Rema 1000 drops major suppliers

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Grocery shopping in Norway has generated lots of criticism and complaints over the years, because of market concentration, high prices and relatively poor selection. Now one of Norway’s leading chains, Rema 1000, has really upset the shopping carts by removing many major brands from its shelves, in favour of local suppliers and only a few national conglomerates.

Norwegian grocery chain REMA 1000 has been back in the news this month, after introducing its controversial new sales strategy that’s pulling lots of products off its shelves. PHOTO: REMA 1000

The strategy has enraged long-time business partners and attracted the attention of competition authorities. “I can’t comment on what investigations we may be conducting, but we are aware of Rema’s (new) strategy,” Magnus Gabrielsen of Norway’s competition authority Konkurransetilsynet told newspaper Dagens Næringsliv (DN) on Friday. He told Norwegian Broadcasting (NRK) earlier this month that “we follow the grocery store market closely” but so far had seen nothing illegal in what Rema is doing.

It’s not entirely popular with either Rema customers, who no longer will be able to buy various products at Rema stores, or suppliers. The controversy began earlier this month when Rema, built and controlled by the wealthy Reitan family of Trondheim, unveiled its so-called “best friends” strategy. It involves developing closer ties with selected suppliers and dropping others on a national basis, to cut costs.

Shunned breweries foaming over
In the important beer and soft drinks market, Rema’s new “best friend” is Ringnes/Carlsberg, which already controls 55 percent of the beer market in Norway, according to the brewers’ trade association Bryggeriforeningen. Now Carlsberg of Denmark and its Norwegian subsidiary Ringnes will be the only drinks supplier with nationwide access to all Rema 1000 stores. In addition to its own Ringnes-brand, the Norwegian brewer owns the brands Frydenlund, Dahls, Nordlandspils and Tou, and imports Brooklyn, Guinness, Corona and Kronenbourg 1664.

Stung suppliers claim that in order to be Rema 1000s “best friend,” they allegedly have to win a bidding war for shelf space. Rema has refused to comment but has denied it charges a “shelf tax.” PHOTO: REMA 1000

Ringnes’ rivals including Mack and Hansa Borg claim Ringnes paid a lot of money to Rema to win access to Rema stores nationwide. “If you want to be Rema’s ‘best friend’ it means you have to lay a frighteningly large amount of money on the table,” Hansa Borg’s boss Lars Midtgaard exclaimed Thursday in a rare press conference. “For Hansa Borg (which produces the Hansa, Borg, CB, Nøgne og Olden beer brands in Bergen, Kristiansand and Sarpsborg) it will never be possible to be in the position of being Rema’s ‘best friend.'”

Trade association reports have claimed Ringnes paid as much as NOK 250 million (USD 30 million) to be able to sell its products in Rema stores. DN reported that neither Rema nor Ringnes would comment, while Rema has earlier denied it engages in the controversial Norwegian practice of charging a “shelf space tax” to suppliers.

Now Borg, at any rate, will only be allowed to sell its beer in some Rema stores in Borg’s local markets in Bergen, Kristiansand and Sarpsborg. After selling 14.5 million liters of Borg brews through Rema stores earlier, volume will now be reduced to just around 1 million. Mack, the main local brewer in Northern Norway, has suffered a similar loss of business by no longer being able to sell Mack’s various beers nationwide. Its distribution through Rema will be restricted to its home markets around Tromsø, for example, and it has claimed it will need to lay off workers at its brewery. Aass brewery in Drammen is also facing a major loss of business by not being able to sell nationally through Rema any longer.

Not so friendly
Rema “best friends” strategy has since lost it some other friends, not least customers in Oslo, for example, who still prefer beer from Mack or Borg. They’ll now have to shop elsewhere, with Borg, at least contending that it will try to offset its Rema losses by doing more business through stores tied to Norway’s dominant NorgesGruppen, which owns chains like Meny, Kiwi, Joker and Spar, and with the Coop chain. “We’re not going to lie down and die,” Midtgaard said.

It’s not just the breweries that are getting forced out of Rema. Lerum jams and jellies, sundries including Dove soap, Palmolive and Vaseline Intensive Care, Kim’s potato chips and Ajax cleaning products will all disappear from Rema on a nationwide basis, replaced by Nora jams and jellies, Maarud potato chips and more Jif cleaning products, for example. With higher volume for the “best friend” brands selected, Rema figures it will be able to sell them at lower prices and resume its position as Norway’s lowest-priced chain, by Norwegian standards. It will also feature its own low-priced housebrands under the new name “Rema Prima” and try to boost overall selection by making room on its shelves for more local products in local markets.

Rema 1000 also launched a new customer bonus program this month that’s had mixed reviews. PHOTO: newsinenglish.no

Problems remain and some wonder whether Rema’s strategy will backfire, even though it’s aiming to retain customers through a much-hyped bonus program called “Æ.” It was unveiled in the midst of all the noise over supplier changes, functions via an app and can result on another 10 percent discount on products that loyal customers buy most frequently.

While two professors at business school NHH think Rema’s new strategy can be “win-win” for both customers and Rema, suppliers who are suffering are complaining mightily and trade minister Monica Mæland even hinted that customers could boycott Rema, although she quickly backtracked on that. “My point has been that we have too little competition in this (the grocery) market, and that we want to increase competition,” Mæland told news bureau NTB. So do the suppliers.

“The fact that Rema’s new strategy has such a widespread effect shows that the entire Norwegian grocery market has been allowed to develop in an unfortunate direction for a very long time,” Helge Hasselgård of the suppliers’ organization DLF told newspaper Aftenposten. Mæland and competition authorities will at least be watching as the “development” continues, while those Norwegians who can will likely continue to drive over the border to shop in Sweden, where prices are generally lower and selection better.

newsinenglish.no/Nina Berglund