Rima Grocery 1000 | Grocery giant drops Norway: – Unprofitable

The Minister of Commerce continues to make promises A grip on the grocery industry Yet record prices for food. In one year, Norwegian shopping baskets became 11 percent more expensive.

At the same time that the whip is swinging for better competition, selection and lower prices, consumers can look far and wide for european grocery stores in norway.

– Ica currently has no plans to establish itself in Norway again, Gabriellas Ohlzon, press officer for Swedish grocery chain Ica, tells Nettavisen.

Ika left Norway

Ica left the Norwegian market in 2015. Ohlzon says the reason was a lack of financial profitability.

That same year, Coop was approved to buy about 550 stores. Ohlzon describes the agreement as win-win for both parties.

German discount chain Aldi wrote in an email to Nettavisen that for business reasons they could not answer whether they wanted to establish themselves in Norway.

Lidl did not respond to Nettavisen’s inquiry about a possible establishment in Norway.

Denmark’s largest 1000 rima

Even if foreign chains don’t look at Norway, Rema-Reitan can sign off that “it’s nice to be Norwegian – in Denmark”.

Norske Rema 1000 is Denmark’s largest grocery chain with more than 360 stores. Before Christmas, it became clear that the Rema 1000 company was buying more than 100 Aldi stores.

Norgesgruppen-owned Kiwi pulled out of Denmark in 2017, after 10 years as a low-priced chain.

Kårstein Løvaas is the authority contact at Reitan Retail. The company, among other things, is behind the Rema 1000. He points out two main reasons why foreign grocery chains are not allowed to establish themselves in Norway.

The first is to focus on the resource side.

The Consumer Council notes that 50 percent of sales volume in the grocery industry comes from four to five food suppliers, it says and explains:

– In Denmark, there are much more suppliers to negotiate with and fewer dominant players.

Orkla, Ringes, Mills, Tine, and Nortura together have significant dominance within their respective categories.

Løvaas believes that competition authorities in Denmark have followed the industry more closely than Norway. According to Lovas, the penalties were much harsher.

Among other things, they suppressed differences in purchase terms that could not be justified.

The deadline for consultation on the ban on unreasonable price discrimination expired in December.

Politicians have not yet decided whether suppliers should be banned from giving unfounded purchase terms to grocery chains.

– If the proposal on unfair price discrimination is adopted, it will give more suppliers and grocery chains the opportunity to establish themselves in Norway, says Løvaas.

A new report from the Norwegian Competition Authority shows that purchase price spreads have decreased. Norgesgruppen is therefore no longer in the same special position, with conditions up to 15 percent better, than competitors Coop and Rema 1000.

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– Welcoming the new grocery chain

Orkla is the leading supplier of grocery store brands. The food supplier is behind Toro, Stabburet, and Grandiosa, among others. They deny that focusing on the supplier side is an obstacle for foreign chains and suppliers.

– We strongly disagree with this hypothesis. There are more than a thousand suppliers for just three grocery chains in Norway. In all categories, chains can choose between several suppliers, both Norwegian and foreign, says Håkon Mageli, executive vice president of communications and corporate relations at Orkla.

And he confirms that Orkla welcomes the new grocery chain

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Grocery players are getting very rich

Erik Fagerlid has worked in and for the Nordic grocery industry for over 20 years. indicates a great paradox.

– Although history shows great wealth among manufacturers and grocery chains alike, there is little interest in establishing itself in the Norwegian market.

johansson f Raytan family He’s been laughing all the way to the bank for years.

Kapital’s wealth list shows that the two families have assets worth more than NOK 60 billion alone. Johansson’s Norgesgruppen made $1.6 billion in profits in the first half of last year.

Karl Albrecht, founder of German discount chain Aldi, was the world’s richest person when he died in 2014. He left behind Wealth of $ 25.9 billion. The low-cost Rema 1000 and Kiwi chains are inspired by the Albrecht brothers.

