The government says all options are on the table to introduce more competition into the supermarket sector, which could include the break-up or restructuring of the two existing supermarket chains.
Currently the Woolworths and Foodstuffs chains dominate New Zealand's supermarket sector.
Cabinet has also agreed to a formal request for information (RFI) to accelerate improved competition.
Economic Growth Minister Nicola Willis said grocery prices in New Zealand were high by international standards.
"It is crucial that we get this market working effectively. Doing so will deliver benefits into every shopping trolley and create new business opportunities up and down the supply chain."
Willis said the RFI would help the government to determine the next potential regulatory and legislative changes, and whether structural changes would be needed.
The government wanted to hear what it would take to get a third player into the New Zealand grocery market, she said.
They were seeking external specialist advice "on ways in which the existing supermarket duopoly could be restructured to improve competition, including advice on options for demerger of existing brands, the potential impacts of structural separation on existing entities, and concepts for how this could be achieved".
She said information for the RFI would be sought in the next six weeks, and she would bring further recommendations to Cabinet in mid 2025.
If legislation was needed, Willis said she wanted it to be introduced before the end of the year and passed during this parliamentary term.
"I am putting all options on the table," she said.
The government reaffirmed that they would not establish a third grocery chain.
Last month, Willis spoke at the New Zealand Economics Forum in Hamilton and spelled out findings of a 2022 Commerce Commission report showing "competition between grocery retailers is muted, profits are high, product ranges are limited and shoppers pay higher prices than people in many other countries".
Willis also noted New Zealand supermarkets were the most expensive for kitchen staples compared with the UK, Ireland and Australia.
In February, Willis ruled out the government opening its own grocery chain and said the government could not force a third entrant to the market to break the country's supermarket duopoly.
In September last year, Grocery Commissioner Pierre van Heerden said supermarket margins had increased, profits remained high and the two main operators, Foodstuffs and Woolworths, remained dominant.
"We want to see more competition and sustained pressure on the major supermarkets to deliver better outcomes for consumers."
He said in a competitive market retail margins growth would be limited, or reduce, with price competition.
