Source: Radio New Zealand
For most of 2025, the government talked tough on supermarkets, presenting itself as a consumer champion willing to use the toughest tools available to bring down food prices.
If competition failed to improve, ministers said they were even prepared to consider the “nuclear option”- forcibly breaking up the companies that dominate New Zealand’s grocery sector.
“All options are on the table,” Economic Growth Minister Nicola Willis announced in March. She promised to “pull out all the stops” for shoppers paying some of the highest food prices in the developed world.
But a year later, the promise of “meaningful change” at the checkout is unfulfilled.
Food prices continue to climb. Stats NZ said food prices increased 4.5 percent in the year to February 2026, with meat, fish and poultry rising the most at 7.5 percent.
Structurally, the supermarket sector looks almost identical to how it did before the threatened political crackdown began.No forced divestment has occurred. No new national supermarket chain has entered the market. The duopoly of Woolworths and the Foodstuffs co-operatives still control about 82 percent of grocery sales, with both suppliers and consumers suffering as a result.
“Consumers in smaller towns and rural areas typically have minimal to no choice… with some stores in small towns functioning as a localised monopoly,” Grocery Commissioner Pierre van Heerden wrote in a 2025 report.
“My concern is that the power imbalance between the major supermarkets and small suppliers creates a reluctance among suppliers to push back.”
The question now is whether the government’s aggressive rhetoric about structural separation was ever a serious threat, or simply a political bluff.
Willis’s ‘break-up threat’ to supermarkets was front page news in the NZ Herald a little over a year ago. New Zealand Herald
The problem
The problem in the grocery market is well known: it is one of New Zealand’s most concentrated sectors, and competition has long been judged inadequate.
The Commerce Commission’s landmark 2022 market study found the dominant chains were earning about $1 million a day in excess profits.
It concluded competition was not working effectively, and that the supermarket giants benefited from enormous scale advantages, including nationwide distribution networks and buying power with suppliers, that smaller retailers struggle to match.
But rather than forcing structural change – such as separating the companies’ wholesale and retail arms, or forcing the sale of part of the business – successive governments have opted for a more cautious approach.
Labour responded to the Commerce Commission’s findings with the Grocery Industry Competition Act, which created a new regulatory regime for the sector.
The law established New Zealand’s first Grocery Commissioner, introduced a wholesale access regime, and imposed a Grocery Supply Code governing how supermarkets deal with suppliers.
The aim was to increase competition without dismantling the duopoly itself.
After the election in 2023, National also came under sustained pressure to act on rising food prices. In her March 2025 speech, Willis warned of “potentially massive changes” to supermarket logistics and warehousing networks, while emphasising the government would only consider structural intervention once it had done its research.
“We have to get the detail right… New Zealanders need confidence that we’ve thought this through thoroughly,” she said.
To the public, it appeared the government was ready for a fight.
But documents released under the Official Information Act suggest the prospect of a supermarket break-up was never the central focus of officials’ work.
Just asking questions
While ministries did examine structural reform options, the bulk of the policy effort focused instead on smaller regulatory fixes and market-led solutions.
By the time Willis gave her speech, officials were already preparing advice on structural reform options. For example, reports titled “Outline of de-merger options FINAL” and
“Information regarding structural reform of the grocery sector” and an aide-memoire about the separation of Telecom were drafted in early 2025.
While most of the information is redacted, what’s left shows officials were careful to frame structural separation as conditional and preliminary.
Briefing notes prepared for meetings with supermarkets and potential entrants emphasised that the Government was not consulting on a decision to break up the sector.
“The government is not consulting on policy options at this initial stage… This is a genuine request for information,” one briefing said.
At the same time, a much larger programme of work focused on regulatory changes aimed at lowering barriers to entry and tightening enforcement. This included making supermarkets eligible for fast-track approvals, improving building consent certainty, exploring changes to the Overseas Investment Act, strengthening Fair Trading Act penalties and clarifying predatory pricing rules under the Commerce Act.
Officials warned internally that these measures might deliver only limited gains. One memo noted there could be criticism that addressing regulatory barriers would “only have a marginal effect on improving competition”.
Structural separation, meanwhile, was more likely to be effective – but was also inherently risky.
In one briefing, officials wrote: “I am aware that structural separation comes with risks – however, I have heard from a number of parties this is the only option which ensures greater competition.”
Midway through last year, Willis shifted focus on to attracting a third major player to break the supermarket duopoly RNZ / Nathan McKinnon
With open arms
By August, talk of structural separation had largely been put on the backburner.
