Shoppers need evidence-based grocery reform

National welcomes the growing political consensus that structural change may be needed to improve supermarket competition so Kiwi shoppers get a better deal, but Labour’s proposal is the wrong answer and lacks detail, National’s Finance and Economic Growth spokesperson Nicola Willis says.

“Kiwi shoppers are paying more than they should for groceries because of weak supermarket competition in New Zealand. They deserve more choice, better prices and supermarkets that have to compete harder for their dollars.

“There is now broad political consensus that structural separation in the grocery market may be required, but it is a significant intervention and needs to be based on evidence and considered carefully.

“National has put forward an evidence-based proposal to separate Foodstuffs, with PAK’nSAVE as one retailer and New World and Four Square as another, subject to a Commerce Commission assessment that it will deliver a net benefit for shoppers.

“Labour’s proposal, however, is concerningly light on detail and the idea has 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. Families deserve grocery reform that is properly tested before it is announced, not policy made in reverse.

“National’s proposal has been developed from extensive evidence and a cost-benefit analysis that has been rigorously peer reviewed by independent experts. All that work showing this option is likely to deliver the greatest net benefits to Kiwi shoppers is what has led to our proposal.

“The Commerce Commission’s 2022 market study found that separation of wholesale and retail operations was not ‘necessary or desirable’ and would create ‘practical challenges and transaction costs’.

“The Commission warned that government facilitation of a new independent wholesaler would be ‘complex, potentially expensive’ and carry a ‘high risk of failure’.

“The subsequent independent assessment commissioned under the previous Labour government went further, finding wholesale ownership separation was ‘fundamentally flawed’ and warning that forced divestment could cause significant disruption and impose costs that could ultimately be borne by consumers.

“Forcing supermarkets to use the separated wholesaler could also draw the Government into regulating the procurement, pricing and distribution of tens of thousands of products, creating what the report called an ‘unusual and unstable market structure’.

“The report found the independent wholesale model had ‘basically failed across the developed world’ and that there was no independently evaluated evidence of significant demand for it.

“New Zealand needs stronger supermarket competition, but families cannot afford another Labour experiment where the intervention is announced first, and the consequences are worked out later.”