Break the duopoly. There are various ways to do it. The recent report from Westpac has some decent ideas:

“Our view is that the reforms do not go far enough to effectively stimulate competition,” writes Paul Clarke, an industry economist with the bank.

"We acknowledge that breaking up the existing retail hegemony is complex, fraught with unintended consequences and may impose short term costs on customers. The industry, sanctioned by regulators, has actively pursued economies of scale through mergers and acquisitions (and hence horizontal and vertical integration) since the early 1980s.

"The impact has been to give the duopoly the kind of control that makes it much easier to set prices at the checkout till.

“This consolidation process needs to be reversed if Government is looking to improve the lot of the average Kiwi over the longer term.”

The report recommends the Government set out a strategy road map that identifies the key milestones that need to be achieved to level the competitive playing field. That would need to be backed up by appropriate legislation: “The sector will not unbundle voluntarily.”

Westpac’s report argued that the first step is the vertical separation of the supply chain – creating a clean break between manufacturers and wholesalers, and then between wholesalers and retailers.

“That means that the duopoly will have to choose where it wants to operate and sell off those parts that it doesn’t,” it says.

The second step is horizontal separation at the retail level. Both Foodstuffs and Woolworths NZ would be forced to sell off some of their individual retail brands to independent retailers, possibly extending as far as the selling off specific outlets.

“Again, that assumes the existence of buyers, who may be put off by the big structural changes occurring within the sector. While that is a big assumption, new entrants may be enticed by attractive returns that are on offer.”

Finally, the Government must create the conditions to encourage online grocery shopping. “Digitalisation is fundamentally changing how goods destined for retail are supplied and how retailers and consumers interact with each other,” the report says. "The idea of supplier ecosystems that dropship directly to customers on behalf of online retail is already here, and there is no reason why, with some modifications, that cannot be extended to grocery shopping.

It cites the exampled of online supermarket Supie, which it says is clearly making waves. “Other new entrants are needed.”