Wellington (Monday, 2 October 2023) - The New Zealand Initiative welcomed today’s announcement that a re-elected Labour government would ease the path for new grocers to enter the New Zealand market.

But it also warned against subsidising entry.

The Labour Party announced today that it would “back credible companies wanting to get into or expand into the New Zealand grocery business. This could include finance, making sure land is available, regulatory changes, incubating innovation and accelerating competition.”

The New Zealand Initiative’s Chief Economist Dr Eric Crampton said, “It has been effectively illegal for any new large-footprint supermarket to enter the New Zealand market at scale.

“If an entrant like Aldi or Lidl were somehow able to find sites with the right zoning, they would also need Overseas Investment Office approval on their sites. Then, they’d have to wait years for permission to build. All of it makes New Zealand simply not worth the effort.”

“Any incoming government should make it simple for new players to secure necessary zoning changes and consent to build. It should direct the Overseas Investment Office to consider new grocery retail as being in the national interest. And it could even consider mixed-use zoning liberalisation to allow apartment towers above new supermarkets. Competition and potential competition do more to protect consumers than any grocery regulator.”

The Initiative’s submissions during the Commerce Commission’s market study into grocery retail highlighted regulatory barriers to entry, which were then emphasised in the Commission’s final report. The Initiative also warned that the new regulatory code, which could require an entrant like Aldi to supply existing supermarkets with Aldi’s products at government-regulated prices, could discourage entry.

Dr Crampton continued, “If regulatory entry barriers are eased, grocers like Aldi or Lidl will come here if they find it profitable to do so. But dangling a promise of government-subsidised financing or other sweeteners would have perverse consequences. Retailers who would come here anyway may hold out in hope of subsidy. And others who enter only because of a subsidy are likely to demand ongoing subsidies.”

Submission: The Grocery Industry Competition Bill 
Submission: Issues raised at the consultation conference on the Commission’s market study into the retail grocery sector draft report.
 

© Scoop Media