Grocery Commissioner Pierre van Heerden says 'reforms need more time to bed in to see significant improvements in the market'

With the ongoing conflict in the Middle East expected to put extra cost pressures on grocery products globally, the Commerce Commission says given the lack of competition in New Zealand, it's worried this will amplify the negative effects of the situation.

"Our expectation on industry is that prices should come down when the crisis is resolved and that the situation should not be used as a cover for increasing margins," the Commerce Commission (ComCom) says. 

“We will act on anything of concern that we observe or is brought to our attention."

The commission's comments come on Tuesday as it releases its annual grocery report, which looks at the state of competition in New Zealand's grocery industry in 2025.

The combined market shares of major grocery retailers Foodstuffs North Island, Foodstuffs South Island and Woolworths were 82%. The report says this indicates the industry continues to be highly concentrated.

Food prices and the Middle East crisis

While food price inflation eased in 2024, it picked back up again in 2025 with retail food prices increasing 4.6% in the year to December, the report says.

“Although inflation is influenced by global factors, the lack of competitive pressure reduces the ability of the market to temper prices when cost pressures ease.”

The report says retail food prices continue to sit above pre-inflation levels.“Volatility across food categories persists, indicating that elevated food prices are likely to remain an issue into 2026.”

With the ongoing conflict in the Middle East, the report says this is expected to place extra cost pressures on grocery products in 2026 and there were also “concerns about the availability of certain products, particularly products that rely heavily on imports or transport-intensive supply chains”.

“As well as impacting fuel prices the conflict has led to surging fertiliser prices due to shipping disruptions, which could affect the costs associated with agricultural products.”

ComCom says it will continue to monitor margins of major grocery retailers and has set out expectations that "as these cost increases flow through to retail prices, they are not used as an opportunity to widen margins, and that prices come down quickly when costs reduce”.

“We also intend to explore options to further enhance our analysis of margins in the industry.”

'Competitive pressure is not meaningfully increasing'

The report found Woolworths continues to have the largest share nationally at 27%. This was followed by Pak’nSave at 25% and New World at 22%.

“A one percentage point decrease for New World this year may reflect that consumers are still feeling the pressure of inflation."

"Pak’nSave had been slowly gaining market share from WWNZ (Woolworths New Zealand Limited) as inflation was driving consumers to search for value, but this has stabilised in 2025, with only 2% now separating the two," the report says.

When it comes to margins and profit, the report says these have remained largely stable “suggesting that competitive pressure is not meaningfully increasing”.

While FoodStuffs North Island and Woolworths had small margin decreases, Foodstuffs South Island’s margins increased across fresh and non-fresh departments.

The report says Foodstuffs North Island and Foodstuffs South Island continue to “sit at the top end of international profitability benchmarks”.

“These patterns are not what we would expect in a market experiencing increasing competition, where sustained downward pressure on margins would be more likely.”

Other findings

The Commission says: “Structural challenges such as volume discounts, strong incumbent brands, and economies of scale continue to constrain the ability of new retailers to grow to a level where they can compete with the major supermarkets.”

However, there’s been more activity from smaller and independent retailers with new stores opening and several specialty stores expanding.

The report found Asian grocers are continuing to expand their presence and two new independent supermarkets opened in 2025. Online retailers had also expanded the range of grocery products.

Alongside this, online grocery sales grew in 2025 to 8% of major grocery retailers’ sales revenue (up from 7% in 2024).

"Click-and-collect sales exceeded delivery sales, potentially reflecting consumers’ price consciousness in recent years.”

With American supermarket Costco planning to grow its presence in Auckland, ComCom says: “We expect this to put pressure on supermarkets in Auckland, particularly those closest, to lower their prices and improve their retail offering.”

In 2025, Costco’s market share was 4% of the Auckland market and it has at least 250,000 members.

‘Regulatory changes are starting to bed in’

Grocery Commissioner Pierre van Heerden says the finding reflect what many shoppers are feeling at the checkout - "reforms need more time to bed in to see significant improvements in the market”.

“The major supermarkets have kept hold of over 80% of the national retail market, margins and profitability were relatively flat, and retail prices increased. There are some regional changes, particularly in Auckland, but nationally things have stayed consistent.”

“Regulatory changes are starting to bed in, with the environment becoming more enabling for the entry and expansion of other grocery retailers, which will support an increase in consumer choice,” van Heerden says.