Foodstuffs challenges the maths behind National's supermarket split

Foodstuffs has released a peer review by HoustonKemp that calls the modelling behind National's proposal to split the co-operative "economically implausible".

The review was commissioned by Foodstuffs as an early check of modelling by Sense Partners on grocery restructuring, according to RNZ. Sense Partners wrote the economic case for National's policy. HoustonKemp sets out the counter-argument.

Sense Partners estimated prices would be about 3.5 percent lower on average in the first year after separation. It put the overall net gain to the economy, benefits minus costs, at $2.9 billion over 20 years. It estimated households would be better off by between $200 and $1320 a year by 2035, depending on income and family type.

Earlier reporting put the same trade-off in narrower terms. Sense Partners' modelling suggested the benefits of a Foodstuffs demerger, a formal split of the group, would outweigh the costs by about 26 percent over 20 years, according to the New Zealand Herald.

HoustonKemp founding partner Greg Houston said the modelled net benefits looked "too good to be true" and would leave the industry making losses over 20 years. His main objection is simple margin arithmetic.

The review said supermarket net profits, what is left after all costs, are now 2.3 percent of sales. Sense Partners modelled a fall in profit equal to 3.5 percent of sales. The review argues the modelling therefore asks the industry to give up more profit than it now earns. That gap stays in place for 20 years in the model.

The review also questioned two inputs, the starting assumptions fed into the model. HoustonKemp said Sense Partners had not tested its assumptions about higher running costs with industry operators. It said Sense Partners assumed no Foodstuffs store or brand competed with another Foodstuffs store or brand, an assumption HoustonKemp said had no basis.

Sense Partners' work also had a peer review. Former UK Competition Commission chief economist John Davies reviewed the analysis and called it an "impressive" piece of work.

Contingent legislation and rival policies

National proposes directing the Commerce Commission, the competition regulator, to assess whether separating Pak'nSave from New World and Four Square would leave shoppers better off, and then passing a law to require separation if it finds it would. The law would depend on the outcome of a six-month Commission review.

Foodstuffs did not respond in detail at first. On 17 September 2026, Foodstuffs said it wanted more time to examine National's supermarket-split policy before commenting in detail, according to Inside FMCG. On 18 September 2026, Foodstuffs challenged the National Party to show its workings on the costs, risks and savings behind its proposal to split Pak'nSave from New World and Four Square, according to 1News. The HoustonKemp release is the detailed follow-up to that challenge.

The other parliamentary parties are not waiting on the Commission model. New Zealand First is campaigning to separate Pak'nSave from New World and Four Square without waiting for a Commerce Commission review. Labour proposes forcing Foodstuffs and Woolworths to run their wholesale arms, the part of the business that supplies groceries to retailers, separately from their retail stores. The Green Party proposes forcing Foodstuffs and Woolworths to sell stores to create a state-owned KiwiMart.

Foodstuffs North Island has previously said its range reviews, decisions on what products to stock, are not driven solely by profit or margin but are guided by supply chain advantage, according to Foodstuffs. That statement is from 2022 and sits apart from the current demerger debate, but it shows how the co-operative describes store-level decisions.

The broader context here is a campaign argued through competing consultancies as much as through party positions. National has left the credibility test to the Commission and to Sense Partners. Foodstuffs has answered with HoustonKemp. For officials and advisers, the question is less which headline saving to quote than which assumptions the Commission would accept in a formal market study or divestment inquiry.

Looking at what this means for the law-making path, the six-month contingency matters. A direction to the Commission, followed by a new Act that applies only if its findings support separation, would still need drafting that defines separation, divides up warehouses, trucks and supply contracts, and can survive a court challenge. NZ First would skip the first step. Labour and the Greens would use commerce law powers in a different way, for wholesale separation and forced sales to a new competitor. Each path sets a different test for proving benefit to shoppers.

In my view, the HoustonKemp intervention narrows the next argument rather than settling it. The dispute is now specific: the 2.3 percent profit base against the 3.5 percent modelled fall, how competition between Foodstuffs stores is treated, and whether higher costs were checked with operators. Those are points a group of MPs examining a bill, and the Commission if asked, can test. The election debate is likely to shift from the $2.9 billion total to whether those inputs hold.