The Government has unveiled plans to speed up the regulatory process companies need to go through to get supermarkets built in New Zealand.
Economic Growth Minister Nicola Willis says the Government’s proposed changes will reduce the time it takes to get consent to build a supermarket from about 18 months to less than a year.
She is still exploring whether to require the country’s two grocery giants, Woolworths and Foodstuffs, to sell off their assets. These companies exercise a lot of power in both the wholesale and retail spaces.
“A decision to restructure the supermarkets is not a decision that would be taken lightly. It would be a significant intervention that would carry costs and risks that would need to be rigorously weighted against the potential benefits to shoppers,” Willis said.
“A cost-benefit analysis is under way on specific options for restructuring the duopoly and will inform future advice I intend to take to Cabinet on whether further legislative changes are required to improve competition.”
Willis didn’t indicate when she would have more to say on this.
The consenting changes the Government has decided to make include:
“With these changes, well-planned and investment-ready new supermarkets have a streamlined pathway to attaining approvals for development,” Willis said.
The Government will also amend the Commerce Act to better combat “predatory pricing” and tweak the way the Overseas Investment Act is operationalised to support new entrants to the grocery sector.
Finally, it will explore ways for potential food importers to bring new product lines into the country.
Willis said the Government decided to make the consenting changes in response to feedback it received from the sector after issuing it with a voluntary “Request for Information”.
The request revealed five domestic companies were mulling entering the market. Meanwhile, several existing grocery retailers had growth aspirations.
“Ultimately, those businesses will make their own investment decisions about whether and when to launch new supermarkets – the Government’s policy changes are intended to give them more confidence to do so,” Willis said.
She noted Costco’s store in West Auckland had markedly changed competitive dynamics in that area and had provided an export pathway for New Zealand food producers.
“Costco has confirmed the Government’s express-lane consenting approach will assist with their future expansion plans,” Willis said.
“They have also confirmed they can see opportunities for new stores to be built in New Zealand in the next few years.”
Willis said it was disappointing that other major international retailers such as Aldi and Lidl didn’t respond to her Request for Information.
Labour’s finance spokeswoman, Barbara Edmonds, accused Willis of “dithering” over how to improve competition in the grocery sector.
“A fast-track regime for supermarkets makes sense, but it won’t make any immediate difference for New Zealanders who will keep paying high prices at the checkout today,” Edmonds said.
“Nicola Willis still doesn’t have a timeline for when a new player could come into the market …
“National talked a big game on cost of living and haven’t delivered.”
When in Government, Labour explored requiring supermarkets to sell off their assets, but decided against moving ahead with this.
Willis, in March, commissioned the same consultancy, Coriolis, that advised the Ministry of Business, Innovation and Employment on the matter in 2022.
Coriolis, Sense Partners and Cognitus Economic Insight concluded: “Supermarket divestment could be net-beneficial, but only if several key factors aligned well and several key risks could be adequately mitigated. And even then, any net benefits are not enjoyed equally by all households.
“Divestment of the nature being considered here is unprecedented in New Zealand. The risks of unintended consequences are not trivial.”
The consultants concluded it was best for Foodstuffs (which has the retailers New World, Pak’nSave and Four Square) and Woolworths (which also operates under the Fresh Choice and Super Value brands) to sell some of their stores to reduce their market shares to a level specified by the Government.
They said the approach should be industry-led, rather than Government-led.
The consultants said the aim could be to ensure there were either three different supermarket retailers in every pocket of the country, or four different retailers nationwide.
They couldn’t guarantee that the benefits of divestment, in terms of spurring more competition and lowering prices, would outweigh the costs.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.