Woolworths' Resistance to New Zealand's Grocery Code Reforms and Implications for Shareholder Value

The Regulatory Crossroads: Woolworths' Strategic Gambit

New Zealand's grocery sector is at a pivotal juncture. The Commerce Commission's proposed amendments to the Grocery Supply Code—aimed at curbing exploitative supplier practices and addressing the duopoly of Foodstuffs and Woolworths—have sparked fierce debate. Woolworths, while supporting some measures like a ban on investment buying, has resisted others, including prohibitions on contractual flexibility for wastage and merchandisingGrocery code crackdown is 'globally unprecedented ...'^[3]. The company argues these changes could inflate retail prices, stifle innovation, and ultimately harm consumersGrocery code crackdown is 'globally unprecedented ...'^[3]. However, this resistance risks alienating regulators and investors amid growing public and political pressure for structural reform.

Regulatory Pushback and Market Dynamics

The Commerce Commission's 2023 Grocery Code of Conduct sought to level the playing field by restricting fees for shelf placement and enforcing fair supplier contractsSupermarkets, Grocery Stores and Convenience Stores in New Zealand^[1]. Despite these efforts, the sector remains dominated by Foodstuffs and Woolworths, which control 80.2% of industry revenueSupermarkets, Grocery Stores and Convenience Stores in New Zealand^[1]. Woolworths' opposition to stricter rules—such as banning merchandising fees—reflects its reliance on supplier relationships to maintain margins. Yet, as the Commerce Commission's 2024 report noted, supermarket margins have not only persisted but increased, raising questions about the effectiveness of current regulationsSupermarkets' super profits - where's the fair pricing for Kiwis^[2].

The proposed amendments, including bans on charging suppliers for shelf stocking and mandating unit pricing, aim to reduce the power imbalance between retailers and suppliersGrocery code crackdown is 'globally unprecedented ...'^[3]. Woolworths' stance—rooted in claims of operational constraints—contrasts with the Commerce Commission's goal of fostering competition. This tension mirrors broader global trends, such as the U.S. Department of Justice's focus on trade compliance and the EU's regulatory simplification effortsThe Biggest Ethics and Compliance Issues of 2025 So Far^[4], where companies face heightened scrutiny over market dominance.

Financial Risks and Investor Sentiment

Woolworths' resistance to regulatory changes could exacerbate existing financial risks. The New Zealand grocery sector's revenue is projected to decline at an annualized rate of 0.2% through 2025–26, reaching $27.3 billionSupermarkets, Grocery Stores and Convenience Stores in New Zealand^[1]. While Woolworths reported a drop in pre-tax earnings in 2024, critics argue that reported figures may not reflect true profitability due to opaque accounting practicesSupermarkets' super profits - where's the fair pricing for Kiwis^[2]. Meanwhile, PAK'nSAVE's fluctuating credit risk profile underscores investor sensitivity to regulatory uncertaintySupermarkets, Grocery Stores and Convenience Stores in New Zealand^[1].

Investor confidence is further strained by public discontent. A 2025 Consumer NZ survey revealed low trust in both supermarkets and government efforts to address food affordabilityGrocery code crackdown is 'globally unprecedented ...'^[3]. This sentiment aligns with global trends, such as Target's $12 billion market value loss due to DEI-related pushbackThe Biggest Ethics and Compliance Issues of 2025 So Far^[4], illustrating how regulatory and reputational risks can erode shareholder value.

The Path Forward: Structural Change or Stagnation?

The Commerce Commission's review of the Grocery Supply Code, set to conclude by 28 September 2025, could reshape the sector. Calls for introducing a third supermarket to break the duopoly highlight the government's willingness to pursue structural reformsSupermarkets' super profits - where's the fair pricing for Kiwis^[2]. For Woolworths, this scenario poses a dual threat: tighter regulations could compress margins, while new entrants could erode market share.

Comparative examples, such as Australia's ACCC supermarket inquiry, offer insights. While the ACCC found no evidence of price gouging, it proposed 20 recommendations to prevent oligopolistic practicesSupermarkets and Grocery Stores in Australia - Market ...^[5]. New Zealand's regulatory approach, however, appears more aggressive, with the Grocery Commissioner advocating for utility-like oversight of supermarketsSupermarkets' super profits - where's the fair pricing for Kiwis^[2].

Conclusion: Balancing Profit and Public Interest

Woolworths' resistance to the Commerce Commission's reforms reflects a strategic bet on maintaining the status quo. Yet, in a sector increasingly scrutinized for anti-competitive practices and high margins, this stance risks long-term profitability. As regulatory frameworks evolve and public expectations shift, Woolworths must weigh the costs of compliance against the benefits of preserving market dominance. For investors, the key question remains: Can Woolworths adapt to a more regulated, competitive landscape without sacrificing shareholder value? The answer may hinge on the Commerce Commission's final decision—and the company's ability to innovate in a sector poised for transformation.