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National has made a supermarket break-up a key part of its election pitch, proposing to sever Pak'nSave from New World in a bid to drive down grocery prices.
The shake-up would be contingent on a six-month review by the Commerce Commission into whether the split would actually leave shoppers better off.
If the watchdog gave it the green light, National said it would legislate to force through the separation.
The significant policy was announced with little warning on Wednesday morning, and on the same day that Labour promised to ban big companies from charging excessive prices.
Foodstuffs is one half of New Zealand’s supermarket duopoly and currently manages all New World, Pak'nSave and Four Square stores. Woolworths is the other major player.
National's plan would split the supermarkets up, leaving the country with three nationwide chains: Pak'nSave, New World/Four Square and Woolworths.
"This is, I acknowledge, a bold and unprecedented step," finance spokesperson Nicola Willis told reporters at Parliament.
"It is the right one. It puts the Kiwi shopper first."
Willis said the proposal followed a comprehensive cost-benefit analysis by Sense Partners and two peer reviews which she commissioned as Finance Minister to explore proposals for breaking up the duopoly.
But she said rather than taking a proposal back to Cabinet this term, National would instead seek an "explicit electoral mandate" from the public, given the significance of the move.
"No Kiwi shopper or store owner would thank us if we mucked this up. While it's always tempting to rush in, the stakes are very high, and work of the sort requires a prudent, careful approach from ministers."
National may well find it difficult to get its policy over the line with coalition partner ACT, given its leader David Seymour previously lambasted the plan, arguing it would scare away investment.
New Zealand First, in contrast, announced its plan to break up Foodstuffs in April this year.
Willis said the coalition had proven an ability to compromise on various policies this term: "Obviously, this is a key priority for us, and that would be reflected in our coalition discussions."
She said the shake-up could eventually save households up to $1320 a year, pushing down grocery prices about 5% lower than they would otherwise be.
Sense Partners' modelling estimated prices would be about 3.5% lower in the first year of separation, with gains growing as the new chains bedded in. By 2035, the estimated annual household benefit ranged from $200 to $1320 depending on income and family type.
"That's real money back in the pockets of New Zealanders," Willis said.
"More competition means supermarkets have to work harder for every customer on price, specials, range and service. That is how shoppers get a better deal."
National also trumpeted a potential $12.6 billion in "consumer benefits" over 20 years. However, the underlying analysis put the overall net gain to the whole economy at just $2.9 billion once lost supermarket profits were counted, or even lower if Foodstuffs' costs increased.
The independent report also carried some hefty warnings, with economists warning their analysis was "indicative rather than definitive" and flagging potential "insurmountable" legal and implementation hurdles.
Willis stressed that National would act carefully on the Commerce Commission's advice and not play "supermarket executive from the Cabinet table".
"There is a very high bar for this kind of intervention and National is not pursuing structural separation in any other sector.
"However, after years of reviews and incremental reform, it's clear the status quo isn't working. It's time for change."
National said no individual Pak'nSave, New World or Four Square owner would be forced to sell or change brands.
Instead, the Foodstuffs brands would be split into rival nationwide groups, with separate structures and incentives to compete against each other.
The Commission's latest monitoring showed Foodstuffs and Woolworths still controlled about 82% of the grocery market, with little movement in the core measures of competition over the past year.