‘Too good to be true’: Analysis questions Foodstuffs breakup benefit

Foodstuffs’ North and South Island co-operatives operate independently. (Source: Foodstuffs North Island)

By Uyen Duong Oct 1, 2026

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An independent analysis by HoustonKemp for Foodstuffs has questioned the $2.9 billion in net economic benefits over 20 years forecast by Sense Partners from separating Pak’nSave from New World/Four Square.

The analysis followed the Government’s release of Sense Partners’ cost-benefit analysis of options to increase competition in the grocery sector. The Government said it would not proceed with the options.

The Sense Partners model forecasts retail prices to fall 4.9 per cent over the long term, while the cost of goods sold rises 1 per cent and profits fall by 3.5 per cent of sales. With the sector’s net profit margin at about 2.3 per cent, HoustonKemp said the assumptions would result in industry-wide losses over the next 20 years.

The consultancy described the results as “too good to be true” and said they risk drawing policymakers towards an ‘economic mirage’.

Sense Partners estimated that the consumer benefit would come mainly from lower grocery prices. It forecasts average retail prices to fall 3.5 per cent in the first year. By 2035, the annual benefit per household is estimated at $200 to $1320, depending on household income and size.

In its base case, Sense Partners assumed supply chain costs would rise 1 per cent after the restructure. A 2 per cent increase would reduce the consumer benefit to about $920 million. Further increases could result in a negative net benefit.

HoustonKemp said the model did not fully account for costs from duplicating supply chains, distribution, technology and support functions. It also questioned the assumption that Foodstuffs brands do not compete directly.

The review noted that the North and South Island co-operatives operate independently. Individual stores also compete with each other and Woolworths. HoustonKemp said this assumption underpins the modelled price reductions.

Sense Partners noted that the results depend on restructuring and supply chain cost assumptions and are indicative and exploratory.

HoustonKemp said its review was preliminary because MBIE did not release all data needed to replicate the model. MBIE said the study assessed the costs, benefits and risks of the restructuring options.