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Monday, May 27, 2024

Stronger krone and higher food prices send shoppers fleeing over the border

Norway’s currency, the krone, has suddenly regained strength in recent weeks and that, combined with a sharp rise in food prices at Norwegian grocery stores this summer, has set off a new wave of shopping across the border in Sweden.

After diving along with oil prices two years ago, the Norwegian krone that had been super-strong through the oil boom years weakened to a point that it was worth less than the Swedish krone. It cost as much as NOK 105 to buy SEK 100 just last spring. Now, however, the krone has strengthened to the point that SEK 100 only costs around NOK 96.

Food prices up, too
At the same time, food prices in Norway have risen considerably in recent months, especially those for dairy products, meat and even fruit and vegetables in season. Salad that sold for around NOK 20 in May now costs as much as NOK 27.90 in Oslo grocery stores. A liter of milk that cost around NOK 15 earlier this year ago now costs NOK 18 (USD 2.22 at current exchange rates), a result in both cases of higher prices in general in Norway, fewer and even more powerful grocery retailers in Norway, and the effects of the farm lobby’s annual state-sanctioned price hikes and tariff protection against cheaper imports.

Meat prices have also jumped, as have those for imported items like wine, especially bottles and cartons bought by importers for sale at Norway’s state-controlled liquor monopoly Vinmonopolet when the krone was weaker. Merchants pass on their higher cost in kroner to consumers, and combined with Norway’s high taxes on alcoholic beverages, a carton of Lindeman’s Chardonnay from Australia, for example, is almost half-price in Sweden.

Consumers are thus responding by heading over the border, especially when they’ve had time off from work this summer. The parking lots at Swedish shopping centers close to the Norwegian border are packed with cars bearing Norwegian license plates, and Swedish merchants are reporting booming business. State broadcaster NRK also reported this week that more Norwegians are driving over the border in Northern Norway to buy cheaper goods in Finland.

“There’s no doubt that the stronger krone has given us an extra boost,” Ole Jørgen Lind, manager of the Maxi Mat grocery store at the Nordby shopping center in Sweden, told newspaper Aftenposten on Tuesday. “It’s always fun for customers to get an extra discount when they go through the check-out lines.”

Swedish prices are already lower on most all items, and the selection of items is greater, so the currency exchange advantage comes as a bonus. Lind said his store, about a 90-minute drive south of Oslo, is logging its best summer ever.

‘Striking’ complaints over the higher Norwegian prices
It’s mostly the higher prices at home, though, that seem to be sending Norwegians over the border. “The big price hikes at Norwegian grocery stores have generated extra traffic our way,” Lind told Aftenposten. “It’s seldom we hear Norwegian customers complain so much about the Norwegian price levels as we’ve heard this summer. It’s been striking.”

Lind said he’s looking forward to the autumn, since he thinks the gap between Norwegian and Swedish prices will widen even more. Many contracts between the grocery stores and their suppliers expire in September, and he predicts both sides will try to raise prices again. There also are fewer grocery players in Norway now, since ICA pulled out of the market. Most ICA stores were taken over by Coop, and prices have risen on a wide variety of items.

Currency analysts, meanwhile, think the Norwegian and Swedish currencies will stabilize. Camilla Viland of DNB Markets linked the renewed strength of the Norwegian krone to higher inflation, a decline in unemployment and more economic optimism. Many key players think the so-called “oil crisis” is ebbing out, and that oil prices are on their way up again.

The Norwegian krone is also much stronger against the US dollar than it has been earlier this year. While it cost more than NOK 8.50 to buy a dollar a few months ago, it cost NOK 8.16 at midday on Tuesday. Berglund



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