Competition Scenarios for Supermarkets

Calculating the geographic market under possible regulatory outcomes

Finance and Economic Growth Minister Nicola Willis recently launched a request for information from potential grocery market participants to “help the Government identify the next regulatory and legislative steps needed to support a significant national-scale competitive challenge to the New Zealand supermarket duopoly”.

We have analysed populations catchments for each store network under multiple possible scenarios: compulsory demerger of PAK’nSAVE from Foodstuffs, full entry of The Warehouse into the grocery market, and the current status quo. This is visualised in an interactive map here.

Screenshot, interactive 10-minute driving catchments of stores in Masterton

We use data about store locations as of 5 May 2025 and compare this with 2023 Census data and address data published by Land Information New Zealand.

A small market served by a duopoly

The current government’s interest in grocery competition comes as part of a sustained period of regulatory attention, including a Commerce Commission market study completed in 2022, and the appointment a new grocery commissioner in 2023 to monitor and analyse competition in the grocery market.

New Zealand’s 5.3 million people are served predominantly by Foodstuffs, which is a cooperative with North and South Island branches running PAK’nSAVE, New World and Four Square supermarkets¹, and Australian-owned Woolworths, which runs Woolworths supermarkets and franchisee-operated FreshChoice and SuperValue supermarkets. The Grocery Commissioner found that these two groupings had 82% market share by revenue in 2023.

Analysis of 797 retail locations

We analysed 188 Woolworths locations and 84 FreshChoice / SuperValue locations for Woolworths group, 221 Four Square locations, 147 New World locations and 58 PAK’nSAVE locations for Foodstuffs², 85 The Warehouse locations, 13 independent locations³, and the single Costco.

We used store addresses listed on the corporate websites of Woolworths, Foodstuffs, The Warehouse and others, geolocated those addresses, and then ran those locations through catchment analysis tools to calculate the 10- and 30-minute driving distances from each location. We calculated these catchments under low traffic conditions.⁴

New Zealand has a highly urbanised population, with Commerce Commission research indicating that on average consumers travel less than 10 minutes to their main grocery store. Using this assumption, 10-minute driving catchments are the baseline for our analysis.⁵

Using Statistical Area 1 census usual resident population, we calculated the populations served by each supermarket brand. Overall, 89% of the population are within 10 minutes’ drive of at least one of these stores. To understand the sparseness of New Zealand’s population, those 89% of the population live in just 7% of the country’s land area.

Multiple brands create the illusion of competition

The Grocery Commissioner annual report and Commerce Commission market study have pointed out that supermarket ownership aggregation is essentially a duopoly.

This means that while there are multiple store brands, operational management of pricing, product portfolio, supplier relationships, store locations and marketing are significantly coordinated across the group. The Commerce Commission has also found that complex group financial relationships and/or property ownership exert significant control over owner-operators and franchisees.

Taking this “ownership” view, 87% of the population are within 10 minutes of a PAK’nSAVE, New World or Four Square. The New World and Four Square stores alone serve 86%, and the PAK’nSAVE store network serves 60% of the New Zealand population within 10 minutes, meaning that forced demerger of PAK’nSAVE would meaningfully increase competition for at least 59% of the population.⁶ By the same “ownership” view, 81% are within 10 minutes of Woolworths, FreshChoice or SuperValue, compared to Woolworths’ 77% and FreshChoice / SuperValue’s 45%.

Loosening the grip of the duopoly

The PAK’nSAVE large format is attractive to a wider catchment of shoppers and is likely to provide a feasible option for a national independent network, with 86% of New Zealand’s population living within a 30-minute drive of a store.

FreshChoice / SuperValue stores are smaller on average and are less likely to attract shoppers from a wider 30-minute catchment if other closer options are available. Well-designed regulatory attention to franchising arrangements could improve competition for the 41% of the population that overlap with Woolworths corporate stores’ 10-minute catchments.

Since 2022, The Warehouse have significantly expanded their range of basic grocery items stocked in store.⁷ Their 85 current locations serve 67% of the New Zealand population within 10 minutes’ drive. The Warehouse’s large format department store has significant cross appeal for shoppers, meaning it can feasibly appeal to its 30-minute store catchment covering 91% of the New Zealand population.

