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Sunday, April 14, 2024

Grocers may win border trade battle

Norwegian grocery stores have been thriving during the Corona crisis, after closed borders and Covid-19 restrictions prevented Norwegians from driving over the border to shop in Sweden. Now other moves are afoot to keep Norwegians shopping at home as the battle over border trade rages once again.

Norwegians can’t drive over the border to shop in Sweden like they used to do. The Corona crisis’ border restrictions have thus prompted a boom in business at Norwegian retailers that many politicians and Norwegian lobby groups want to retain. PHOTO:

Thousands of Norwegians living within an hour or two’s drive from Swedish border towns often spend weekends shopping in Sweden, where grocery stores are also open on Sundays. With prices on popular items like beer, bacon, soft drinks and coffee often just a third of what grocers charge in Norway, shopping centers in border towns like Nordby, Strömstad and Charlottenberg have long been packed with Norwegians.

Then came Corona, spoiling Swedish shopping but suddenly sending business skyrocketing at Norwegian grocery stores and, not least, the state-controlled wine and liquor monopoly Vinmonopolet. In the Norwegian border city of Halden, workers at the local Vinmonopolet experienced what newspaper Aftenposten called “Pol-shock” when sales shot up by 125 percent in March and April. In Kongsvinger, farther to the north but close to the Swedish border, sales jumped 179 percent. Norwegians weren’t necessarily drinking more. They simply had to buy their wine and other alcoholic beverages at home instead of in Sweden, when alcohol taxes and prices are much lower.

“The closer a Vinmonopolet lies to Sweden, the higher the increase in revenues,” Jens Nordahl, communications chief for what Norwegians simply call ‘polet, told Aftenposten. Revenues had already risen around 35 percent by April on a nationwide basis, and it’s higher now. In Sweden, sales at its state liquor stores (Systembolaget) fell accordingly.

‘Trade leakage’ came to a halt
It’s all brought a sudden halt to what economists call Norway’s “trade leakage” to Sweden, and it set off a boom in business for Norwegian grocery retailers, food producers and breweries. It’s ironic that Norway’s dominant grocery retailer NorgesGruppen (which owns big chains like Meny, Kiwi and Spar) should become even more profitable in a crisis that has hurt so much other business, but it has generated more jobs. State broadcaster NRK reported this week that NorgesGruppen and Coop, which together control around 70 percent of the market in Norway, have hired around 2,000 new employees each to meet customer demand.

Farmers and food producers are also enjoying more demand. Oslo’s Freia chocolate and candy factory has mounted a fourth shift to meet new demand in Norway from consumers who previously bought their sweets in Sweden. Norway’s controversial increase in a sugar tax recently sent prices even higher on chocolate and soft drinks, prompting Norwegians to stock up on such when in Sweden. Now they have to buy their sweets at home.

Breweries have also reported that they would have had to lay off workers when bars and restaurants closed if it hadn’t been for the jump in beer and soda sales at Norwegian grocery stores.

Political opportunity
Politicians are seizing the opportunity to try to keep Norwegians shopping at home when borders eventually open up again on a more permanent basis. Norway’s Conservative Party wants to allow Vinmonopolet to stay open longer, until 4pm on Saturdays, for example, and also recently called once again for allowing all grocery stores, not just small shops, to open on Sundays like they long have in Sweden.

The Conservatives cite a need to spread out shopping hours during the Corona crisis to avoid crowds at the check-out line. The Conservatives’ former government partner, the Progress Party, has always supported ending Norway’s ban on Sunday store openings and the Liberals are keen to liberalize shopping hours as well.

Opponents claim it’s just a ploy by the Conservatives to win some popularity but then use the proposal as a bargaining chip in future government cooperation negotiations with the Christian Democrats, who firmly oppose Sunday openings. “This is just something (the Conservatives) can sacrifice to placate the Christian Democrats, without really giving anything up,” newspaper Dagsavisen editorialized on Thursday. The same may apply to allowing Vinmonopolet to stay open longer.

Tax cut calls going out
Both the Progess Party and the Conservatives are also mulling cuts in Norway’s notoriously high alcohol and sugar taxes. That would make beer, wine and soft drink prices in Norway more competitive with Swedish prices, and may be the best means of battling border trade. They’re not keen to lower tobacco taxes, however, because of the greater health aspects involved.

“The most important duty we have now is to get people back to work,” Linda Helleland, who’s been working to shape the Conservatives’ political platform heading into next year’s election, told business news service E24. “We need to make it easier to create jobs. We’ve lost thousands of jobs because of border trade and we’re in the midst of a pandemic that has cost many jobs.” She thinks that lowering taxes, and thereby prices, can help battle border trade.

At the same time, the government kicked up a fuss this week when it actually halted further study of exactly what border trade costs Norway. Estimates have hit as much as NOK 16 billion in lost revenues a year, and national employers’ organization NHO is very keen to make sweets, soft drinks, beer, wine, liquor and even tobacco cheaper in Norway.

“Our record-high tax levels send consumers to Sweden, and that hurts the entire Norwegian food and beverage industry, from farmers to grocery producers,” Petter Haas Brubakk of NHO Mat og Drikke told Dagsavisen even before the Corona crisis began. Food prices in Norway later rose once again, by 3.3 percent from June to July, allowing grocery retailers to rake in even more revenue.

Norwegian grocery stores have also long been accused of charging unnecessarily high prices also on items that aren’t subject to Norway’s protective tariffs on some food imports or high taxes. It’s hard to understand, for example, why a carton of cranberry juice produced in Europe costs the equivalent of NOK 18 in Sweden and NOK 46 in Norway, or why items from shampoo and toothpaste to Swedish-roasted coffee are so much cheaper in Sweden than Norway. The government regularly commissions studies to examine why grocery prices in Norway are the highest in Europe, but little happens to bring them down.

Now the Corona crisis has shown what border trade can actually mean in terms of lost revenues to Norwegian retailers and lost tax revenue to the state. Both wholesale liquor suppliers and an anti-alcohol organization want Parliament to cut the quotas of how much alcoholic beverages Norwegians can bring home with them to Norway, and the suppliers want to cut wine and liquor taxes as well.

“Something must be done to stop the enormous trade leakage we have,” Ingunn Jordheim of the wine and liquor suppliers organization VBF told Aftenposten last month. “It was a problem before Corona, and now the travel restrictions have given us alarming documentation of just how huge the leakage is.”

It may be even bigger than the NOK 16 billion (USD 1.7 billion) state statistics bureau SSB estimates. Efforts to research the trade imbalance more closely, however, were halted by the government this week until borders open again. “We don’t think it will serve any purpose to study this more until borders reopen,” Magnus Thue, a state secretary in the finance ministry for the Conservatives, told NRK.

That disappointed and even angered both the Progress Party and employers’ organization NHO. “It’s tempting to think that the finance minister (also from the Conservatives) is afraid to see the result (of a study) that can show just how big border trade is,” Morten Ørsal Johansen, a Member of Parliament for the Progress party, told NRK, “and what major effect it has on Norwegian business.” Berglund



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