New Zealand’s supermarket sector remains dominated by two major companies, a situation that continues to drive food prices higher and limit competition, according to current government officials and regulatory authorities. Despite widespread recognition of the issue, meaningful change has yet to materialize, prompting renewed calls for structural reforms ahead of the upcoming election.

The Commerce Commission’s 2022 report highlighted that the country’s supermarket market is highly concentrated, with the two largest companies—Woolworths and Foodstuffs—controlling over 80% of the national market. The report found that competition between major supermarkets was ineffective for consumers, contributing to grocery prices that are relatively high compared to international standards. Barriers to new entrants and expansion for smaller competitors remain significant.

Nicola Willis, leader of the National Party, has pledged to reduce grocery prices since National took office three years ago. However, recent analysis shows retail prices have continued to rise, with the duopoly remaining intact. While National has recently acknowledged the need for structural change, it has proposed commissioning another six-month review on whether separating some Foodstuffs brands—Pak’nSave, New World, and Four Square—would benefit consumers. The party has not committed to implementing any breakup of Foodstuffs, drawing criticism from the governing Labour Party.

Labour officials argue that repeated reviews and delays are insufficient in addressing the fundamental market failures. Their proposed approach centers on breaking up the duopoly to improve competition. The party points to the Grocery Industry Competition Act passed in 2023 as a step toward opening the wholesale market to smaller retailers, allowing them access to essential products on fair terms. Labour’s plan also includes separating wholesale and retail operations within the major supermarket groups, ending non-compete clauses that restrict Four Square store owners, and simplifying the complex system of rebates, discounts, and payments between suppliers and supermarkets—a system estimated to be worth about NZD 6 billion annually.

Labour asserts that this intricate rebate structure and the purchasing power wielded by the dominant chains enable them to secure favorable terms with suppliers, disadvantaging smaller competitors and impeding market entry. By increasing transparency and curbing so-called “junk fees” that do not offer real value, Labour aims to create an environment where small businesses and new entrants can compete effectively.

In addition to structural changes, Labour proposes legislation to outlaw price-gouging by companies with substantial market power. This measure would target sustained excessive pricing that is not justified by supply costs or normal market fluctuations, particularly on essential goods and services. The government clarifies that legitimate price increases due to higher input costs or seasonal changes would not be considered price-gouging.

Labour officials contend that combining these regulatory reforms with enhanced competition will place downward pressure on prices and provide better choices for consumers. Meanwhile, National’s approach remains focused on further study and potential future action, pending the outcome of the proposed review.

As the election approaches, the debate over how to address New Zealand’s supermarket duopoly remains a central issue, with proponents of reform emphasizing the urgent need to improve competition and reduce food prices for consumers across the country.