The Norwegian government is finally cracking down on grocery retailers and wholesalers who dominate the market and thus, it’s believed, limit competition. Torbjørn Røe Isaksen, the government minister in charge of business and trade, formally presented 39 measures to Parliament on Friday aimed at making sure the dominant players comply with competition law.
Isaksen’s “Report to the Parliament” aims at both sustainable growth and restructuring within wholesale and retail trade and distribution. “Limited competition in the grocery market is damaging both in the form of inefficient use of resources, high prices and a lack of innovation,” Isaksen told newspaper Aftenposten just before his ministry’s report was presented.
Among the 39 measures are several giving Norway’s competition authority (Konkurransetilsynet) more clout and access to address more issues within wholesaling and retailing. Among them, for example, is the longtime complaint that large Norwegian wholesalers like food producer Orkla, dairy conglomerate Tine, beverage maker Ringnes and meat and poultry cooperative Nortura offer lower prices to the biggest players. Those who buy the most from a supplier get the biggest discounts and lowest price, making it difficult for newcomers and smaller players to break into the market.
The grocery store market itself has long been dominated by NorgesGruppen, which owns the grocery chains Meny, Kiwi, Spar and Joker among others. NorgesGruppen also has wholesaling and distribution operations, and a grocery market share of 43.3 percent in Norway. Next-biggest, according to AC Nielsen, is Coop, with 29 percent, followed by REMA1000 with 23.9 percent. The small Bunnpris chain has the rest, at just 3.7 percent. It’s been extremely difficult for new players to enter the market, even large international firms like ICA or Lidl, much less start-ups like online shopping venture Kolonial.no.
Now Norwegian competition authorities will be able to question often secretive deal-making between suppliers and retailers, and practices like “pay for shelf placement” in which grocery stores charge higher prices for “prime” display space.
The grocery store owners have long downplayed their power, blaming Norway’s high food prices on the country’s subsidized and protectionist farming industry and the so-called “market regulators” like Tine and Nortura. The regulators all but set prices by controlling supply. When Norwegian farmers produce “too much” milk, lamb or pork meat, for example, consumers rarely if ever enjoy lower prices at the grocery store. Instead the meat is frozen away or dumped abroad to reduce supply and keep prices high. Newspaper Nationen reported this week that pork producers will be offered NOK 16,000 per pig if they shut down production, because more than 5,000 tons of pork meat is already in “regulatory storage” with more “overproduction” expected next year. Instead of lowering Norway’s notoriously high prices for bacon (three times the level they are in Sweden), supply is slashed.
Wealthy families, high prices
There’s also believed to be a lot of cooperation and deal-making among other players, though, with NorgesGruppen seen as the most powerful of them all. The family owning NorgesGruppen has long been among Norway’s wealthiest, as have the families behind REMA1000 and the old RIMI chain. “I’m sure that the REMA or Meny grocery store manager thinks competition already is high,” Isaksen told Aftenposten, “but that doesn’t mean the competition mechanisms back in the branch function optimally. That’s what we want to look at more closely, and we’ll be expanding the competition authority’s assignment.”
Lars Sørgard, director of the competition authority, said it was “important” to examine the supply side as well as the retail side of Norway’s grocery business, where prices are consistently higher and selection lower than just over the border in Sweden. It’s hard to understand why a carton of Ocean Spray Cranapple Juice, for example, costs around NOK 50 in Norway and only around SEK 20 in Sweden, despite Norway’s higher labour costs. Or why a can of imported Canada Dry ginger ale costs more than NOK 30 in Norway (when it can even be found) and just SEK 12 in Sweden. Someone is making a decent profit, while Norwegian consumers can feel cheated, and motivated to drive over the border to do their shopping if they can.
Norway’s competition authority also looks likely to get more resources to carry out more examinations and control. “It can mean extra funding,” Isaksen acknowledged. “I haven’t asked the authorities to reduce the priority of other issues.”