National’s Nicola Willis says if re-elected into Government, her party will look at breaking up Foodstuffs into two competing grocery chains - subject to an independent Commerce Commission assessment

Subject to an independent Commerce Commission assessment, National is proposing to pursue the structural separation of Foodstuffs - breaking the cooperative up into two competing grocery chains.

“The proposed structure would see New World and Four Square as one nationwide chain and PAK’nSAVE as another. Together with Woolworths, this would mean New Zealand would have three major nationwide grocery chains,” National’s finance and economic growth spokesperson Nicola Willis said on Wednesday morning in a policy announcement ahead of November's election.

Foodstuffs' main brands include PAK'nSAVE, New World and Four Square, and a recent report found that the combined market shares of major grocery retailers Foodstuffs North Island, Foodstuffs South Island and Woolworths were 82%.

“National will amend the Grocery Industry Competition Act in our first 100 days in Government to empower the Commerce Commission to develop and assess a detailed implementation plan, and determine whether the separation can be delivered in a way that leaves consumers better off.

“We will require the Commission to provide its recommendation in six months.”

The Commerce Commission would have six months to test the separation proposal, consult affected businesses, owner-operators, suppliers and consumers and develop an implementation plan as well as make a formal recommendation.

National would provide the Commerce Commission $5 million to carry out this work.

“Independent analysis estimates restructuring Foodstuffs could be worth around $200 to $1,320 a year, per household, by full rollout, depending on the household type and income. That’s real money back in the pockets of New Zealanders," Willis said.

“It could also see $12.6 billion in consumer benefits over 20 years, with grocery prices projected to fall by around 3.5% lower than they otherwise would be one year after separation, and around 5% after six years."

Willis said National’s initial view was that New World and PAK’nSAVE would “compete harder on prices, specials and service if they were genuinely independent of each other”.

“They currently sit within the same Foodstuffs structures. Separation would create three major nationwide grocery chains and put more pressure on supermarkets to win and keep customers.”

If the Commerce Commission recommended separation, National would legislate to implement it. 

“This policy is aimed at the uncompetitive structure individual Kiwi supermarkets are currently operating in, not the owner-operators who are hardworking people striving to do good by their community.”

Willis said no owner of a PAK’nSAVE, New World or Four Square will be forced to sell or re-brand their business.

“Existing owner-operators would retain ownership of their businesses, continue to operate under their existing brands, and remain part of a larger group with the scale and infrastructure to support their store.”

She said structural separation of this scale had risks and had to be done carefully.

“Whether a separation would deliver net benefits for consumers would depend on how it is implemented and what happens to supply-chain costs.

“That is why National will not have politicians playing supermarket executive from the Cabinet table, whether by ordering a breakup themselves or spending billions of taxpayer dollars trying to run a supermarket.”

“There is a very high bar for this kind of intervention and National is not pursuing structural separation in any other sector. This will be a supermarket-specific process under the Grocery Industry Competition Act," Willis said.

“However, after years of reviews and incremental reform, it’s clear the status quo isn’t working. It’s time for change.”

“New Zealanders deserve a better deal at the checkout,” Willis said.

Interest.co.nz is seeking comment from Foodstuffs.