The Government has made another attempt to shake up New Zealand’s grocery market, releasing new guidance it says will make it easier for overseas investors to open or expand supermarkets here and, over time, bring down prices at the checkout.
Associate Finance Minister David Seymour announced on 13 July that Land Information New Zealand had published fresh guidelines setting out how the Overseas Investment Act applies to anyone wanting to build a grocery business in New Zealand. The document tells prospective investors which parts of the Act apply to them, what tests their investment must meet and how officials will weigh up an application.
“New investment means more choices and lower prices at the checkout,” Seymour said. He said the aim was to “make it as easy as possible for credible investors to establish or expand grocery retail operations in New Zealand”, and argued that overseas capital was “critical to ensuring economic growth” because it brought money and technology that local firms could not always supply on their own.
The pitch is that a foreign chain looking at New Zealand should not have to guess how a consent application will be handled. Under changes made to the investment rules over the past year, most decisions now have a target turnaround of five working days, and the law requires a call within 15 working days on everything except residential land, farmland and fishing quota. The Government says the average processing time has fallen from 71 working days to about 23, with some business and forestry consents cleared in as little as four working days.
Officials point to strong overall investor interest as proof the settings are working. Land Information New Zealand granted consent to 230 transactions worth roughly $23.8 billion in gross investment value in the past financial year, the highest number on record. The question the guidance is meant to answer is whether any of that appetite can be pointed at the one part of the economy where shoppers feel prices most keenly.
That is where the story gets harder for the Government. New Zealand’s grocery trade is split between Woolworths and the two Foodstuffs co-operatives, which between them control roughly 82 percent of sales. For years, ministers of both stripes have said they want a third national chain to force real competition, and for years nothing has arrived.
The scale of the effort has been striking. The New Zealand Herald reported that officials drew up a shopping list of 21 global supermarket and e-commerce giants across 10 countries and courted them to take on the incumbents. None has committed to entering the market. Analysts who have looked at the numbers keep landing on the same barriers, that the best retail sites are already taken, and that the two big players own the distribution centres and wholesale supply that any newcomer would need to get products onto shelves.
The competition watchdog has not seen much movement either. The Commerce Commission, which monitors the sector under a special regime, found little change in supermarket competition over the past year, with margins and pricing looking much as they did before the current round of reforms began. Grocery prices have kept rising through the same period, a point the Opposition has hammered as households juggle rent, power bills and the weekly shop.
The new guidance also throws the spotlight back on a choice the Government made earlier. Cabinet stepped away from the toughest option on the table, forced structural separation, which would have required the big chains to sell off stores or split their retail and wholesale arms. Ministers judged that route too risky and too slow, and chose instead to smooth the path for a new entrant. Critics argue that leaves the underlying market power of the duopoly untouched, and that no amount of paperwork reform will tempt a rival in while the incumbents hold the sites, the supply chains and the customer base.
Supporters of the approach counter that the alternative has never been tested, and that lowering the friction for a serious investor is a sensible first move rather than a substitute for stronger action later. The Government has left the door open to further steps if competition does not improve, while making clear it would rather attract a challenger than break up the businesses that already employ tens of thousands of New Zealanders.
For shoppers, the practical test is simple. Groceries are one of the largest and least avoidable costs a household faces, and after several years of steep increases, voters will judge the policy on whether a third chain actually opens its doors and whether prices move when it does. With the general election due in November, the cost of the weekly shop is shaping up as one of the defining issues of the campaign. You can see where the parties stand and compare your own views with our voting tool.
Since this guidance was issued, National has proposed splitting Foodstuffs in two, and Newswire has argued for going a different way by taking supermarket distribution into public ownership and opening it to every grocer at cost.
Do you think inviting an overseas chain will finally crack the supermarket duopoly, or should the Government have gone further and broken the big players up? Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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