Could a third player be about to enter? Willis sets scene for supermarket announcement

27th March 2025 By Bridget O'Connell | bridget@propertyticker.co.nz | @propertyticker

The government is preparing to make changes in order to encourage more competition in New Zealand’s $26bn supermarket sector, according to Finance Minister Nicola Willis.

Willis, who is also economic growth minister, has been setting the scene for an announcement from the government over the coming days – with any changes expected to be focused on changes that would encourage a third entrant into the market currently dominated by Foodstuffs and Woolworths. 

“The simple fact is, right now, despite efforts by the previous government, we do not have a competitive grocery sector in New Zealand. We have essentially a duopoly in some areas, a regionalised monopoly, which means there’s not enough competition,” she told RNZ’s First Up.

“And what I said at the beginning of the year is I’m interested in what it would take to get a third entrant offering more competition in the grocery sector. I will have further announcements to make about next steps on that later in the week.”

Under the previous Labour government a raft of reforms were introduced following a Commerce Commission grocery retail market study which concluded there was a lack competition in the sector where the duopoly ruled.

Reforms included the introduction of the Grocery Industry Competition Act, which took effect in July 2023, bringing with it a new Grocery Code of Conduct regulating grocery retailer activity and relations with suppliers. Changes have also bee introduced to wholesale supply, with access to wholesale supply identified as a barrier to entry for new players and the expansion of existing smaller rivals. 

Willis added that in particular, the government’s interest was in identifying the barriers to a large scale third entrant.

“What we saw in Australia was they did have Aldi into the market, but it’s taken many years to only get to 9% of the market,” she said, referring to the German-owned cut-price retailer’s current position in Australia following its entry in 2001. 

Long-established domestic players Woolworths Group and Coles still dominate with 37.1% and 27.9% in 2023, while the Metcash-supplied IGA chain held a 6.9% market share. The remaining 18.6% came from other, smaller grocery retailers.

“And just this week you’ve had the Australian competition watchdog saying, hey, there’s still competition issues here. So I think that shows that you really do need someone to get up to scale if you’re going to get lower prices for consumers, and that’s what we want to see.”

In an interview with Newstalk ZB, Willis added that like Australia, it had been identified in New Zealand that there are real barriers to a large-scale new entrant.

“The point is it is good having a niche grocery provider opening, but unless someone is opening multiple stores, it is hard to get competition impact,” she said.

“Cabinet has made some decisions here and will be making announcement in the next week about our next steps to encourage competition in the supermarket sector.”

She added that she wanted to understand the structural market barriers that meant “even a cash-upped investor looking to make profit says ‘oh, if you go and invest in that sector in NZ, you’re on a hiding to nothing’,”.

“What the Australian report shows, and what reports in NZ have shown, is that there is such significant market power in the existing duopoly that anyone wanting to enter our grocery sector goes ‘that’s going to be hard road’.

“And we need to address that, because if they are going to face predatory pricing, and if they are going to face problems that make them think you just can’t do it, I think we have an obligation to NZ shoppers to do something about it.”