Instead, Willis pivoted to a strategy of facilitation, introducing planning reforms and the so-called “Express Lane” approach to speed up consents for new supermarkets, and attempting to attract a new international competitor.
By streamlining the Overseas Investment Act and Resource Management Act, the government hoped to lure a “third major player” like Costco or well-funded domestic ventures to take on the duopoly’s 82% national market share.
Effectively, that move shifted the financial risk of competition away from the state and onto private investors. Willis admitted the limitations of the approach, noting: “I can’t force a third entrant in… All I can do is open my arms as wide as possible.”
As part of the plan to attract a third competitor, the government launched a Request for Information (RFI) process to figure out what was stopping new competitors from entering.
Ministers and officials engaged directly with a range of potential challengers, including Costco, Sir Stephen Tindall, Farro Fresh, Night ‘N Day and iwi organisations considering a supermarket venture.
But the response from the industry’s biggest global players has been muted.
Documents released to the Herald earlier this year show Tesco declined to participate in the process after “internal personnel changes.”
Two of the world’s most aggressive discount chains – Aldi and Lidl – also declined to take part, with Aldi confirming it currently has no plans to expand into New Zealand.
Without a large international entrant, the government’s strategy of creating competition through a new market entrance faces a much steeper climb.
Kai Co, a local grocery co-operative in Christchurch, lacks the vast scale of the larger players so currently has no real impact on prices nationwide. Facebook/Kai Co
Local alternatives have emerged. Christchurch grocery co-operative Kai Co has drawn significant consumer interest, positioning itself as a community-owned alternative to the major chains.
But regional initiatives remain a long way from challenging the incumbents’ national scale.
Limited signs of change
By late 2025, some observers were describing developments in the sector as “Groundhog Day.”
The 2025 Review of the Grocery Supply Code, published in June, had said the original rules failed to rebalance power because suppliers were still reluctant to push back on retailer behaviour for fear of damaging relationships or losing shelf space.
In response, the Commission announced tougher new rules in October 2025, including a standalone ban on retaliation and the prohibition of “investment buying”- the practice where supermarkets profit from supplier-funded discounts without passing them to shoppers.
But even the Commerce Commission has acknowledged those kinds of changes address specific behaviours rather than the underlying structure of the market.
The government has prioritised what some call “low-hanging fruit”- prosecuting supermarkets for misleading pricing and inaccurate specials.
Consumer NZ chief executive Jon Duffy, pictured delivering a petition for accurate food pricing to Economic Growth Minister Nicola Willis Anneke Smith
While this led to criminal charges and record fines – including a $3.25 million penalty for Foodstuffs North Island – consumer advocates like Jon Duffy warn that these fines may be a “feather rather than a stick” for billion-dollar entities.
Willis is currently considering raising maximum fines to tens of millions of dollars to match Australian standards, though this has faced significant pushback from the industry.
Will they or won’t they
As inflation concerns return with war in the Middle East, the political shield of “all options on the table” may be wearing thin.
If the new Supply Code and the arrival of players like Kai Co fail to shift the balance of power in the market, the current and future governments will eventually face a stark choice: accept the duopoly as a permanent feature of New Zealand’s grocery sector, or pursue the threatened structural break-up.
Willis repeatedly signalled that stronger intervention remained possible if her reforms failed to embed change. As of last year, a cost-benefit analysis was underway, she said. But similar work commissioned under the previous government found the economics of a break-up were far from straightforward.
A 2023 MBIE analysis suggested forced divestment could deliver competition benefits but also carried the risk of a $3.8 billion net cost over 20 years, largely due to the loss of economies of scale.
Officials warned that if those efficiencies were destroyed, grocery prices could actually rise – a scenario described internally as a “very high regret” outcome.
A forced break-up would also be highly disruptive to a $25 billion industry, raising complex legal and commercial questions that could take years to resolve.
Willis has previously cautioned that restructuring the supermarkets would be a “significant intervention”.
“A decision to restructure the supermarkets is not a decision that would be taken lightly. It would be a significant intervention that would carry costs and risks that would need to be rigorously weighted against the potential benefits to shoppers,” she said in announcing the “express lane” changes last August.
Supermarket executives argued that the Grocery Supply Code and wholesale access rules needed time to “bed in” before further radical changes were made.
But industry observers have noted that while the expertise for a break-up likely exists within the Commerce Commission, the government has already effectively “run out of time” to implement such a complex legal and commercial overhaul before the next election cycle.
What’s more likely is that plans for the “nuclear option” remained locked away, again.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
