A recent letter submitted by Kit O’Halloran of Northcote Point highlights concerns over government proposals to break up the supermarket duopoly in New Zealand’s retail food sector. The letter argues that requiring the locally owned Foodstuffs collective to divide its operations could impose significant costs related to duplicating staff, premises, and transportation infrastructure.

O’Halloran suggests that the Government’s approach may inadvertently benefit the Australian supermarket chain Woolworths, which operates in the New Zealand market alongside Foodstuffs. According to the letter, Woolworths could respond to increased costs faced by Foodstuffs by raising prices, while positioning them just below the higher prices resulting from Foodstuffs’ restructuring, thereby maintaining a competitive edge.

The letter further emphasizes the challenges posed by New Zealand’s relatively small market size. O’Halloran notes that without attracting new supermarket entrants—such as international chains Lidl or Aldi, or a domestic player like The Warehouse—the market may struggle to sustain the lower profit margins typical in larger countries. The implication is that the Government should temper expectations about achieving price reductions or greater competition simply by dividing existing market players.

This perspective underscores ongoing debates over how best to enhance competition and affordability in New Zealand’s grocery sector, weighing the difficulties of market size and the potential economic impact on domestic retailers.