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MONEY

EXPLAINED: Why food in Norway is so expensive

Groceries in Norway are among the priciest in Europe, but have you ever wondered why? 

Pictured is a supermarket's fresh produce section.
There are a few reasons why groceries in Norway are so pricey. Pictured is a supermarket's fresh produce section. Photo by Mehrad Vosoughi on Unsplash

One of the first things people will say to you when asking about life in Norway is “I’ve heard it’s really expensive”, often  before asking how much a beer costs. 

Prices for food and non-alcoholic beverages in Norway are the second highest in Europe, according to Eurostat

In 2018 the cost of food and non-alcoholic drinks was 63 percent more expensive in Norway than the EU average, according to a Statistics Norway report. The data agency noted that food prices were 40 percent higher than in Sweden and 25 percent pricier compared to Denmark. 

There isn’t one single reason why food in Norway is so expensive. Instead, several factors contribute to the dizzying prices. 

Competition laws and subsidised farms

Dairy and meat products from abroad face high import tolls to protect Norwegian produce and ensure that Norwegian products remain competitive domestically and that farms in the country remain profitable. 

However, the country only produces around 50 percent of the food it needs to be self-sufficient, not including fish, meaning tolls are paid on a lot of the food sold in supermarkets. These tolls are then passed onto to customers in the form of higher prices.

Also, farms in Norway are relatively small compared to other parts of the world, and there are strict laws on the welfare of animals. This makes farming less profitable, so farmers sell their produce for much higher prices than other countries.

Every year the government pumps several billion kroner into farming subsidies to ensure the industry remains viable. Norwegian dairy and meat might not seem cheap in the slightest, but these subsidies help to stop prices being even higher still. 

The prices of dairy in Norway are already the highest out of the 37 European countries that Eurostat uses to compare grocery prices, so it’s hard to imagine how high they could go without the government supporting farms. 

READ MORE: Why dairy products in Norway could become more expensive and less varied

A handful of brands dominate the market

Another factor driving high prices in the Scandinavian country is the lack of competition in the market. 

Many living in Norway will have noticed, and even bemoaned, that there are fewer brands and products on offer than in other countries. 

For example, Tine dominates the dairy product market, Notura and Gilde are among the only major players in the meat industry, and Orkla makes up most of the processed food market. The lack of competition among various brands means there’s no real incentive for the few dominant brands there are to compete on price. 

Furthermore, there aren’t many choices when it comes to major supermarket chains. Norgesgruppen, Rema and Coop are the main competitors, and with so little competition, the supermarkets are not drawn into price slashing wars to get customers through their doors.  

High costs for producers and supermarkets 

Norway is a costly country for all, not just for consumers but also for supermarkets and suppliers. For example, Norway is known just as much for its famously high wages as it is for being expensive. This means supermarkets, food producers, and farms have to pay higher salaries to staff than elsewhere. 

This is also forms part of the explanation as to why eating out in Norway is expensive. 

Taxes

The entirety of Norway’s food costs can’t all be pinned on suppliers and supermarkets. Instead, some of the costs that households in Norway pay for their shopping are directly or indirectly passed on from the government in the form of various taxes. 

The government taxes many things such as sugar, alcohol and tobacco very highly with these taxes driving up the price of everyday products. More indirect costs passed on include toll roads and high fuel taxes which mean high distribution overheads for producers and supermarkets. 

How expensive is food really?          

According to Statistics Norway, people living in Norway spend around 51 percent of their total income on the cost of living. 

READ MORE: What do workers in Norway spend their salaries on?

However, only 11 percent of a person’s total income a year is spent on food and non-alcoholic beverages. Compared to most of the rest of Europe, this is lower. The average proportion of wages spent on food across 37 countries around the continent was 18 percent.

Only six of the countries measured had a lower share of income spent on food and non-alcoholic beverages than Norway. 

Statistics Norway said the reason the percentage of wages spent on food was so low was the high salaries and a large amount of disposable income.

“When inhabitants of a country become wealthier, the share of the household budget spent on food and other necessities will normally decrease as consumption of other goods and services increases,” Statistics Norway wrote in its report on food prices

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For members

EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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