Serving older people and Māori

We analysed the served population using census demographics, looking at people 65+ and Māori served by the existing store networks. Overall, 89% of people 65+ and 87% of Māori are within 10 minutes’ drive of at least one of these stores, compared to 89% of the general population.

Independent and single stores

Farro Fresh, Moore Wilsons and McKibbon’s are three independent grocers in Auckland, Wellington and Queenstown, and 17% of the country’s population lives within 10 minutes’ drive. These focus on a combination of specialty and gourmet foods, so essentially compete on quality and assortment rather that price.

Costco’s bulk and value-for-money driven offering has 1% of the national population within 10 minutes of its single West Auckland store, however 21% are within 30 minutes’ drive. There are a number of additional independent stores which we have not covered in this analysis, including Japan Mart, Bin Inn, Yogijis, and Tai Ping.

Access by locality

To bring it all together, we look at the average number of options per locality under various scenarios. To do this, we use unique addresses rather than census populations. These addresses are maintained by Land Information New Zealand. The served percentages differ for important reasons including that an address can be non-residential or vacant, that it measures addresses rather than individuals, and that it is not a statistical data source, however at a high level these are similar.

The combined Woolworths group serves 79% of addresses within 10 minutes’ drive (compared with 81% census population), New World and Four Square serve 84% of addresses (87% census), PAK’nSAVE serves 55% of addresses (60% census), The Warehouse serves 63% of address (67% census), Farro Fresh, Moore Wilsons and McKibbon’s serve 17% (17% census), and Costco serves 1% (1% census).

In the current competitive scenario, the average address in New Zealand has 2.05 options within 10 minutes’ drive. Full entrance of The Warehouse into groceries at all current locations would increase this to 2.77. Demerger of PAK’nSAVE from New World and Four Square, without The Warehouse, would increase the average options per address to 2.66, while both options simultaneously would give the average address 3.37 grocery options within 10 minutes’ drive.⁸

Assuming the higher future competition scenario, the local board or local authority with the highest average number of options per address is Auckland’s Upper Harbour Local Board Area with 3.14 options currently and 4.96 in the future scenario, while the lowest average number of options is in Ōtorohanga at 0.47 in both scenarios. This is summarised for each area in the map above.

The Government’s request for information closed overnight and it will be interesting to see what potential market participants submit. Keen to hear feedback from others who have been working in this area.

1. Foodstuffs has a complicated structure. As noted by the commerce commission, Market Study, p28: “Retail stores are owner-operated franchises which are supplied by Foodstuffs co-operatives. Owner-operators own shares in, and provide funding to, their co-operative. Models for this funding differ across the two Foodstuffs co-operatives…The Foodstuffs co-operatives own the land and buildings on which many stores are located, as well as supply chain infrastructure and IT assets. They also provide other services to their owner-operator members, including wholesale purchasing, warehousing and distribution of groceries, and they undertake marketing, IT, and a range of other support functions.”

2. We also analysed Foodstuffs brands Raeward Fresh and On The Spot, however Raeward Fresh now has only one full grocery location which completely overlaps with the 10-minute catchments of Christchurch New World locations, and On The Spot was also excluded as its stores are described both by market observers and Foodstuffs as convenience stores.

3. These comprise the 8 Farro Fresh locations in Auckland, 4 Moore Wilsons locations in Wellington Region, and McKibbon’s of Royalburn in Queenstown.

4. The analysis assumes equal population density throughout the Statistical Area 1 in order to apportion SA1s that are only partly covered by a catchment.

5. Commerce Commission, Grocery Market Study 2022, p. 129. There is also significant minority living in sparsely populated rural areas with relatively poor transport infrastructure and few options for locally purchasing groceries, with the Commerce Commission highlighting infrequent shops at long distance by rural Māori.

6. While the second order commercial and economic consequences of regulatory-driven changes, including forced demergers or incentives for new market entrants are difficult to predict, using geographic analysis we can get a better understanding of the status quo and how this could change the competitive landscape holding other factors equal.

7. The Warehouse also made an unsuccessful attempt to launch Warehouse Extra stores with full supermarket offerings from 2006-2008, which was considered unsuccessful due to lack of scale.

8. This analysis assumes that access to more than one store with the same owner/group does not provide the customer with an effective additional option from a competition perspective.