The food chain’s margins went up. Wattie’s is closing four plants. And shoppers paid for all of it.
Heinz Wattie’s will close four manufacturing facilities this year, costing between 300 and 350 jobs. The company’s managing director Andrew Donegan told media that revenue had been “flat for nearly a decade while costs rose steadily.” The union called it multinationals “making a choice to walk away.” The Green Party has asked for a parliamentary inquiry.
Much of the public reaction has landed on supermarkets — specifically Foodstuffs’ 2021 decision to replace Wattie’s frozen range on the shelves of New World, Pak’nSave and Four Square with its Pams and Value house brands. It’s a tidy narrative: multinationals squeezing Kiwi workers, supermarkets squeezing Kiwi suppliers, costs rising faster than revenue.
But when you follow the money through Stats NZ’s Producers Price Index, which tracks what each link in the supply chain pays for its inputs and charges for its outputs, the narrative stops fitting the numbers.
Food manufacturers are not being squeezed on margin
The PPI measures the prices NZ industries receive for what they sell (output prices) and the prices they pay for the materials, energy, labour and services they consume (input prices). The ratio of the two is a reasonable proxy for gross margin at the industry level.
Over the eight quarters from December 2023 to December 2025 — the most recent period the PPI covers — here is what happened to margin in the key links of New Zealand’s food chain.
| Link in the food chain | Output prices | Input prices | Margin change |
|---|---|---|---|
| Dairy farmers | +16.8% | +8.0% | +8.2 pp |
| Dairy product manufacturing (Fonterra et al.) | +19.4% | +14.0% | +4.7 pp |
| Fruit, oil, cereal and other food manufacturing (Wattie’s, McCain) | +12.1% | +5.3% | +6.4 pp |
| Beverage & tobacco manufacturing | +6.1% | +4.3% | +1.7 pp |
| Horticulture and fruit growing | +5.9% | +6.2% | −0.3 pp |
| Supermarket, grocery and specialised food retailing | +6.5% | +5.1% | +1.3 pp |
| Meat and meat product manufacturing | +9.6% | +35.9% | −19.3 pp |
Every link in the food chain except meat processors has gained margin over the past two years. The industry category that contains Wattie’s and McCain has gained 6.4 percentage points of margin. Their output prices — what they sell to retailers and wholesalers — rose more than twice as fast as the prices they paid for raw materials, packaging, energy and labour.
This is not the profile of an industry in a margin crisis.
Wattie’s has a volume problem, not a margin problem
Donegan’s own language in the closure announcement said it plainly — “revenue had been flat for nearly a decade while costs rose steadily.” In a high-inflation environment, flat revenue means one of two things. Either prices are falling (they are not; output prices are up 12% in two years) or volumes are falling. Wattie’s is selling less product.
That fits the pattern of the 2021 Foodstuffs de-listing, where the Pams and Value house brands moved into the freezer space Wattie’s used to occupy across more than 200 North Island supermarkets. A food manufacturer’s fixed costs — plant depreciation, maintenance, minimum staffing — are substantial. Once volumes drop below a threshold, those fixed costs spread over fewer units can make individual factories uneconomic even while the industry aggregate keeps earning margin. That is exactly the pattern the closures show — four plants with low throughput, not a company-wide shutdown.
So what Donegan is really saying, once the accountancy is translated, is this. We can still sell what we make at a profitable price per unit; we just can’t sell enough of it because the shelf space has gone to the retailer’s own brands.
The real margin squeeze is on meat processors
AFFCO, Silver Fern Farms and their peers — the industry Stats NZ classifies as “meat and meat product manufacturing” — saw their input costs (largely the price they pay farmers for livestock) rise 35.9% over two years. They were only able to pass on 9.6% to their own customers. That is a 26-percentage-point gap, and the PPI margin ratio for meat processors has collapsed by roughly 19%.
Matching that — sheep, beef and grain farmers’ output prices rose 46% over the same two years. Farmers cashed in on the global protein rally; meat processors absorbed the cost. If there is a factory-closures story with real margin compression behind it, it is in meat, not in Wattie’s-style prepared foods.
Supermarkets did not take the margin
One reading of the Wattie’s closures is that supermarkets are extracting ever more of the total food-chain margin through house brands and pricing power. The PPI data does not support a dramatic version of that story. Supermarket retail margins rose 1.3 percentage points over the two-year window — the smallest gain of any profitable link in the chain. What supermarkets pay wholesalers moved in near-lockstep with what they charge consumers.
What supermarkets are doing is different. They choose which products occupy shelf space. That is not captured in margin indexes, because a house-brand sale at the same margin as a branded sale looks identical in the output-price data. The retailer captures the entire chain’s margin rather than sharing some of it with a Kraft Heinz or a McCain. The squeeze on Wattie’s comes from that displacement, not from retail pricing games.
Where did the money go? To the till.
Here is the question the Wattie’s coverage has almost entirely avoided. If producers kept their margin, processors kept or expanded theirs, and retailers kept a stable margin, and prices at the consumer end still went up sharply — somebody paid for the aggregate margin expansion. The consumer did.
Over the past 20 years, New Zealand’s Consumer Price Index sub-groups have moved like this.
| CPI group | Index 2005 | Index 2025 | 20-year change |
|---|---|---|---|
| All groups (headline CPI) | 100 | 166 | +66% |
| Food | 100 | 180 | +80% |
| Housing and household utilities | 100 | 215 | +115% |
| Transport | 100 | 148 | +48% |
| Within food: Fruit and vegetables | 100 | 195 | +95% |
| Within food: Meat, poultry, fish | 100 | 174 | +74% |
| Within food: Restaurant meals, ready-to-eat | 100 | 195 | +95% |
| Within food: Grocery food | 100 | 171 | +71% |
Food has outpaced general inflation by roughly 14 percentage points. Housing has outpaced it by 49. Fruit and vegetables alone have nearly doubled. These are not shocks — they are two-decade trends.
