The government has set its sights on luring a duopoly disruptor, explains Stewart Sowman-Lund for The Bulletin.

Welcome to my final edition of The Bulletin! Don’t worry, this newsletter will still arrive in your inbox as usual next week (maybe even earlier than I send it out, though I can’t speak for the new editor). More self-reflection below, but for now, let’s start with supermarkets.

As reported by The Post’s Luke Malpass, the government has once again put the supermarket duopoly “on notice”. Finance minister Nicola Willis, delivering a speech at the New Zealand Economics Forum yesterday, signalled the government wanted to help see a third major supermarket chain open stores in New Zealand in an effort to bring prices for consumers down. “We owe it to Kiwi shoppers to help remove the barriers that could get in the way of a new entrant,” she said.

What’s new?

If you’re getting a sense of déjà vu here, you’re not wrong. As Jenna Lynch reported for ThreeNews last night, there’s little new in what the finance minister talked about yesterday. There’s a flashy new website – Going for Growth – but it basically just lays out action already taken and cheekily asks the public for suggestions on how to bolster the economy at the bottom.

The supermarket duopoly has been on notice for quite some time, with the former Labour government appointing a grocery commissioner, Pierre van Heerden, tasked with overseeing the industry. Little meaningful action was actually taken by Labour before it left office, though it did clamp down on land covenants. The coalition has previously been at loggerheads on how best to address supermarket competition – Act calling for “less regulation”, while National minister Andrew Bayly endorsing the grocery commissioner’s argument for more. Willis told those gathered yesterday she’s interested in cutting red tape to make it easier for a new operator to open up. Some of this has been flagged before, such as the long-planned revamp of the Resource Management Act. BusinessDesk’s Pattrick Smellie also reported (paywalled) that a “long tussle” between the coalition over how to liberalise the Overseas Investment Act has been resolved – we’re likely to hear more on this in the lead-up to the government’s foreign investors summit.

It might not be so easy

There are likely to be some difficulties that legislation itself can’t fix. As Newsroom’s Andrew Bevin reported in 2023, the existing supermarket duopoly holds vast amounts of land for its hundreds of stores. Any new entrant would need to open more than just a handful of stores to be a real competitor. Costco, for example, has proved hugely successful as a business from its sole base in West Auckland, but outside that very specific location, there has been little flow on effect. And, as noted in this article from the Herald, Costco is not often used by consumers as a replacement for a weekly shop anyway.

Tex Edwards, the man responsible for disrupting the telecommunications sector through the establishment of 2Degrees, told The Post that about 140 existing supermarkets would need to be relinquished to a rival in order to make a real dent in the duopoly. Quite simply, he explained, New Zealand is over-supplied with supermarkets already. “We have more per capita than other OECD nations. You can’t mount a business case to build a new chain.”

It will take time

The grocery sector is one of a handful the government (and its predecessor) has routinely gone after – along with banks, energy companies and fuel providers. As Jenna Lynch argued last night, that’s because they all have a real impact on consumers and if prices go up, the polls will trend down. Action is going to have to happen quicker if the government wants to claim victory here. As Tex Edwards said, while the finance minister’s comments are promising, “these things aren’t done overnight”. Writing for The Spinoff in 2022, Bernard Hickey noted the various difficulties at play in tackling pain at the supermarket checkout as opposed to breaking up the telecom monopoly. Among them, a “multiplicity of product lines, ownership types, physical supply chains, retail outlets and brands”.

Even if a third entrant entered the market, the impact wouldn’t be felt immediately. Any new supermarket would have to scale up dramatically. In Australia, explained Lincoln University’s Alan Renwick in an interview with Newsable last year, it took around a decade for Aldi to disrupt a similar duopoly system. “They have grown steadily, [but] it’s only now that they’re beginning to challenge [the other supermarkets].” The right noises are being made by the government, but it’s going to take more than words.

‘An economic own-goal’ or a triumph of democracy? Stewart Sowman-Lund explains in today’s edition of The Bulletin.

