The political brawl over New Zealand’s grocery prices escalated yesterday, with Labour pledging to forcibly split the wholesale and retail operations of Woolworths and Foodstuffs if elected.
The aggressive policy move doubled down on an ongoing crackdown by the Commerce Commission, which is investigating how the duopoly uses complex supplier rebates and payments to manipulate shelf prices—a breach that carries potential fines of up to $10 million.
Labour MP Arena Williams took direct aim at Foodstuffs, accusing the corporate giant of using wholesale rules to keep prices high at roughly 300 regional Four Square stores.
“They’re the ones who can’t lower their prices; that’s what we are going to fix,” Williams said.
She detailed how Four Square operators are contractually bound to buy from Foodstuffs’ wholesale arm, while being barred from undercutting sister chains New World and Pak’nSave.
By targeting wholesale rules, Labour aims to unchain independent retailers and smaller chains like Night ‘n Day, allowing local grocers to access fair wholesale prices and pass savings directly to consumers.
The move follows damning Commerce Commission findings from July, which revealed suppliers are also penalised by the big two’s wholesale operations, which extract around $6 billion annually from them through over 50 different payment types—ranging from shelf restocking to aisle-cleaning fees.
Labour’s move yesterday looks suspiciously like the endgame of a political trap which saw National lured by early media advice from Labour of a move to deal to price gouging.
Labour made the announcement at a Wellington Night n Day store, one of the independents that would later become the focus of its wholesale separation policy.
National appeared to panic and hurriedly held a press conference before Labour made its announcement, announcing its own policy to forcibly separate the two big Foodstuffs chains, New World and Pak’nSave, into separate companies.
“We gazumped them,” Finance Minister Nicola Willis told Parliament during Question Time on Wednesday.
But she spoke too soon.
It would seem that yesterday’s announcement was the core Labour policy and that may have trumped National.
It has certainly left Willis under fire looking like she may have scored an own goal.
National is facing a Caucus revolt, according to ACT leader David Seymour, who says he is being approached by National MPs asking him to stop Willis’s policy going ahead.
Centre-right lobby groups like the EMA and Business New Zealand have attacked Willis, while at the grassroots the independent owners of the supermarkets in the Foodstuffs co-operative have been busy lobbying their own National MPs.
Furthermore, National’s policy will require a Commerce Commission investigation, while there are already powers in the Groceries Industry Competition Act which would allow Labour’s separation of the wholesale companies from the retail to go ahead.
“This legislation is already in place,” said Williams.
“National have spent three years trying to come up with any solution, which wasn’t a wholesale-retail split to let the small grocers have a go, but they could have got this legislation working because it’s already the law in New Zealand to require this kind of formulation.
“We’ll make sure that we’ve done that in the first hundred days and that the law is in place.”
Williams said the Labour proposal would deal with the anti-competitive provisions in place that force small food stores to pay the full price when they procure their stock from Foodstuffs-owned wholesaler Gilmours.
“Small grocers, like Four Squares, could not only not choose to buy from the co-op that they’re a part of, but they also can’t lower their prices,” she said.
“They are prohibited from allowing their business to sell products to New Zealand consumers who need them cheaper, at a cheaper rate than the grocery store down the road.
“That’s not fair to the business owner, and we’re going to end that practice.
“We’re also going to allow them to do what any other business owner can do and set up another shop.
“Great grocery owners who have been in the business for 30 years should be incentivised to set one up down the road, to build a bigger format store, and to offer more range and more innovation.
“These anti-competitive practices that stop them from doing that have got to stop because they’re hurting consumers.”
Willis said Labour’s proposal was concerningly light on detail and the idea had already been examined and rejected as complex, costly and high-risk.
“A separation of supermarkets’ wholesale and retail operations, as Labour is now proposing, was given the lowest score of every option considered by independent experts commissioned by the previous Labour Government.
“It was not taken forward for detailed analysis, meaning Labour cannot say what it would cost, whether it would work, or whether shoppers would pay less as a result. That is a fundamental problem.
The Ministry of Business, Innovation and Employment did evaluate the options for increasing wholesale competition in the grocery industry in its Regulatory Impact Statement for the 2023 Grocery Industry Competition Bill.
They were sceptical of the ability of anything other than a “toolkit of possible regulatory responses” hovering in the background as a threat to persuade Woolworths and Foodstuffs to open up their wholesale operations.
In September 2024, the Commerce Commission launched an inquiry into wholesale competition in the grocery industry to see how the 2023 solution was working.
It was not impressed.
“Overall, the information we have received led us to conclude that competition remains weak on wholesale pricing, range and access across wholesale supply channels,” it said.
“Wholesale pricing is the primary barrier, with limited access to rebates, discounts and payments constraining wholesale customers’ ability to obtain competitive prices.”
So, in July this year it shut the inquiry down and began a focus on ensuring compliance with the existing law and Grocery Supply Code.
This could see the big two grocery companies face fines of up to $10 million.
Williams was critical of National’s separation of the two big supermarket groups.
“Nicola Willis’s policy will make food prices rise in the short term,” she said.
“She’s picked the wrong model here because she’s been looking around for anything that was not the model that made the most sense because Labor started it and she could have done it.’
So, what Labour will do is require the existing two grocery wholesalers to operate as independent businesses.
They will retain their existing ownership.
Hipkins likened it to the separation of Telecom’s retail and wholesale arms into Spark and Chorus.
And he saw politics as the driving force behind the National proposal.
“Nicola Willis’ rushed announcement last week was all about politics and not about substance,” he said.
“She clearly hasn’t done the detailed work.
“If she’d done that, she would have found that what we were working on when we left government, which was the wholesale separation, is the thing that’s most likely to drive down prices for consumers and that’s more likely to open up the market to more competition.
“She didn’t want to do that because Nicola Willis doesn’t like to do anything that has any other political party associated with it, hence the inter-island ferries debacle,
“She’s trying to do the same in supermarkets; she’s not making a decision based on sound evidence of what’s going to work; she is just interested in the cheap headline.”
