New Zealand Mulls Interventions to Break Supermarket Duopoly

(Bloomberg) -- New Zealand will canvass a range of options to break a duopoly in its grocery market, including reducing barriers to a new international entrant and forcing the separation of the existing supermarket chains.

The government will now “actively seek a third player” and consider how to facilitate their investment in New Zealand, Finance Minister Nicola Willis told a news conference Sunday in Wellington. “At the same time, I have asked officials for advice on ways in which the grocery sector could be restructured to increase competition,” she said.

Foodstuffs New Zealand and the local unit of Australia’s Woolworths Group Ltd. form a dominant supermarket duopoly, which has been blamed for the relatively high prices New Zealanders pay for their groceries. In 2022, anti-trust watchdog the Commerce Commission found that the two big players were earning NZ$1 million ($570,000) a day in excess profits because of a lack of competition. 

Willis said she is seeking information from a range of potential investors on what it would take for new grocery retailers to enter the market on a national scale, or for existing competitors to grow to sufficient size to materially increase competition.

“I’ve asked officials to seek responses from firms which already have a presence in the New Zealand market, such as Costco and the Warehouse, as well as established overseas grocery firms such as Coles, Aldi and Lidl,” she said.

However, more significant action may be required to foster genuine competition and specialist external advice has been commissioned on ways in which the existing supermarket duopoly could be restructured, Willis said.

“Officials are working with the appointed advisors to consider options including a possible demerger of existing entities,” she said.

Foodstuffs operates the New World, PAK’nSAVE and Four Square supermarkets in New Zealand, while the Woolworths chain also owns the Fresh Choice and SuperValue stores.

Willis expects to make recommendations to cabinet by mid-2025 and if legislation is necessary, to introduce it to parliament by the end of the year. 

(Updates with additional Willis comments from fifth paragraph)

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