaller independent retailers to source from these. It also promises to legislate against price gouging.

New Zealand First says it will introduce legislation to reform the system and break Foodstuffs into two nationwide cooperatives based on brand – one for Pak’nSave and the other for New World and Four Square jointly. It will also “fix” the supermarkets’ stranglehold over which suppliers do, or do not, have their products stocked.

The Greens will require Woolworths and Foodstuffs each to divest at least 120 stores and equivalent distribution centre capacity into public ownership. They will also ban “excessive” pricing and put constraints on anticompetitive behaviors including house branding, loyalty schemes and data harvesting.

The Opportunity Party and Te Pati Maori appear to have not yet released a supermarkets policy.

The ACT party retains its belief that if resource management regulations are relaxed some new investor will enter the market. (Naive in my view.)

Which Rates Best in My Opinion?

With the exception of ACT which is clearly an outlier based on its far right ideology, all the other proposals have merit.

Notably the two main parties, National and Labour, were surprisingly slow to release policies on the issue. And having observed their policy announcements, neither came across as having fire in their bellies when it comes to delivery. National’s announcement gave the impression of having been cobbled together late at night to make “Morning Report” the next day, rather than being a considered response after three years in government.

So my question to both would be not about the detail, but about the level of commitment. “Can you assure me you’ll do it, and that it will be a top priority in any coalition discussions?”

National’s focus is on forced structural separation of Foodstuffs’ retail arm. This has merit, but would need to be accompanied by selective separation of the shared services functions – range selection, central warehousing, pricing decisions, own brands, freight, marketing support, supplier relationships, and the like. This will be a complex exercise the details of which are best left to the Commerce Commission. The objective should be to ensure that every function which could be used in an anticompetitive way is completely separated, but without unnecessarily separating any elements that can reasonably remain shared so as to retain economies of scale.

Labour is on track with its focus on splitting the shared back-office functions including distribution. However, Labour appears silent on dealing with the need to split banner groups. Its promise to legislate against “price gouging” feels ambitious – that could open a Pandora’s box of issues reminiscent of the failed Muldoon price freeze of the 1980s. It also breaks the golden principle that you can’t fix a structural problem with a behavioral solution.

New Zealand First set the lead in being first to announce a policy on supermarkets and should be given credit for that. Its policy of breaking Foodstuffs into two retail groups – Pak’nSave and New World/Four Square – mirrors National. But likewise it is silent on the central distribution/shared services function – that needs to be addressed as well.

The Greens’ presentation of its policy is the most comprehensive and impressive. Its notion of a publicly-owned supermarket chain formed by requiring Foodstuffs and Woolworths to divest 120 stores and distribution capacity will immediately invite pushback from people opposed to public ownership. And Kiwibank has not made the difference to the banking market that proponents hoped. That said, the Greens policy is a useful threat to have on the table, sending a signal to the incumbents that this is a bottom line unless something else changes dramatically. The Greens are also planning to legislate against price gouging, like Labour.

The key message is that these are all good policies and not too wide apart. The differences are insignificant compared to the points of agreement. The parties should be working on closing the gap, not using it as a point of division - cross party support of key principles would be a huge step forward for MMP.

Why Not Woolworths Too

Several commentators have expressed concern that splitting Foodstuffs without also giving Woolworths similar treatment is unfair.

I disagree.

Woolworths NZ is one business. Leaving aside a smallish number of franchise operations such as Fresh Choice, it is a conventional centrally controlled, transparent public company with the wholesale and retail arms controlled by a single Board and CEO.

Foodstuffs, conversely, is a pair of cooperatives, one in each Island with a labyrinth of retail stores most of which appear to be owner-operated. It wears the “cooperative” label as a badge of honour. Each store has the appearance of being individually owner operated though that is almost certainly not be the case with all.

Therefore, the remedy with Foodstuffs in reality is not a “breakup”. It is better described as imposing a new way for the already separate business units to work together. Until now Foodstuffs have had the best of all worlds. When it suits their argument they can point to decentralized ownership by “our friendly local grocer families”, but in reality the business is run from a very tightly controlled central office with a labyrinth of interlocking directorates, opaque money flows, and control structures. Even now Foodstuffs remain intent on further consolidation of power by combining their North and South Island operations.

So perhaps a change of language is needed. Rather than talk about a “break up” of Foodstuffs, they should be required to return to their original cooperative values which they continue to espouse, with decentralization of operations and devolution of power.

Foodstuffs Hysteria (and flashback to history)

The orchestrated response from Foodstuffs in recent days has been extraordinary. Their lobbyists, PR teams, communications agencies and the like have obviously been extremely hard at work producing fiery, defensive “scare tactic” material for their store owners, business buddies, and captive business associations to add their names to and distribute through mainstream and social media.

It brought to mind a moment in the successful breakup of Telecom encapsulated in “unbundling the local loop.” In 2004, Telecom CEO Theresa Gattung wrote a letter to then Minister Paul Swain, which was initially in confidence but surfaced a couple of years later. It became known as the “Paul, can I be frank” letter because she used those words. Here’s an extract:

“I don’t know if you have seen the McQuarie Research Equities Report (30 April 2004) which concludes that a negative government decision on unbundling could wipe 30 cents or so from the Telecom share price. I know the government may feel no reason to be concerned by one stock’s performance, but the reality is that more than 20% of the share market is at stake….. I struggle to see why it would be in New Zealand’s interests to shift that value to an Australian company and to undermine the performance of the New Zealand share market - and a stock which is of course a key component of the government’s superannuation fund.”

In reality of course the breakup of Telecom had a profoundly positive effect on the sharemarket and the economy as a whole, allowing many other businesses to enter the phone and Internet markets, bringing down phone prices for consumers and other businesses dramatically, and broadening the base of telecommunications service providers from about three to 50 or more.

I thought about that episode this week as I read a whinging letter by a Foodstuffs store owner pointing out the long hours he works in his store. Yet I’ll guarantee many of his staff on the minimum wage of $23,95 per hour work equally long hours but probably for less than 1% of the pay packet their store owners are pocketing. Similarly another owner was talking up how his store donates to local charities – great, but so do many other businesses who don’t enjoy the benefits of a duopoly-controlled, super-profitable market. These are red herrings – politicians please ignore!

How Much is at Stake

Finally a comment on how much is at stake here.

Theres been much talk about the Commerce Commission’s finding that the duopoly is making $1 million every day in “excess” profits. I believe that is significantly understated. Especially in the cooperatives, the structures are so complex and opaque that profits can be hidden in a vast range of places – wholesale, retail, store rents, excess salaries, supplier promotional funds, gifts, and more.

This has been the week when proponents of radical change to our grocery market saw some real momentum. Lets cement the gains and press each Party to treat this as its top campaign promise, and a non-negotiable component of any coalition negotiations.