Juanita Neville-Te Rito says everyone's fighting over who splits the supermarkets. Nobody's asking who pays for it

By Juanita Neville-Te Rito*

I try not to get too involved in politics but I am sitting in Australia this week for work and woke up to some headlines and thought, hang on. National's grocery announcement reads beautifully. Three nationwide competitors instead of two and a half. PAK'nSAVE standing alone. New World and Four Square standing together. Everyone fighting harder for your trolley.

Here's what the press release skips: New Zealand's grocery problem was never the number of logos on the door. It's the cost of running a grocery network across a small, thin, expensive country. Split an existing operator in half and that cost doesn't vanish, it just gets handed to two smaller companies instead of one.

New Zealand has one supermarket for every 12,871 people. Germany has one for every 3,009. Ireland, almost exactly our population, has one for every 5,563. Our stores also carry the highest revenue per store of any developed grocery market, well clear of the US, Germany or Ireland. That's not margin-gouging, it's arithmetic. Fewer stores means each one carries more of the fixed cost of getting product to it. Split PAK'nSAVE off and someone has to build it a second logistics network from scratch, or send it to market thinner and weaker on price than the operator it replaced. Either way, "more competitors" and "cheaper groceries" stop being the same sentence.

Before anyone reaches for Ireland as proof this works: Ireland has real fragmentation, five or six retailers, none above 25% share from memory. It's also a compact island bolted directly onto the UK and European supply chain, trucking in off networks that took someone else decades and billions to build. That's geography handing Ireland a gift, not a policy anyone can legislate their way into here.

Australia gets waved around too. Except Woolworths Supermarkets and Coles Group still hold close to two-thirds of that market between them. ALDI Stores Australia and Metcash added pressure, they didn't dismantle the duopoly. If National wants Australia's outcome, the lesson from Australia is that it takes a genuinely new entrant with a genuinely different cost model, not a court-ordered split of an existing one.

And my favourite piece of timing. While the government drafts a plan to split Foodstuffs apart, Foodstuffs has been combining its Gilmours and Trents wholesale arms, despite the Commerce Commission blocking the full North and South Island retail merger last year on competition grounds. The regulator says no to more scale. The industry finds a way to get more scale anyway. And the government's answer is to legislate for less scale, in the opposite direction, on a six month clock.

You don't have to take my word for any of this, either. BusinessDesk NZ said that structural separation sends a "chilling signal" to investors, and its read on the economics lines up with mine almost word for word: supermarkets run on scale across purchasing, distribution, logistics and technology, and if a split erodes that scale or duplicates the cost, the risk is that cost finds its way back to the shopper.

And National isn't even the most radical bid on the table this election. The Greens want to nationalise 120 stores into a government-owned chain, KiwiMart, price tag $2.8 billion of your tax dollars. Labour wants to make "price gouging" illegal, without anyone quite explaining how you legislate the correct price of a lettuce in a bad growing season. Four parties, four different mechanisms, one election. If you're a supplier, an investor, or a store owner-operator trying to plan the next five years, it's not competition policy, it feels like a lucky dip… well to me anyway.

And I am really wary about the position on price: don't bank the household budget on it. Run the government's own modelling through the numbers ACT crunched and it lands at $2.38 a week per person in year one. WOW! Food price inflation alone was running at 1.9% in the year to July, enough to wipe out that entire gain on an average $125 weekly shop before it reaches your wallet. The Commerce Commission 's own June report on this sector found "little observable change" in competition since the 2023 reforms, a dedicated Grocery Commissioner and everything. Even Nicola Willis has said as much herself, whether this delivers net benefits "would depend on how it is implemented and what happens to supply-chain costs." That's the minister proposing the policy telling you it might not work. Treat 3.5 to 5% as an opening bid, not a forecast, until someone shows an implementation plan that says who builds the second supply chain and who pays for it.

For sure there are opportunities for New Zealand's grocery market to work better for shoppers. But "too concentrated" and "the fix is a forced demerger" are two different claims, and National wants us to accept the second on one consultancy's modelling, in a sector where nobody, anywhere, has tried this and made it stick. And we have seen how this type of modelling has gone in the past. Not a great track record (any track record?)

If the Commerce Commission's six month review means anything, the question isn't "can we split this company." It's "who pays to build the second supply chain, and where does that bill land." Because somebody always pays it. Usually the person holding the trolley.

*Juanita Neville-Te Rito is founder and Managing Director at RX Group. This was originally posted on LinkedIn and is here with permission.