Supermarket shake-up policies score below 2 out of 5 in boardroom survey (NZ Herald)

Supermarket shake-up policies score below 2 out of 5 in boardroom survey (NZ Herald)

Business leaders are unimpressed by the supermarket policies being taken into the election.

Plans to break up, restructure or directly compete with the grocery duopoly all scored below 2 out of 5 in this year’s Mood of the Boardroom survey.

National has proposed amending the Grocery Industry Competition Act within its first 100 days, then giving the Commerce Commission six months to assess whether Foodstuffs should be separated into two entities: one combining New World and Four Square, and the other Pak’nSave.

If the commission recommended separation, National says it would legislate to implement it.

Respondents gave National’s proposal an average score of just 1.83 out of 5, where 1 was ‘not impressive’ and 5 was ‘very impressive’. More than half — 51% — gave it the lowest possible score of 1 out of 5.

“The Foodstuffs move seems to be driven more by the need to be seen to be doing something than by any strong rationale,” says a property sector director.

Another non-executive director is similarly sceptical: “Signalling the potential break-up of privately held businesses is unhelpful.”

An energy sector leader warns the policy “will increase the cost of capital for all industries in New Zealand as businesses and their funders ask ‘who is next?’”

New Zealand First has proposed splitting Foodstuffs into two national co-operatives. Its policy scored 1.76 out of 5.

Labour would require Foodstuffs and Woolworths to operate independent wholesale businesses, guarantee smaller grocers access to wholesale supply on fair terms, and free Four Square operators from restraints of trade.

This policy scores 1.81/5, with 47% rating it 1/5.

The Green Party’s KiwiMart proposal — a $2.8 billion plan that would bring 120 stores and two distribution centres into public ownership to establish a state-owned supermarket chain — received the lowest score of all: 1.15 out of 5. Some 86% of respondents gave it a 1.

Act opposes a restructure of the incumbents. It says it would instead make it easier for a new operator to enter the market, through streamlined consenting and fewer council hurdles.

The boardroom’s verdict is much harsher than the public’s. A Talbot Mills poll commissioned by Foodstuffs found 45% of respondents supported National’s policy to investigate separating Pak’nSave from New World, with 38% opposed.

But even so, voters are not convinced it would make a difference at the checkout. Just 28% of those surveyed believed forcing the separation would lower grocery prices. A Verian poll for 1News found only 32% thought any of the parties’ proposed policies would lead to lower grocery prices within three years.

New Zealand’s grocery market is dominated by Woolworths and Foodstuffs. Australian-owned Woolworths operates the Woolworths supermarket chain, while Foodstuffs comprises two co-operatives — Foodstuffs North Island and Foodstuffs South Island — whose owner-operators run Pak’nSave, New World and Four Square stores.

The Commerce Commission’s 2022 market study concluded competition in the retail grocery sector was not working well for consumers, and recommended a package of measures aimed at improving price, quality and choice.

At the time, it estimated the major grocery retailers were earning excess profits equivalent to about $1 million a day.

The Government responded by creating a Grocery Commissioner and passing the Grocery Industry Competition Act. In 2024, the commission declined clearance for the two Foodstuffs co-operatives to merge, saying it was not satisfied the deal would avoid substantially lessening competition.

Progress since has been slow. The commission’s latest annual grocery report, released in June, found “little observable change in core competition metrics”, with the two groups’ combined market share essentially unchanged at around 80%.

The search for a third major player has also stalled, with The Warehouse ruling itself out last month.

The low policy scores do not mean business leaders believe the grocery market is working well.

A healthcare executive argues that addressing cost-of-living pressures “requires targeting monopolies”.

They support “formal inquiries into margins across major banks, the grocery duopoly and energy gentailers to lower everyday costs”.

While many accept there is a competition problem in groceries, there is little confidence that structural decisions designed in the heat of an election campaign will solve it.