Labour will force Woolworths and Foodstuffs to split their businesses if elected, separating their supermarket chains from the wholesale arms that supply shops — in a bid to give smaller grocers a better shot at competing.
The two big operators would have to run their wholesale arms independently under the plan, creating what Labour calls "Foodstuffs Wholesale" and "Woolworths Wholesale".
Independent grocers would get a guaranteed right to buy stock from any wholesaler on "fair terms"; small grocers such as Four Square operators would be freed from restraints of trade the party says keep prices high, and stricter rules on supplier fees.
The announcement comes days after National said it would "pursue" breaking up Foodstuffs so New World and Four Square became one chain and Pak'nSave another. But it would only do so if the policy passed a Commerce Commission review and approval.
Labour leader Chris Hipkins said that was a key distinction with the party's policies, and that his party wanted to "back the small grocers".
At the launch, held at an independent grocer in Wellington, he said the two big chains dominate not just retail but the supply that smaller rivals depend on.
"I was visiting a small independent greengrocer earlier in the week. They were telling me that they can buy goods from Pak'nSave cheaper than they can buy it from the wholesalers. That suggests that the market is not delivering real competition."
He said Labour would move "very quickly" on the issue if elected, "aiming to get the legislative framework in place within the first 100 days".
If returned to govern, the party says it will divvy up grocery giant Foodstuffs – with Pak'nSave a separate entity. (Source: 1News)
The party's commerce spokesperson Arena Williams added: "Only Labour will act decisively. We will open the market so more supermarkets can offer lower prices, giving shoppers more choice and a better deal at the checkout.
"These changes will put money back in people’s pockets. Our grocery plan will deliver lasting change by giving shoppers more choice and ensure fairer prices that last."
She continued: "Despite talking big, National has had three years and done nothing. Now, with the election only weeks away, they say what we need is another review.
"New Zealanders can't eat a review. It's time for real action."
The rival announcements from Labour and National mean the grocery duopoly now likely faces some form of government intervention no matter which party wins the election.
Grocery action group chairperson Sue Chetwin told Breakfast National’s supermarket separation proposal was largely good news. (Source: Breakfast)
National finance spokesperson Nicola Willis said Labour's plan was the "wrong answer", but "welcomes the growing political consensus that structural change may be needed".
"There is now broad political consensus that structural separation in the grocery market may be required, but it is a significant intervention and needs to be based on evidence and considered carefully," she said.
"New Zealand needs stronger supermarket competition, but families cannot afford another Labour experiment where the intervention is announced first, and the consequences are worked out later."
Hipkins compares proposal to Telecom split
In a two-page factsheet, Labour sets out several points for how it would deliver the plan, starting with what it calls freeing small grocers from "anti-competitive restraints".
Night 'n Day operator wants separation forced on major brands owned by Foodstuffs and Woolworths. (Source: 1News)
Williams said Four Square operators were the most tightly bound.
"Four Squares will be free to leave the anti-competitive restraints that stop them from lowering their prices and competing hard for your shop," she said.
She said the change would not require the big companies to sell off their wholesale arms, but to wall off their pricing and to run the two arms separately.
"We're going to firewall the pricing around the decisions that get made for their pricing, so that they cannot do that between the wholesale and retail arms," Williams said.
"It will effectively be a different team operating under a different business model, where they are incentivised to behave like any other business."
The Grocery Industry Competition Act is giving smaller players the chance to offer cheaper goods. (Source: 1News)
Hipkins drew a line back to Labour's telecommunications reforms under Helen Clark as a precedent when Telecom was split into both a retail arm – now referred to as Spark – and a wholesaler, now known as Chorus.
"When Telecom needed to be broken up because of its monopolistic behaviour that was blocking out competitors, it was Labour that separated retail from wholesale in telecommunications. Every day now, New Zealanders get a better deal because it was a Labour government that was bold enough to do that," he said.
"The Labour Party has a proven track record here, unlike the National Party, who seem to be having a panicked identity crisis at the moment."
Last week, Labour also announced its plan to make it illegal for big companies to "charge excessive prices for essential goods and services".
TVNZ has extensive coverage of the election campaign. (Source: TVNZ)
ACT attacks 'cynical race to bottom'
Willis said the wholesale-retail separation Labour was now proposing had already been examined and rejected under the previous government.
"Labour’s proposal … is concerningly light on detail and the idea has already been examined and rejected as complex, costly and high-risk," she said.
"Families deserve grocery reform that is properly tested before it is announced, not policy made in reverse.
"National’s proposal has been developed from extensive evidence and a cost-benefit analysis that has been rigorously peer-reviewed by independent experts.
"All that work showing this option is likely to deliver the greatest net benefits to Kiwi shoppers is what has led to our proposal."
ACT leader David Seymour attacked all of his rivals over their policies, adding Labour's plan was the latest in a pattern of parties threatening intervention in private business.
"Business is difficult enough without worrying if your own Government will attack you any time politicians get a bad focus group," he said in a media release.
Seymour argued that weakening the buying power of New Zealand's supermarkets against large multinational suppliers would leave shoppers worse off.
"The most likely outcome is simply costly restructures, more hesitancy to invest, and less chance of a third competitor entering New Zealand from overseas," he said.
"Why would you take the risk when the political environment is so volatile. Why would anyone else think this behaviour will be confined to the grocery sector?"
ACT, which sits in government with National, has said it would not support the break-up of supermarkets. Seymour has previously indicated he would veto National's proposals.
Meanwhile the Greens have proposed setting up a state-backed competitor, KiwiMart.
Whereas NZ First had also announced a policy to structurally separate Foodstuffs, including forcing the break-up of Pak'nSave, New World and Four Square.
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