UPDATED: Prices have been rising again at Norwegian grocery stores, and a new study suggests the grocery store owners are padding their margins and pocketing more profits. They claim they’re not, and a new round of fending off blame for Norway’s notoriously high grocery prices has begun.
Food producers admit in the study that they’ve raised prices by around 4 percent. Prices for their items at the grocery stores, however, are up 6 percent, and the study by research firm Oslo Economics contends that the owners of grocery chains like Meny, Kiwi and REMA 1000 are benefiting from the difference, not least in the form of wider margins.
‘The answer at last’
“This is the answer (Agriculture Minister Sylvi) Listhaug has been waiting for,” Helge Hasselgård of the grocery suppliers’ organization DLF (Dagligvareleverandørenes forening) told newspaper Aftenposten on Tuesday. “The grocery chains have raised their prices to the consumers more than the food producers have.” Listhaug later said she found the DLF report “credible” and repeated concerns about a lack of competition in the grocery store business.
Hasselgård was referring to last year’s debate over a sudden 3.2 percent jump in prices from June to July. The price hikes prompted Listhaug to demand an explanation from both suppliers and grocery store owners alike, since farmers didn’t receive such an increase during the spring’s state subsidy and support negotiations. Norway’s high food prices are generally pegged to a combination of such factors as the country’s strictly regulated, subsidized and protected farming industry, high costs, tax and tariff policies, lack of economy of scale, concentrated ownership of wholesalers and retail grocery stores.
Many wholesalers and the families owning the major grocery store chains, however, consistently rank among Norway’s wealthiest people, so they’re periodically accused of profiting off hapless consumers who have few shopping options other than driving over the border to shop in Sweden, where prices are much lower and selection must higher.
Decline in competition
Researchers conducting the study by Oslo Economics, which was also due to be covered during state broadcaster NRK’s investigative Brennpunkt TV program Tuesday evening, gained access to the suppliers’ prices to the grocery stores minus any rebates they may enjoy. Those prices were compared to prices at the stores, as gathered in analysis bureau Nilsen’s database.
“Changes in margins are a goal,” said Jostein Skaar of Oslo Economics. “The increase here indicates that competition among the grocery store chains has declined, and they have an opportunity to exercise more market power,”
Neither REMA 1000 nor the Johannessen-family controlled NorgesGruppen, which owns many of Norway’s major grocery store chains including Meny, Spar and Kiwi, agree. “We believe the price rises are taken out other places,” Mette Fossum Beyer of REMA 1000 told Aftenposten, pointing to price differences between REMA 1000 and other supermarkets. Consumers can often also find major price differences for the same items at Meny and Kiwi, even though they have the same owner.
Bård Gultvedt of NorgesGruppen pointed out that the study by Oslo Economics was commissioned by the suppliers’ own organization, DLF, and that it presented a “distorted picture of reality.” REMA 1000 called for an independent investigation of the entire market, with an emphasis on margins.
Skaar stressed that “when a store can raise its prices without losing the customer, it’s a direct consequence of less competition.” Hasselgård of the suppliers’ group claimed the study “clearly shows that competition is not good enough. Now the politicians must take responsibility so that consumers can get the prices for food that they deserve.”
Consumer advocates agreed, with an official at competition authority Konkurransetilsynet telling NRK that prices can be “artificially high” and selection poor in Norway, with just a few purchasing officials “deciding what the Norwegian public can buy.” The situation may worsen, Hasselgård feared, now that Coop has been allowed to take over all the ICA and Rimi stores in Norway that had been owned by ICA Norge, which pulled out of the market.