On Wednesday, the announced price increase hit Norwegian grocery store shelves. Experts had predicted in advance that we could get a price increase of up to 10 percent. The price jump comes on top of a price increase of over 10 per cent on food last year. And when the numbers were ready on Wednesday morning, I have to say that some of the findings news has documented were downright sensational. Here are some extreme examples: The cheapest toilet paper at Extra has become 40 per cent more expensive, while at Rema the price has increased by 15 per cent to NOK 19.5 The price of Jif spray has increased by 52 per cent to NOK 49.90 at Extra. Rema has had a price increase of 9 per cent to NOK 35.90. Q-light cream has increased by 20 per cent to NOK 19.50 at Extra, and 14 per cent to NOK 18.40 at Rema. Do they really have to? Do real chains have to raise prices by 40-50 percent on some items? For example, has the manufacturer of Jif, which is Orkla, really increased the price by over 50 percent when they have sold the bottle to Extra? Or has Extra dragged on a bit? There we have three good questions that we will never get an answer to. If you had asked the suppliers of Norwegian brands to see what they actually sell their goods for, you would probably be met with “then we will lose our customers (the chains), and we will have the competition authority on our backs”. And as we know, there is not a flood of customers to take off. Power in the Norwegian grocery chains is concentrated in very few hands. It is a frustrating starting point for Norwegian journalists or others who want to explore the grocery industry. We never get the numbers. We never get to check properly. Mild climate for price increases Because there is reason to at least raise the question of whether Norwegian grocery chains are not taking the opportunity to raise prices a little more than they have to. When prices rise a lot, as they are doing now, there will also be a milder climate to go on a bit. All the experience we have from periods of high price growth shows that. The industry’s own price system also supports this. Every year, the biggest price jumps occur after 1 February and 1 July. In the food industry, these months are called price windows. Price increases are then taken out after negotiations with suppliers, the agricultural settlement and the wage settlement. The industry itself has developed this practice. Stunned by the practice One of Norway’s foremost experts on competition law, Erling Hjelmeng, has previously told news that he is stunned that prices are set this way in the grocery industry. – When you know that these are price increases that come twice a year on this date, you certainly have no incentive to take the minimum possible in(…). You have almost got a kind of institutionalized price signaling, he says. Increased food prices The comparison of food prices and the wage trend says something about whether you get more, less or the same amount for your money. When the development of food prices is higher than the development of wages, it means that food has become more expensive. Both figures are averages for the specified period. Read more about sources and reservations here. How much food prices have increased in the past year, compared to wage development Food Dec 2021 – Dec 2022 Wage development Forecast for 2022 The chains are also hoarding During January, tendencies were seen for people to start hoarding goods with a long shelf life, before they announced the price increases. There is reason to believe that the chains did as well. The shops have been able to increase their purchases throughout January, because they have known that the purchase prices will rise sharply. Goods with a long shelf life such as frozen food, dry goods, tinned food, washing and hygiene items and toilet paper – were probably hoarded. In addition, fresh produce has a longer shelf life. The chains have good and large stocks that they can fill up. This is a tendency that the supplier Orkla, among other things, has documented in the company’s second quarter report. In June, they experienced far higher sales than normal, just before the price window on 1 July. The hoarding is probably even greater now, as even higher increases were announced from the suppliers. So if the chains increase their prices by 5-10 per cent in February, it also means increased earnings for the chains – a kind of pure super profit. Money in filling Norwegian stomachs But, as I said, we will never get a proper answer to that. The only thing we know is that there is good money to be made from filling the bellies of Norwegians. Some of the largest fortunes in the country originate from grocery operations. One can mention in succession: the Reitan family, the Johannson family, the Lykke family and the Hagen family. One can also point to the manufacturers; because here, too, there are families who need salt in their porridge. The Rieber family, the Friele family and the Hagen family here too. To mention a few. Sky-high margins DN documents on Wednesday that Norgesgruppen and the Reitan group increased their profits by NOK 4 billion, and that profit margins have skyrocketed. The chains themselves explain the profit jump with good corona years and that margins will decrease going forward. In the case, it also emerges that the chains are tired of the strong rhetoric, and that the finger is constantly being pointed at them. Perhaps they are thinking in particular of the fact that Minister of Business, Industry and Industry Jan Christian Vestre has announced investigations to get to the bottom of where the money goes, at the same time that he has urged the chains to show moderation. – This is not a “blame game”, Vestre replies to DN. Maybe not, but I’m sure it’s not far off. In recent years, it appears that the players in the grocery industry; the chains, the suppliers, the farmers and the politicians, are involved in a kind of unofficial NM in the pointing game. “At least it’s not us,” they reply. We don’t get an answer today either. But the bill, we get it.
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