June 8, 2023


Complete News World

Food, Grocery | Urkla warns Rima and Kiwi: – We’re watching closely

(The newspaper onlineNettavisen has written several times about the battle between grocery chains’ own (EMV) brands and suppliers’ products. Last year, Virke called for more EMV in stores.

There has been speculation about whether the chains deliberately raise the prices of suppliers’ products in order to subsidize their own goods. But testing by Nettavisen showed that many products from Kiwis First Price were more expensive than the brand’s. The first price products must be the cheapest.

When asked if Orkla himself was there and checking out the series’ merchandise development, it came directly from Communications Director HÃ¥kon Mageli:

– We’re watching closely.

“Our operating environments are very much on the ball and track prices, especially around our two central price windows of February 1st and July 1st,” he adds.

– What we are saying is that we have a cautious decline in market share, and we believe we are losing share to private brands, explains Group CEO Niels K. Celty.

It is not Orkla that sets the prices

As a supplier to grocery chains, Orkla does not have the opportunity to set the price for consumers, the chains do.

– No, our customers are the ones who determine the price in the stores, and it is a special case. Our most important competitor is the chain brands, Selte says, and our most important competitor is the one who sets the prices themselves.

– Is it uncomfortable?

– Yes, Magili replies. He fears that the prices in the shops will be set in a fair and correct way, so that Orkla will compete on an equal footing.

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– These are the rules of the game, and we have to deal with them. Therefore, we must be innovative, bear costs, and continuously provide good products that consumers want. Then we continually increased our marketing budgets. It’s an area where we’ve said we’re not going to cut costs, Selte explains.

strong growth

Orkla delivered strong first quarter numbers and did much better than analysts expected. Growth compared to the first quarter of 2022 was a nice 13 percent,

Orkla wrote in a stock announcement that growth in the critical brand area was driven by price increases to offset the cost increase. So, the entire growth from last year is actually price increases.

Magelli says analyst reports show this is true of global branding companies as well.

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It sells mostly outside Norway

Orkla has up to 75 percent of its sales outside Norway. So the findings largely apply to operations outside the home market. Orkla is careful not to say anything about volume growth in Norway versus overseas markets.

– What we said is that there are big differences between different fields of work. We see that Orkla Foods (well-known brands in the Nordic countries and Europe, editor’s note) has very poor volume development, while other regions have fairly positive development. Sweden, Denmark, the Czech Republic and Slovakia are probably the areas where volumes have developed weaker, Celti says.

He doesn’t want Nettavisen to go into detail about the scale of the drop in volume.

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– We have achieved income growth of approx. 13 percent, and we saw a slight decrease in volumes, says the CEO.

in arrears

Last fall, Celty was clear that the prices they charged were behind the high costs. But the prices of a number of raw materials have fallen, and energy prices are on the way down.

– If you look at the world market, it is true that commodity prices have fallen. But there is a backlog here, and it’s not like we’re buying all the input factors in the spot market, Selte counters.

Orkla still has to bear high acquisition costs. And again, there is a huge difference between the different companies.

– Purchase costs are increasing at Orkla Foods, for example on meat, dairy raw materials, potato mash and rice. For other parts of the business, we’re seeing some backtracking, Selte says.

Drought can lead to new jumps in prices

Prices of some raw materials may rise further as a result of the prolonged drought in southern Europe.

– Obviously, it comes as cash from the CEO.

– We had two fairly dry summers in Europe, which affected several input factors on prices. There is not only war and instability, but also drought.

Are you worried about the impact of climate change on both raw material supplies and prices?

– Yes, it’s something we follow very closely and constantly monitor very closely. It’s also part of our sustainability strategy, Selte replies.

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