New Zealand’s major political parties are preparing for a contentious debate over the country’s supermarket sector, centered on a proposal to restructure Foodstuffs, one of the two dominant supermarket groups. National Party has put forward a plan to split Foodstuffs into two separate chains, dividing Pak’nSave from New World and Four Square, with the stated aim of increasing competition and benefiting consumers.

National argues the current supermarket duopoly limits competition, resulting in higher profit margins for supermarket owners than seen internationally. According to the party, Foodstuffs North Island reported after-tax profit margins of about 4% on items sold, while Foodstuffs South Island recorded roughly 3%, both significantly greater than the 1.5-2.5% range typical of comparable supermarkets in countries like Australia. National contends that this disparity indicates that efficiencies from economies of scale are not fully translating into lower prices for shoppers.

The party emphasizes that the proposed structural separation would only proceed if the Commerce Commission, which regulates competition in New Zealand, finds the plan viable. Should the split go ahead, existing supermarket owners would not be compelled to sell their businesses or switch to a different retail banner. National frames the policy as a response to an “unusual” market structure, noting New Zealand is among the few developed countries of similar size with only two major supermarket groups, whereas nations such as Ireland, Norway, Iceland, and Denmark have three or four.

Supporters also cite advice from the Organisation for Economic Co-operation and Development (OECD) and remarks by Steven Joyce, a former Finance Minister and recently appointed director of Foodstuffs North Island, suggesting the need for increased competition in the sector.

National stresses that this intervention would be unique to the supermarket industry, with no plans to pursue similar structural changes in other sectors, underscoring the belief that the concentration of market power in supermarkets is exceptional.

The supermarket issue is expected to become a key point of discussion in New Zealand’s upcoming general election campaign, as parties weigh the balance between fostering free enterprise and tackling concerns over market dominance and consumer prices.