In the narrower window where the PPI data lets us trace the chain end-to-end — Dec 2020 to Dec 2025 — retail grocery food prices rose 30% while global dairy export prices rose 22% and meat export prices rose just 2%. The gap is real and accumulates. It has to land somewhere. In a free market, it lands on whoever has the weakest position in the price negotiation. That is not the farmer, the processor, or the retailer. It is the shopper who still has to feed a family whether the cost of frozen peas is five dollars or eight.
NZ is making less of its own food, not just paying more for it
The Wattie’s closures are not an isolated event. They fit a two-decade trend in the Stats NZ GDP figures. New Zealand’s food manufacturing output per capita has fallen 14% since 2005.
| Year | Food manufacturing real output (2005 = 100) | Population (millions) | Per-capita index |
|---|---|---|---|
| 2005 | 100 | 4.13 | 100 |
| 2015 | 100 | 4.61 | 89 |
| 2020 | 106 | 5.07 | 86 |
| 2024 | 110 | 5.29 | 86 |
The absolute quantity of food NZ processes in its own factories has grown 10% in 20 years — largely on the strength of dairy processing for export. But the population grew 28% over the same period. On a per-head basis, NZ makes 14% less of its own food than it did before the Global Financial Crisis.
The gap is being filled by imports. David Hadfield of Process Vegetables NZ has pointed out that supermarkets are increasingly sourcing frozen vegetables from China, South Africa, Thailand and Italy. Every Wattie’s plant closure reduces domestic processing capacity, and when capacity goes, it does not come back quickly.
What the ownership actually explains
Heinz Wattie’s is owned by Kraft Heinz, a US multinational. McCain Foods is a Canadian family company. Fonterra is a New Zealand farmer cooperative. Foodstuffs is a federation of New Zealand owner-operator cooperatives. Woolworths NZ is a subsidiary of Woolworths Group in Australia.
None of these structures is inherently predatory. None is inherently virtuous. But they do answer different questions when the strategic maths gets hard. The question Kraft Heinz asks about a Christchurch frozen vegetable plant is this. Does this factory still earn our global cost of capital? If the answer is no, it closes; capital is reallocated to the next opportunity, which is likely to be in a country with lower unit costs or a bigger consumer market. The question a NZ-owned retail cooperative asks about shelving a NZ supplier’s frozen product is different. Does the house brand make more margin per shelf metre? If yes, the house-brand wins; the supplier’s NZ workforce is a cost to them, not an asset.
Both answers are rational at the level of the decision-maker. Both are economically efficient by the narrow definition. Neither gives weight to the collective fact that the worker made redundant in the Wattie’s Hastings frozen line is the same person who stopped buying second-tier groceries at Pak’nSave the following week.
That is not a conspiracy. It is a feature of the ownership and incentive structure New Zealand’s food chain now runs on. Every participant is playing their hand correctly. The composition of players means nobody at the table is playing for the country.
What the data does and doesn’t settle
The price data is clear enough to settle some arguments.
- Wattie’s is not being squeezed on margin. Food manufacturing PPI margin is up, not down, over the two-year window.
- Supermarkets haven’t captured a dramatic share of total food-chain margin in that same window. Retail margins rose only slightly. Their power is expressed through shelf allocation, not pricing.
- Consumers have paid more than the general cost of living for food, and much more for housing. Cumulative retail food inflation since 2005 has run 14 points ahead of headline CPI.
- Meat processors have genuinely been squeezed. Their margin has collapsed as farm-gate livestock prices raced ahead of what they could charge downstream.
It does not settle the following.
- Wattie’s firm-specific profitability. Industry averages can hide firms with older plants, higher fixed costs, or branded-premium pricing that no longer justifies itself. Kraft Heinz’s decision to close Hastings may be correct for Kraft Heinz even if the industry category is profitable on average.
- Whether consumer-side inflation reflects genuine cost pass-through (labour, logistics, energy not captured in the raw-material input index) or margin expansion by retailers and processors collectively. The PPI shows processor-level margin expansion; the CPI shows retail-level prices rising as fast as that. Both are consistent with margin expansion flowing through to the consumer. Neither, on its own, proves it.
- The counterfactual. We cannot know what Wattie’s revenue would have done if Foodstuffs had kept the frozen range on its shelves in 2021.
A quieter story than the headlines
The Wattie’s closures will produce a week of political heat, a Green Party call for an inquiry, a few rounds of supermarket-blaming, and then fade. Three hundred families will adjust to the loss.
The bigger story the PPI and CPI data expose is this. Over two decades, New Zealand has built a food system in which global commodity-facing producers do well, an oligopolistic retail sector does comfortably, and the consumer — whose wages have not risen by 66% over those two decades, let alone the 80% that grocery food has — pays the accumulated difference. At the margins, the system also reduces its own capacity. Fewer factories, more imports, less resilience to the kind of shipping disruption the Middle East reminded us of this year.
Nobody is stealing anything. Everyone is doing their job. The problem is in the composition of the jobs. Until New Zealanders decide they want a food system built for something other than the hand of each individual player, the Wattie’s closures will not be the last, grocery prices will continue to outpace headline inflation, and the bill will keep arriving at the same address — the one with the chequebook at the checkout.
Is the answer a stronger Commerce Commission, a different supermarket ownership model, or something else entirely? Leave your view in the comments.