March 18, 2026

Three years of supermarket reform and the duopoly hasn’t lost a single point of market share

Historic Painted Ladies homes with parked cars in San Francisco, showcasing Victorian architecture.

The machinery is running but the needle hasn’t moved

Three years ago, the Commerce Commission handed the government a damning verdict: New Zealand’s grocery sector suffered from muted competition, higher-than-expected profitability, and prices that were high by international standards. The recommendation was clear. The response was cautious. The MBIE Regulatory Impact Statement laid out two paths: structural intervention or conduct regulation. The government chose the easier one.

The result was the Grocery Industry Competition Act 2023, which created a Grocery Commissioner, imposed rules on land covenants and wholesale supply, and introduced a Grocery Supply Code of Conduct. The Commerce Commission has since completed a full review of the Supply Code, run a supplier survey drawing over 560 responses, and published a Wholesale Supply Inquiry documenting the scale of the problem in brutal detail.

And where does that leave us? Foodstuffs and Woolworths still control 82% of the retail grocery market, with combined annual purchases of approximately $18 billion. The three regulated grocery retailers extract over $5 billion annually in rebates, discounts and payments from suppliers through more than 50 different mechanisms. The regulatory apparatus is humming. The market hasn’t budged.

Wattie’s is what buyer power actually looks like

The most visceral evidence arrived in March. Heinz Wattie’s announced factory closures in Auckland, Christchurch and Dunedin, cut frozen packing lines at its Hastings King St plant, eliminated 350 jobs and booked a $211 million asset impairment. The chain of causation runs directly through the duopoly. In 2021, Foodstuffs conducted a review of frozen ranges, cut Wattie’s products and replaced them with house brands Pams and Value. McCain Foods and Sealord suffered the same treatment. Sealord closed its Nelson coated fish factory in November 2025 with 79 job losses.

This is not a consumer price story. It is an industrial story. When two buyers control the channel and can swap branded products for house labels at will, domestic manufacturers lose the volume that justifies running a factory. The duopoly’s buyer power is hollowing out New Zealand food manufacturing, and a Supply Code cannot fix that.

Meanwhile, food prices rose 4.5% over the last year, with fruit and vegetables up 9.4%, while Woolworths NZ made $100 million in profit in the past six months. The incumbents are doing fine.

The Foodstuffs merger test

While the government regulates at the margins, Foodstuffs is in the High Court trying to overturn the Commerce Commission’s rejection of its proposed merger of the North and South Island co-operatives. The deal would bring all Pak’n Save, New World and Four Square stores under a single entity. The Commission’s barrister James Every-Palmer KC told the court that allowing the merger “would certainly be at odds with Government policy to increase competition in the grocery markets. If you’re aiming to increase competition, you don’t do that by fusing together two parts which are currently independent in the industry.”

The case is notable internationally as one of the few involving buyer power aggregation in competition law. If the merger succeeds, every supplier in the country will negotiate with a single dominant buyer on one side and Woolworths on the other. The conduct regulation framework was not designed for that.

The fix nobody wants to talk about

Woolworths NZ managing director Sally Copland argues breakup would push prices up, noting the company takes just 2.3 cents for every $1 spent in its stores. That argument is not without merit, but it is also the argument every incumbent makes when facing structural reform.

The more interesting analysis comes from Dr Eric Crampton of the NZ Initiative, who identifies the real barrier to competition: planning law. “It has taken Woolworths four years to get planning permission for a supermarket in Halswell,” he notes. District plans that allow only one supermarket per area, combined with years-long consenting processes, mean international entrants face a structural barrier that has nothing to do with the Commerce Act. His proposed solution is a fast-track consenting system for new supermarket entrants, overriding district plan restrictions that “amount to making it illegal to compete.”

Crampton also flags the risk that forced divestiture without a credible new-entry pathway would deter the very international players New Zealand needs. “Government definitely should not be doing things that would make New Zealand seem risky, unpredictable, and generally hostile to retailers.”

Conduct regulation cannot create a competitor

This is the uncomfortable truth at the centre of three years of grocery reform. You can regulate supplier codes, review wholesale terms, survey 562 suppliers, and appoint a commissioner. None of it creates a third major retailer. Only new entry can break the duopoly, and new entry requires planning law reform that is politically harder than anything the government has attempted, because it means overriding councils and local objectors rather than imposing codes on two large companies. The breakup rhetoric was always the easy part. The actual fix requires a fight with local government that no minister has been willing to start.

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