Store owners alarmed by plans to break up NZ supermarkets, 1News reports

Proposals to break up New Zealand’s dominant supermarket sector carry a populist streak that risks driving food prices higher rather than lower, according to Foodstuffs NZ managing director Chris Quin. Most political parties are heading into the October 2023 general election with policies designed to split apart a grocery market dominated by Foodstuffs and Woolworths, with 1News reporting that the plans have alarmed store owners across the country.

Scale and Supply Operations Under Election Scrutiny

Political parties have declared war on the supermarket duopoly ahead of next month’s general election. Most political groups, with the exception of ACT, are campaigning on policies that could split up the grocery giants. If elected, one major party would force Foodstuffs and Woolworths to separate their retail and wholesale supply operations, and divvy up Foodstuffs so that Pak’nSave becomes an entirely distinct entity.

Speaking to Q+A, Quin said he could not comment directly on the politics involved in the campaign. “Although, clearly, you know, there is a populist nature to a lot of this,” he told the program. Quin argued that proposals to dismantle the industry’s scale would fail to lower food prices. “In fact, they run a real risk of the opposite,” he said.

The uncertainty generated by the election proposals has already begun affecting capital expenditure and operational planning. Quin pointed to a recent $340 million warehouse expansion in Palmerston North announced two weeks prior to the interview. “With all of these policies floating around now, you could forgive our board for going ‘Should we be concerned about this?'” Quin said, adding that individual store owners were losing sleep over whether to invest in new refrigerators or store upgrades.

Quin Rejects Duopoly Label Citing Alternative Competitors

Defending the current market structure, Quin rejected the duopoly label entirely. He argued that the label overlooks a growing range of alternative competitors, asserting that about 80 percent of households shop outside of Foodstuffs and Woolworths every week. “When you walk out the door today and watch where people go shopping, and I drive around my suburb, you see dozens of options about where people can buy groceries,” Quin stated, pointing to Chemist Warehouse, Kai Co, Tai Ping, Pino Foods, and other retailers.

Host Simon Mercep questioned whether Quin’s opposition to market intervention was hypocritical given Foodstuffs’ historical use of restrictive land covenants. In 2024, the High Court in Wellington fined Foodstuffs North Island $3.25 million for lodging land covenants intended to block rival supermarkets. Quin noted that those agreements predated his 11 years in the industry.

“They were things that we stopped doing and then recognised we needed to remove from market. It was right to not have those. We accepted that they were against the spirit of competition from a different business time,” Quin said. The Commerce Commission previously noted that Foodstuffs North Island committed in 2021 to stop using restrictive covenants and admitted the conduct at the earliest opportunity. Justice Radich noted in his judgment that the company had not intended to breach the law and had never enforced the covenants.