Would splitting Foodstuffs lower grocery prices?
National wants PAK'nSAVE and New World to become competing nationwide groups. The proposal has a testable promise — but no prices have changed yet.
National has put a new option into the supermarket competition debate: separate PAK'nSAVE from New World and Four Square, creating two competing nationwide groups from brands that now share Foodstuffs co-operative structures.
The proposal is significant, but it is not a break-up decision. RNZ reports that a re-elected National government would first give the Commerce Commission six months to assess whether separation would leave shoppers better off. National says it would legislate only if the Commission recommended proceeding.
What National is proposing
Foodstuffs currently consists of North Island and South Island co-operatives covering PAK'nSAVE, New World and Four Square. National's proposed structure would instead put PAK'nSAVE in one nationwide group and New World and Four Square in another. Woolworths would remain separate, leaving three major nationwide supermarket groups.
Individual store owners would not be required to sell or change brands. The structural change would be above the store level, where buying, distribution, technology and other shared operations sit.
National cites independent modelling that projects grocery prices around 3.5% lower than they otherwise would be one year after separation and around 5% lower after six years. "Lower than they otherwise would be" matters: it is a comparison with a modelled future without separation, not a promise that every shelf price would fall by 5% from today's price.
Why the outcome is disputed
The argument for separation is straightforward. PAK'nSAVE and New World would have separate incentives to compete for shoppers, suppliers and sites rather than operating within the same co-operative structures.
The argument against it is also concrete. Foodstuffs says shared buying power and infrastructure keep costs down. Business groups told RNZ that duplicating those systems or reducing scale could raise costs, while also warning about the precedent of a government forcing a private business to separate.
Those claims point in opposite directions, but both turn on evidence: whether stronger rivalry saves shoppers more than lost scale and duplicated operations cost them. That is the question the proposed Commerce Commission process would have to answer before any split.
Local pricing already complicates the picture
Foodstuffs stores are owner-operated, and prices are not perfectly uniform today. In Kete's recent full-store price collection, about 21% of New World products and 23% of PAK'nSAVE products had at least one store priced differently from that island's most common price. Most individual product-and-store rows still matched the island norm; roughly 1% were deviations.
That existing variation does not prove the two banners compete as fully independent chains. It does show why a national average alone would be a weak way to judge any reform. Effects could differ by banner, island, city and store.
What shoppers should watch
If separation eventually happened, useful measures would include:
- The price gap for the same product at nearby PAK'nSAVE and New World stores.
- Whether regular prices fall, rather than savings appearing only through short promotions.
- Whether specials become deeper or more frequent.
- Whether price differences between places with strong local competition and places with little choice narrow.
- Whether any gains persist after the new groups absorb the cost of separation.
The baseline needs to be recorded before the structure changes. Otherwise, a lower price could be credited to reform when it came from seasonality, supplier costs or an ordinary promotion — or a genuine competitive effect could be missed inside a national average.
A proposal, not a checkout change
For now, shoppers will not see a new competitor or a structural saving at the till. The policy depends on the election, a Commerce Commission assessment, a workable implementation plan and further legislation.
The debate has nevertheless moved. Structural separation is now an explicit proposal from a major party, with quantified claims that can eventually be checked. Kete's role is not to decide whether the policy should proceed. It is to preserve the store-level price record needed to see whether more competition, if it arrives, actually reaches the checkout.