Fagerlid believes that the purchasing power of Norwegians is great, but there are still many obstacles for foreign players. He answers categorically “no” to the question whether foreign food chains will come to Norway.

– We are few people in a very large area, he says.

Nettavisen asked Torgeir Knag Fylkesnes (SV) if he thought foreign chains would establish themselves in Norway.

He says it is important to bring in new players in the Norwegian grocery industry. He believes that the different prices of goods that chains buy from food suppliers is the biggest problem for new enterprises.

– Players who currently control the purchase conditions will not be able to kick out other players. The goal here is new actors who will be able to dismantle the problematic concentration of power in today’s Norwegian grocer. If they’re Norwegian, great, but foreigners are welcome, too, he says.

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– The competitive situation is difficult

Fagerled analyzed the Norwegian market for a number of foreign grocery operators.

The list includes German Aldi, French Carrefour, Dutch Jumbo and Italian supermarket chain Esselunga.

Why did foreign grocery chains abstain from voting?

– Norway is a small market that is expensive to service due to the scattering of settlements. Even if it’s a deliberate policy, Fagerled says it has its price, and points out that even Norgesgruppen can’t make money apart from distributing goods to all its stores, say, in Troms and Finnmark.

But it is not just the scattered settlements that stand in the way.

– The competitive situation in Norway is very tight, with three dominant chains having their own wholesaler and a number of their own brands, he says, and concludes:

For foreign parties, it is pure mathematics. It will be difficult to make a profit.

Norgesgruppen dominates the grocery industry, with 44 percent of the market. Coop 29.7 per cent and REM 1000 22.9 per cent. In addition, there is a significant focus on the supply chain, with Orkla being the largest with brands such as Toro, Stabburet and Grandiosa.

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German Liddell was a failure

For years, politicians have pointed out that there are very few players in the Norwegian grocery market. Industry Minister Vestri is joined by ministers who point to the problem of having fewer players than in other countries, says Fagerled.

German discount chain Lidl established itself in Norway in 2004. Almost four years later, they had to give up.

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The failure of Lidl in Norway is often cited as an example of obstacles to establishing in the Norwegian market.

– Lidl’s model is to bring goods from Europe. Norway’s trade restrictions on the import of milk, meat and fruit make it unattractive because we are not part of the European Union. Fagerled says this was an important reason for Liddell’s withdrawal.

Import protection prevents foreign establishments

Fagerlid receives strong support from the social economist Ivar Gasland.

Import protection does not make it particularly attractive for foreign chains to establish themselves in Norway, says Gasland, a social economist and associate professor at the BI School of Economics.

He does not want to remove protections on imports, but rather reduce them to the point where continuous imports become a realistic alternative. He believes that import protection is currently so high on meat, dairy products and flour that it is not profitable to import foreign goods.

– We are talking about customs rates of more than 100 percent. Then you are left with Norwegian suppliers as your only alternative, such as farm-owned Tine and Nortura.

Tariff rates on dairy and meat products make it somewhat unprofitable for foreign food chains to establish themselves in Norway.

An important explanation is that they cannot take their network of suppliers with them, who would otherwise supply their stores in Europe. Suppliers are very important to profitability, both in terms of purchase prices and product selection. The store’s entire operation relies on merchandise that isn’t bought so expensive then the chains will lose profit margins, he says.

Gaasland believed that tariffs should be greatly reduced, and priced comparable to Norwegian goods. Only then will it be tempting for foreign chains to set foot in Norway.

– Iceland closed shops

The English frozen food chain in Iceland is an example of new entrants to the Norwegian grocery industry in recent years.

Geir Olav Ohheim, general manager of Iceland, has previously spoken of the problems of finding a good placement. Established grocery chains have clauses in their leases that prevent the landlord from leasing to competitors.

Iceland recently announced that it will close many stores in Norway.

The Minister of Commerce and Industry was asked to comment on the matter, but he did not reach an answer. Among other things, we asked if he thought foreign chains would come to Norway.