Govt Fast-Tracks Supermarket Reforms to Break Duopoly and Lower Grocery Costs

Minister Willis said the changes would create an “express lane” for new supermarket developments, accelerating consenting and regulatory processes that currently stifle competition.

The Government has announced a sweeping package of legislative and policy reforms aimed at breaking down barriers that have long prevented new supermarket chains from entering and expanding in New Zealand. The move, unveiled by Economic Growth Minister Nicola Willis, is designed to boost competition in the grocery sector, challenge the dominance of the existing duopoly, and deliver better prices for Kiwi consumers.

Express Lane for New Entrants

Minister Willis said the changes would create an “express lane” for new supermarket developments, accelerating consenting and regulatory processes that currently stifle competition. “We’re creating an express lane for new supermarkets to boost competition and deliver better deals for Kiwi shoppers,” she said.

Earlier this year, the Government ran a Request for Information (RFI) process, inviting feedback from businesses and investors. Responses highlighted widespread frustration with restrictive zoning laws, slow consenting processes, and cumbersome regulations that make it nearly impossible for competitors to challenge the dominance of Foodstuffs and Woolworths, which control the vast majority of New Zealand’s grocery market.

Key Policy Changes

In response, the Government will implement several reforms:

• Fast-track consenting: New supermarkets that would improve regional or national competition will qualify as fast-track projects under the Fast-Track Approvals Act. Legislation is expected to be introduced in November and passed by year’s end.

• Streamlined building consents: A single building consent authority will be designated to standardise and accelerate approvals for grocery developments.

• Pre-approved building plans: Amendments to the Building Act will allow “MultiProof” pre-approved designs for multiple supermarket builds.

• Overseas investment facilitation: Grocery-specific clarifications will be made to the Ministerial Directive Letter under the Overseas Investment Act, giving investors clearer pathways.

• Stronger competition law: The Commerce Act will be amended to introduce an objective economic test to prosecute firms engaged in predatory pricing designed to eliminate competition.

• Support for imports: The Government will actively explore ways to help new food importers bring product lines into the country, increasing consumer choice.

Industry Interest and Market Impact

The RFI process revealed five prospective domestic competitors exploring entry into the market, as well as expansion ambitions from existing grocery players. International retailers, including Costco, expressed interest in growing their New Zealand footprint.

Costco, whose single West Auckland store has already altered competitive dynamics, confirmed that the Government’s express lane approach would support its expansion. The company has signaled interest in building additional stores in the coming years, providing not only lower-cost groceries but also new export pathways for New Zealand food producers.

However, other major international retailers, such as Aldi and Lidl, did not participate in the RFI. Willis noted that the reforms announced today could encourage them to reconsider New Zealand as a viable market.

Strengthening Consumer Protections

Alongside new entry pathways, the Government is focusing on robust enforcement of existing fair trading and grocery sector legislation. The Commerce Commission is pursuing several enforcement actions under the Grocery Industry Competition Act and is reviewing protections for suppliers under the Grocery Supply Code.

The Government has also completed consultation on proposals to strengthen penalties under the Fair Trading Act, with Cabinet expected to consider changes shortly.

Considering Structural Reform

Some RFI respondents argued that only by forcibly breaking up Foodstuffs and Woolworths could meaningful competition be achieved. While acknowledging these concerns, Willis stressed that such a move would be a major intervention.

“A decision to restructure the supermarkets is not a decision that would be taken lightly,” she said. “It would carry significant costs and risks that must be rigorously weighed against the potential benefits.”

A cost-benefit analysis is currently underway on potential restructuring options. The results will inform future advice to Cabinet on whether more radical reforms are needed.

Towards a More Competitive Market

The Government’s goal remains clear: a more competitive grocery market that delivers lower prices, better value, and greater choice for Kiwi shoppers.

“Our objective is a more competitive grocery market that delivers better prices and more choice for Kiwi shoppers,” Willis said. “These reforms will give new entrants the confidence to invest, expand, and challenge the duopoly, while ensuring the incumbents are held accountable to consumers.”