No McDonald’s for Wānaka

Wānaka will not be getting a planned McDonald’s after a long-brewing stoush ended in the local council declining a resource application for the new restaurant, which would have been just outside the town centre and therefore in an area covered by rural consenting processes. RNZ’s Delphine Herbert has the details, reporting that the majority of the 367 public submissions made were against the new 455-square metre restaurant, with concerns it could impact the visual aesthetic of the lakeside town and impact the environment. “We acknowledge if constructed the consented development will further alter the character of the site,” noted the commissioners in their final decision. “However, we do not consider that the consented development, or even the service station, creates a commercial node. Further we find the proposed development at odds with the character typically associated with rural living.”

However, as we’ll dig into a little below, the controversy over the McDonald’s came to represent – for some at least – burdensome regulation getting in the way of more jobs and economic growth.

The backstory

This issue has been bubbling away for some time. As Stuff’s Debbie Jamieson reported in February last year, plans for the restaurant were “revived” after first being put forward the previous November. By this point, there was already a 5,000-plus strong petition against the store, with organiser Sarah Morrison arguing the fast food giant was “responsible for extensive food waste and pollution” and would impact patronage of smaller, local businesses. At this stage in the process, the proposed store was to operate 24/7, but by the end of last year it had put forward shorter opening hours and offered to reduce its signage to assuage concerns about the impact on the town’s image. A three-day public hearing in November saw arguments for and against the restaurant made. Debbie Jamieson covered this extensively for The Press, noting that health experts largely opposed the plans (with some caveats). The restaurant had argued that moral and health-related objections to fast food should not be allowed in the hearing.

Speaking to Newstalk ZB’s Andrew Dickens last night, Queenstown Lakes District deputy mayor Quentin Smith explained that from the council’s perspective, this came down to the restaurant’s location rather than concerns over fast food. “There are maybe parts of town that might be appropriate, and if this had been within the town centre or a commercial zone I dare say there’s very little that anybody could do to stop that.” Following yesterday’s decision, reported the Otago Daily Times, McDonald’s said it remained committed to opening a restaurant in Wānaka and would “[navigate] some of the local commercial interests at play”.

Did bureaucracy get in the way?

It’s entirely acceptable to dislike having a new McDonald’s open on your doorstep, just as it’s entirely valid to argue in favour of one. However, this particularly development arguably garnered more attention than you might expect given there are already over 170 McDonald’s restaurants up and down the country.

The development has been pulled into the national consciousness for a few reasons. Last year, then-health minister Shane Reti criticised health officials after it emerged the National Public Health Service had submitted a broad proposal against the McDonald’s. “Content within the submission, including observations about planetary health, landscape values, traffic and Te Tiriti do not match my over-arching view of what the NPHS should be spending its time on,” said Reti at the time. “Whooping cough, measles and raising immunisation rates are among the most pressing issues facing health today.”

The Act Party has been consistently critical of how this process has been handled. The party’s health spokesperson Todd Stephenson called the health service “taxpayer-funded busybodies”, while, after yesterday’s decision, environment spokesperson Cameron Luxton suggested bureaucracy had simply got in the way. “A legitimate business has been blocked from investing, hiring locals, and selling products to willing buyers. This is an economic own-goal for Wānaka, and it shows how our planning regime stifles development,” the MP said.

Culture of no

This is just one isolated example involving a large multinational company, but it’s hard not to see how it ties into the prime minister’s crusade against “no” culture. The Spinoff’s Duncan Greive made a similar link when looking at the decision to bar under 18s from Laneway Festival. While that was about alcohol licensing rules, Greive said it illustrated “both the complex set of factors which go into making such a decision, but also… how difficult it can be to make something original and fun happen in New Zealand”.

Just a couple of days ago, prime minister Christopher Luxon proudly wrote on Twitter that New Zealand was “open for business”. It’s all part of his pro-growth campaign that he’s been waging since the start of the year (though some, such as The Spinoff’s Hayden Donnell, have wryly pointed out that there are plenty of examples of when the PM himself has said “no” to things). Part of that includes a long-overdue overhaul of the Resource Management Act. As RNZ’s Adam Burns reported, RMA reform minister Chris Bishop recently said that the Wānaka McDonald’s case was a “perfect example of everything wrong with the” the existing act. Opponents to the restaurant, however, have urged the government to ensure that community voices will still be heard after any legislative update.