Grocery Regulation Gets the Lewis Carrol Treatment

The Saturday Satire

When did supermarkets become the official villains of economic policy? Prices go up, and it’s market failure. A supplier complains, and it’s proof of abuse. No need to look too closely—we already know who’s to blame.

The Commerce Commission has spent two years assembling its case. Supermarkets, we’re told, hold all the power. The evidence? Mostly grievances. The method? Identify the culprit, then look for supporting facts.

So, when Foodstuffs released a price comparison of 20 everyday grocery items, suggesting Pak’nSave prices were cheaper than Australia’s (and the UK’s)—after removing GST—Grocery Commissioner Pierre van Heerden had a problem.

It turns out Australia’s apparently cheaper prices are not so cheap when GST is accounted for. That’s because Australia doesn’t tax grocery food. New Zealand does. Removing GST to compare like with like should be uncontroversial. It’s what every duty-free shopper on earth does.

But not the Grocery Commissioner. His verdict? The whole price comparison was “a bit sort of sneaky.”

Sneaky.

The Grocery Commissioner of New Zealand—the man charged with understanding retail markets—thinks adjusting for tax differences is sneaky. Not “methodologically sound.” Not “standard practice.” Not even “reasonable, though I disagree with the conclusions.”

Like the Queen of Hearts declaring “sentence first, verdict afterwards,” the Commissioner’s response to inconvenient evidence was to attack the witness. No shame required when the target is Big Grocery.

This is the intellect safeguarding our $22 billion grocery sector.

Having established that arithmetic is questionable, the Commissioner has identified another rabbit hole: supermarkets play it tough when they negotiate with suppliers. These procurement practices extract big discounts. And promotional payments. The total adds up to about $5 billion annually. The Commissioner finds this “troubling.” Other people might call it competition.

Especially when they understand the numbers. According to figures published by Foodstuffs, suppliers keep 68 cents of every “grocery dollar.” Some stays local, much flows to multinationals like Nestlé. Supermarkets are responsible for just 19 cents: four cents profit, fifteen for costs like wages, rent, and refrigeration. GST takes the remaining thirteen.

Wellington’s response? Shield the 68 cents from further pressure. Clamp down on the supermarkets and their 19 cents for negotiating too hard.

To do this, the Commission wants to limit how aggressively supermarkets can bargain with suppliers. Then it proposes to ban them from charging suppliers who won’t stock their own shelves. In supermarket language, these are merchandising fees. In Wellington, they’re an abuse of power. Because clearly, what’s stopping Aldi from entering New Zealand is anxiety about shelf logistics.

Unfortunately for the Commissioner, there’s another arithmetic problem. The costs currently covered by the $5 billion in rebates and merchandising fees won’t vanish. They’ll just need to be recovered some other way. Supermarkets will try to negotiate lower wholesale prices to make up the difference. If that doesn’t work, the cost will land on consumers. Yesterday’s discounts become tomorrow’s everyday pricing. Van Heerden’s protection racket doesn’t squeeze profit from Big Grocery—it shifts cost to ordinary shoppers.

You couldn’t make this stuff up.

Meanwhile, the real barriers to any international supermarket chain wishing to enter the New Zealand market go untouched. Woolworths spent four years getting planning consent for a single store in Halswell.

A new entrant must persuade dozens of councils—each with their views on whether new stores might threaten urban “vibrancy”—to grant them planning permission. Just recall the problems McDonald’s has faced trying to open a fast food restaurant in Wanaka.

The Overseas Investment Office, in turn, treats foreigners wanting to buy land as if they are acquiring military facilities.

The New Zealand Initiative proposed a real solution to these problems: treat supermarket entry like infrastructure. Fast-track consents. Let new competitors build ten stores without begging permission from every district planner who thinks competition means “oversupply.”

But that would mean confronting causes, not characters.

Instead, we’re policing arithmetic while Aldi executives Google “North Korea investment opportunities” and wonder if it might be simpler.

Mission accomplished, Wellington. You’re solving the wrong problem with the wrong solution at the wrong time.

Yet, in all this, the Grocery Commissioner isn’t the underlying problem. He’s a symptom. A regulatory avatar for intellectual unseriousness—perfectly suited to an age that prefers villains to explanations, and storylines to evidence.

Meanwhile, Kiwi shoppers have just voted Pak’nSave and New World into the top 10 in the 2025 Kantar NZ Corporate Reputation Index. Perhaps we all missed the memo.

Disclaimer: I chair a think tank which has both major supermarket chains as members. Representatives of both sit on its governance board. I also shop from time to time at stores from each chain. Neither have been consulted in relation to this Substack post.