Advertisement

Cost of living For Members

Are Norwegian supermarkets being greedy with their price increases?

Robin-Ivan Capar
Robin-Ivan Capar - [email protected]
Are Norwegian supermarkets being greedy with their price increases?
Prices in Norwegian supermarkets are likely to increase in February. Are supermarkets attempting to increase their profits by inflating prices? Photo by Bart Dekimpe / Unsplash

Prices in Norwegian supermarkets are widely expected to soar in February. Are the supermarkets using the overall inflation to boost their profits?

Advertisement

The Norwegian grocery industry has two fixed dates when they adjust prices and introduce new products - one is on February 1st, and the other is on July 1st.

Traditionally, this is when supermarkets enter into negotiations with suppliers and producers, who ask for price increases. However, these dates are not set in stone – they're a product of culture, Olav Kasland of the Norwegian Consumer Council told The Local.

"It's a cultural thing; it's not a legal thing. A certain culture developed between grocery chains and their suppliers. However, this is probably the best way for all parties involved to do it.

"It's more predictable when they have two dates in a year to adjust prices and have negotiations. I think it's better that way than if they were to do this continuously. This is also the window for coming out with new products and getting them into grocery chains, the window to bring new products into the stores," Kasland said.

Advertisement

How (and why) prices are adjusted

During the negotiations between supermarkets and suppliers, numerous elements – such as different supplier costs – are taken into account.

As Kasland points out, these are classic negotiations – the stores want to cut prices, while suppliers want to increase them.

On the other hand, Kine Søyland, the chief of communication at Norgesgruppen - Norway's leading company in the grocery retail market - told The Local that inflation also affects their side of the value chain.

"Everything is becoming more expensive, which also affects our prices and costs," she said, explaining that a number of considerations need to be considered during the price adjustments.

"Generally speaking, supplier prices and costs which they present to us (note: the grocery chains), energy costs, transportation costs, commodities and raw material, the overall rise in prices and expenses in every single field… The increase in costs in our shops and expenses overall in the company," Søyland noted.

Are supplier costs being passed on to end customers?

Price adjustments are a hot topic in Norway, especially in years of financial crises, as critics and consumer watchdog organisations believe that the store chains pass on supplier costs to consumers and try to profit off the adjustments.

According to Olav Kasland of the Consumer Council, the chains pass most of the supplier costs to end consumers.

"Definitely. They will probably say they are trying to cut costs, as higher prices affect competition. But mostly, they pass the costs on (to consumers)," Kasland told The Local.

Norgesgruppen's Søyland, on the other hand, firmly denies this is the case.

"Generally, the retail prices reflect our purchasing prices plus the operating costs and central warehouses and stores. However, with the current inflation, it has turned out hard to pass on all cost increases to the shelf prices. Some critics say we're raising prices more than we should or could have, and that's not right. Our profitability is actually under pressure currently.

"On our side, if we take the example of the last autumn adjustment period, we can see a lot of competition. For example, before Christmas, we saw particularly hard competition, especially with low-price brands like Kiwi and shops competing for customers and cutting prices.

"There's hard competition in the Norwegian retail market, and all our shops compete daily. We can't pass on all the price rises to our customers – that's why you can see our profitability going down.

"Our annual results for 2022 are not out yet (they will be by the end of March), so I can't go into it, but what I can say is that we've experienced higher costs in every area of business - energy, transport, fuel, it's all affecting our business," Søyland explained.

Advertisement

Other criticism

On the other hand, some critics warn that supermarkets are incentivised to use the opportunity of price adjustments to increase their profits – even in the middle of a cost-of-living crisis.

"Well, I don't have proof, but the Consumer Council has warned about this possibility many times. It might be tempting for them. Still, as I said, I don't have proof.

"But of course, supermarkets are living off their profits. If they can increase profits and not lose market share, they will probably do that – that's capitalism," Kaland said.

Norgesgruppen's Søyland, on the other hand, says that the company is also facing challenging times in terms of profitability.

"Our profits are also challenged. If you look at the figures on our website, Norgesgruppen's margin at the end of the day is 3-4 percent; it's quite low.

"For example, when we sell a product like pizza, we only make a few cents on each pizza. However, when we sell large amounts of it, it adds up and gives you a profit. However, our margins are much lower than suppliers end up with.

Advertisement

"In practice, for every 100 kroner of goods we sell, we end up with a 3 kroner earning. So, when you sell enough goods, the total amount of kroner might be significant at the end – but the margins are low, which is typical for the retail market," she said.

What can consumers do amid skyrocketing prices?

Norwegian Broadcasting (NRK) has reported that grocery prices are expected to increase by around 10 percent in February.

The price increase is sure to put an additional strain on the already tight budgets of Norwegian households.

With that in mind, The Local asked the Consumer Council for tips on navigating the ever-rising costs of living in the country.

"We need more competition in the market, all of its parts. The only parts of the market that don't profit or can't adjust are at the start and end of the chains, the farmers on one end and the end consumers on the other; they have the biggest problems.

"So, I would advise consumers to make use of the competition, follow the market, and don't do all of their shopping in one place. Some of the grocery chains, especially before Christmas, had bargains on Christmas goods, tempting consumers to do their whole shopping there.

"Don't fall for it. Go where the prices are lowest. Don't do all of your shopping in one store… It's a tough time, especially for the poorest. I hope the competition will increase, and I hope – as does the rest of society – that inflation will go down," Kasland concluded.

More

Join the conversation in our comments section below. Share your own views and experience and if you have a question or suggestion for our journalists then email us at [email protected].
Please keep comments civil, constructive and on topic – and make sure to read our terms of use before getting involved.

Please log in to leave a comment.

See Also