The first salvo has come in the form of a review by economic consultancy HoustonKemp, commissioned by Foodstuffs North Island and Foodstuffs South Island. The report challenged the modelling behind a projected $2.9 billion in net economic benefits from separating PAK’nSAVE from the New World/Four Square banners.
The Sense Partners analysis, commissioned by the Ministry of Business, Innovation and Employment, was examined in HoustonKemp’s report dated 30 September 2026. HoustonKemp described its review as preliminary and confined to the reported numbers, saying the information released was insufficient to replicate the modelling or explore its sensitivity to key assumptions.
Working backwards from Sense Partners’ reported results, HoustonKemp calculated an implied retail price reduction of 4.9 percent and a sector-wide profit reduction equivalent to 3.5 percent of sales including GST. These calculations used discounted supermarket sector revenue over the 20-year modelling period. Sense Partners also assumed the cost of goods sold, including payments to suppliers, would increase by one percent.
HoustonKemp compared the implied profit reduction with a revenue-weighted net profit after tax margin of 2.3 percent of sales including GST. It calculated this margin using Commerce Commission data for Foodstuffs North Island, Foodstuffs South Island, and Woolworths New Zealand over the financial years 2022 to 2025.
The consultancy argued that the modelled outcomes implied industry-wide losses over the next 20 years and that no sector could sustain ongoing negative profits. Its profit reduction calculation excluded the effect of increased costs of doing business, which it said might be offset by higher sales volumes reducing unit costs.
HoustonKemp said Sense Partners’ cost increase assumptions had not been tested with industry participants, including whether they properly reflected the costs of duplicating supply chains. It also questioned the use of a merger simulation model in reverse to estimate the effects of separation.
The review said these models were designed to predict price increases when competitors merged, but did not account for the diseconomies of scale that would increase the total costs of separated businesses. HoustonKemp said Sense Partners appeared to account for separation-related cost increases separately from modelled price reductions, without a feedback mechanism to assess whether those reductions were consistent with ongoing commercial viability.
The consultancy said Sense Partners assessed supermarkets’ willingness to cut prices to attract more sales using gross margins of approximately 23 percent, while treating net profits as an unimportant residual. It criticised the explicit assumption that restructured businesses and new entrants would remain commercially viable and sufficiently profitable to continue operating.
HoustonKemp said the modelling assumed no individual Foodstuffs store or brand currently competed with another. It disputed that assumption, arguing that individually owned stores had strong incentives to compete and that PAK’nSAVE stores already won business from New World and Woolworths stores, and vice versa.
The review argued that the assumption restructuring would significantly intensify competition between supermarket brands and stores underpinned the entirety of Sense Partners’ modelled grocery price reductions. HoustonKemp concluded that the findings risked drawing policymakers towards “an economic mirage”.
Source: Review of Sense Partners’ NZ grocery restructuring CBA_30 September 2026
