International supermarket chains and local investors have expressed interest in entering the New Zealand grocery market, Economic Growth Minister Nicola Wills has said, as she aims to remove “unnecessary regulatory hurdles” that discourage new entrants.
Willis made the comments today during a speech to the New Zealand Economics Forum.
In her speech Willis discussed the 2022 Commerce Commission report on the country’s supermarket sector. The report found competition within the industry, which has a duopoly of Foodstuffs and Woolworths with a fringe of other retailers, was not working well for consumers.
Willis said: “Competition between grocery retailers is muted, profits are high, product ranges are limited, and shoppers pay higher prices than people in many other countries.
“In this environment, it is almost impossible for a new entrant to establish a foothold in the New Zealand market.”
Economic Growth Minister Nicola Wills aims to remove “unnecessary regulatory hurdles” that discourage new entrants. (Source: 1News)
Willis said the country’s current setup was bad for both food producers and customers.
“If Kiwi food producers can’t afford to keep their products on New Zealand supermarket shelves, how are they ever going to grow to the point where they can export overseas?
“Studies have shown that New Zealand supermarkets were the most expensive for kitchen staples compared with the UK, Ireland and Australia.”
Willis believed Kiwis were not getting a fair deal at the supermarket and said she was “ready to pull out all the stops” to change that.
“The supermarkets will fight back, I’m sure. It’s a fight worth having.”
She said that while the Government would not open its own grocery chain, she wanted to see another competitor enter the market to disrupt the major players and drive down prices.
“Over the past 12 months, international supermarket chains and local investors have expressed interest in entering the New Zealand grocery market,” Willis said.
While the minister did not name any chains or investors, she said Kiwi investors were interested in potentially partnering with an international supermarket chain.
“I want to help them succeed.”
Willis said the Government would help remove barriers to new market entrants – although she had no immediate announcements to make.
“That could include removing unnecessary regulatory hurdles in the Overseas Investment Act, Resource Management Act and the entire regulatory maze; helping them to access suitable land and properties for development; helping them to attract capital; cracking down on predatory pricing and ensuring they have fair access to products.
“If a new grocery chain opened up here, it would deliver massive gains for Kiwi shoppers. So I’m up for actions needed to help make it happen.”
At a press conference after her speech, Willis said she understood an injection of competition into the sector would require people with private capital to take a risk.
She urged the major supermarket chains to “listen up”.
“Our Government is on the side of Kiwi shoppers, and we will act to defend their interests.”
Tax and Energy
Willis also said she was “considering a range of proposals to make our tax settings more competitive over time”, and that is was time to think about what actions the Government may be able to take to incentivise new generation, security of supply and affordable electricity.
Willis also released a progress report on the work being done to move New Zealand to a “higher growth track”.
The report provided a snapshot of over 80 actions that have been completed or started since the Government took office in 2023.
“lnflation is now back under control but to deliver the opportunities and high-quality public services people expect we need to build a stronger, wealthier and more resilient economy that benefits all New Zealanders,” Willis said.
“We must adopt a ‘yes’ mentality when sometimes it is easier to say ‘no’.”
Kiwis ‘need real action’ – Labour
Reacting to Willis’ comments today, Labour’s commerce and consumer affairs spokesperson Arena Williams called them “painfully weak” with “no new ideas”.
“New Zealanders struggling with the cost of their weekly grocery shopping don’t need more vague promises from Nicola Willis, they need real action,” she said.
“If National was serious about tackling the supermarket duopoly, it would build on the real progress Labour made. Instead, all Nicola Willis is offering is no new ideas, no deadlines, and no clear policies.”
Williams called it a “smokescreen” for a government “floundering” when it came to the cost of living.
“Nicola Willis talks about ‘growth,’ but the only growth we’ve seen is in the number of job losses, the number of Kiwis leaving, and the number of homeless Kiwis,” Labour finance spokesperson Barbara Edmonds said.
She said Willis’ comments today were part of a “troubling trend of all talk and no action”.
“This government has failed to deliver on their FamilyBoost promises, they’re failing on ferries, and now they’re failing to seriously address grocery prices.”
Woolworths and Foodstuffs respond
In a statement responding to Willis, a Woolworths spokesperson said: “We’ll continue to work constructively with the government and the Commerce Commission, including any steps the government might take to remove unnecessary regulatory hurdles in the grocery sector.”
They said the company’s focus was on “giving our customers more value, convenience and a fantastic shopping experience” as the cost of living continued to bite.
Regarding the lack of competition within the sector, the spokesperson said there had been “even more” over the last couple of years — using Costco and select Warehouse stores that sell groceries as examples.
“There have been significant new regulations and initiatives in the grocery sector which we’ve supported, like the Grocery Supply Code, unit pricing and we have also established a new wholesale business.
“The primary concern for our customers is the cost of living, and our priority is continuing to help them find value when they shop with us.”
A Foodstuffs spokesperson said the company supported the Government’s focus on removing “genuine barriers” to competition “and making sure regulations add value and make it easier to do business here in New Zealand”.
“Regulations must ultimately deliver better outcomes for consumers.
“We’re committed to ensuring New Zealanders get a fair deal at the checkout. That’s why we’re focused on being as productive as possible, investing in efficiency, and keeping prices down for customers.
“We’re proud of our work getting food inflation back under control. New Zealand now has the lowest rate of food price inflation in the OECD.”
The spokesperson said that as the country’s only New Zealand-owned supermarket retailer, Foodstuffs needed to do “all we can to compete hard against current and future multinational competitors”.
“Every day, we’re working as if a new competitor is going to enter the market. A key part of improving our efficiency and keeping prices competitive is our proposal to merge our two separate regional co-operatives.
“This will allow us to operate at scale, invest in our business, and continue providing customers with the best possible value so that in 10 years’ time, NZ still has a 100% Kiwi owned major grocery retailer that can compete against big multinationals.”
The spokesperson said the company would continue to “engage constructively” with the Government to ensure “any changes deliver real benefits for New Zealanders while supporting a strong and resilient grocery sector”.
