Norgesgruppen, the country’s largest grocery group, has left two years of record revenue as a result of border closures and changing consumption.
Last year, the group increased its sales by 1.5 percent to NOK 103 billion, making it NOK 4.9 billion before taxes. Revenues were 18 percent higher than they were in 2019, the last year before the coronavirus pandemic and border closures.
Now the golden age is over.
According to CEO Runar Hollevik, the grocery market is down five percent so far this year. Holevik thinks it will drop by a few.
This is not the only problem.
expensive to operate
The war in Ukraine drove up already high energy prices, which led to sharp increases in the prices of a large number of the world’s most important raw materials. Fertilizers, wheat, gas and corn are trading at record levels in international markets.
This puts more pressure on the demanded supply of goods, but it also increases costs in the value chain for food, energy, fuel and raw materials. It’s demanding, Hollevick says, but it’s manageable.
Transportation in particular has become a major challenge for Norgesgruppen.
Transportation has partially collapsed in some places. We had to transport goods by train from China instead of by boat. Things take longer, and we have to buy larger quantities in advance. We also go through certain product groups where we need more suppliers than usual, Hollevick says.
Also on electricity prices, the company received a stir last year. Norgesgruppen trades all types of electricity on the spot market, and electricity costs have risen to NOK 693 million, compared to NOK 317 million a year earlier. The higher electricity prices did not come until the end of 2021, and they continued until 2022.
“low price growth”
Price changes from in-store supplier negotiations are revised twice a year: February 1 and July 1.
Have the suppliers announced further price increases?
Nothing beyond what we got before Christmas, but we’ve now increased raw material costs, energy prices and fuel prices that will impact the food value chain, and there are new opportunities for negotiations leading up to the agricultural settlement on July 1, Holevec says.
The CEO believes that Norway is less affected than our neighbors by what is happening in European markets. He believes that anyone who sees that Norwegian supermarket food prices have risen sharply lately should familiarize themselves with Statistics Norway’s CPI.
In Norway, food prices rose by 0.8 percent in February, compared to the same month last year. Compared to the general increase in prices, the increase in food prices was lower, and came after 11 months of declines, Hollevick says.
At the same time, there is some delay in the value chain which means that one does not necessarily see the effects of commodity shortages and increase in raw material prices now.
You won’t notice much until fall and next year. Not only do we get our food supply of grain and flour from the Black Sea region, but we are also affected by what happens in the global market, Holevec says.
billion in dividends
Norgesgruppen is behind chains like Kiwi, Meny, Spar and Joker in groceries, and Deli De Luca and Mix in a kiosk. Norgesgruppen is by far the largest grocery group in the country with a market share of 44 percent. The empire is built around the wholesale company Asko.
Norgesgruppen recently created the Gigaboks chain, at the same time it bought the inexpensive Dollarstore chain. The goal of these new initiatives is to win back the sales chains that were “stolen” by Europris and Normal, according to Holevik.
Norgesgruppen has the media-shy Johansson family as the main owner, with about 75 percent of the shares distributed among the various companies.
Calculations show that a total dividend of 975 million NOK has been proposed.
CEO Runar Hollevik earned NOK 11.5 million last year, of which NOK 7.8 million was at a fixed salary. Including retirement, he earned nearly 15 million crowns. (Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
“Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff.”