National’s plan to split the Foodstuffs-owned grocery networks into separate ownership has been widely panned. But Foodstuffs itself wants more time to examine the surprise policy before commenting in detail.
On Wednesday, the leading party in the ruling coalition government said it would force Foodstuffs to split the New World and Pakn’Save businesses into two separate competing companies, a move it said would create three rival supermarket operators, with Australian-owned Woolworths the third player. Four Square would be rolled into the New World business.
Currently, the combined Foodstuffs South Island and North Island businesses – currently working to satisfy the Commerce Commission that they should be allowed to merge into a single entity – hold around 50 per cent of the supermarket trade, with Woolworths holding most of the rest in an effective duopoly. Their combined share of the total grocery market is around 83 per cent, with convenience stores and independent operators like Night & Day holding the balance.
Foodstuffs said in a statement on Wednesday that the National Party policy would have “significant implications” for the 500 locally-owned and operated businesses under the co-operative structure it runs.
“Our immediate focus is supporting our owner-operators, our 3000 supply chain and support centre team members, and the many New Zealand businesses that work with us, all of whom are hearing proposals that could fundamentally change the co-operatives they own, work for and support, and the businesses they have spent years building in communities throughout New Zealand,” Foodstuffs said.
“Any proposal of this scale raises important questions about how long a major restructure would take to implement, the level of disruption involved, the costs of making those changes, and whether those costs and disruptions would ultimately deliver meaningful savings at the checkout.
“These are significant issues that deserve careful consideration. We will take the time to thoroughly review the proposal and its implications before providing further comment.”
BusinessNZ had already described the plan as sending a “chilling signal” to the business sector that the Government could break up companies. The EMA echoed those concerns in a statement on Thursday.
“It’s not quite nationalising a private business, but it’s too close for comfort,” said EMA head of advocacy Alan McDonald. “That’s a terrible signal to send when we’re currently trying to attract much-needed international investment through the government’s open-for-business mantra.”
He said seeing a centre-right party advocating forcefully breaking up a private business would sit uneasily with New Zealand businesses.
“It might be a populist policy for a grumpy electorate, but that doesn’t make it a good policy.”
Successive governments had tried to encourage a scaled-up, third-party chain into the market and failed because the scale needed simply wasn’t there, McDonald said.
The Green Party has gone as far as promising to force Foodstuffs to sell about 500 of its stores to a state-owned business, but that policy has drawn little reaction given the Greens would be unlikely to win government or have enough power in a centre-left coalition to force such a Soviet-era initiative.
