August 12, 2022

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News, Grocery |  A sharp rise in food prices: - I think someone is trying

News, Grocery | A sharp rise in food prices: – I think someone is trying

(Internet newspaper): – Now it is more important than ever to think about what you need, and check the price per liter and kilogram when shopping, says Ron Nikolaisen, responsible for Gjerrigknark.com.

Food prices rose sharply on July 1which has been announced for a long time. Kiwi and listing owner Norgesgruppen have received unusual price increases from suppliers this time around, according to Executive Vice President Stein Rømmerud.

It was not unexpected that buying food would become more expensive after the end of the month. The increase in the prices of raw materials and the high cost of electricity and fuel gave suppliers no choice – they had to raise the prices of grocery chains, which in turn leads to higher prices for consumers.

At the same time, food prices are also affected by agricultural settlement. So it is not surprising that a number of meat and dairy products saw a real jump in prices after July 1.

Suppliers, such as Orkla, Nortura and Tine, can also increase prices for chains twice a year – February 1 and July 1.

The online newspaper is based on a shopping cart with a number of different items, and we purchased these items before and after July 1st. The price increase is staggering: The shopping cart at Kiwi, Extra, and Rema is 16-17 percent more expensive after July 1, compared to mid-June.

Here are some examples:

  • Gilde ground beef 400g increased by 14 to 27 percent
  • Dairy Butter 500g of Tine increased by 20 percent
  • 200 grams of Freya’s milk chocolate is up 33 percent
  • The cost of Coca-Cola without sugar is now 26 percent
  • Milk increased by 8-10 percent
  • Norwegian cheese increased by 10 percent

See full price overview below in the box.

– Take advantage of the situation

Nikolaysen says an expectation has been created that prices should rise due to the agricultural settlement, but he believes the price increase is worse than expected.

– I think here someone is trying and seeing what they can get out of it, so that people will eventually stop buying some goods and lower prices again, he says, and he adds:

– They drive rough now in July, and then there will likely be some coups in August.

Nikolajsen believes that chains in July survive on the tourism trade and that people want to enjoy themselves without looking too much at the price. However, he cannot understand that they had to increase the prices as much as Nettavisen discovered in the price test.

– They are taking advantage of the situation. Yes, they increased costs, but you should very well argue that the 20-30 percent price increase is to cover the cost increase, he says.

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– There is a certain limit to how much they can tolerate, Nikolaisen points out.

Watch how prices have changed from June to July:

Price increase in kiwi:

Extra price increase:

Price increase in Rima:

The online newspaper traded goods at the same time in all three chains. However, it is important to note that some goods may be on offer, and therefore the price increase over the original price may be lower.

Not for the benefit of consumers

Christian Anton Smedschog, general manager of Agri Analyze, recently told Nettavisen that he thinks we’ll see an average price increase of 4 to 5 percent, but with great variance, after July 1. Smedshaug said earlier this summer that for the whole of 2022 he thinks we’ll see food and non-alcoholic beverage prices increase by five to ten percent — perhaps closer to ten percent.

Nikolaisen had also envisioned a price increase in that layer.

“I thought the price increase after July 1 would be five to ten percent for farmers to get a better income, but to increase prices so dramatically I think no one expected it,” he says.

Grocery giants Coop and Norgesgruppen told Nettavisen that it is important for them to ensure that suppliers do not take advantage of the exceptional situation of war in Ukraine, and the increase in interest rates, electricity and fuel prices, to increase their margins.

As Harald Christiansen, Director of Communications at Coop Norge said, “All of our customers must be confident that we are doing what we can to keep prices low.”

The chains seem to have done a bad job, not to the benefit of consumers, says Nikolaisen.

– Don’t overdo it

Harald Christiansen, Director of Communications at Coop Norge, denies that they are trying to take advantage of the exceptional situation we are in.

– Both Gjerrigknarken and anyone else can make sure Coop, which is owned by customers, does not increase prices more than is absolutely necessary, he tells Nettavisen.

It is worth noting that the prices of food and non-alcoholic goods rose much lower than the consumer price index over the past year, and are lower than in the United States and many countries in Europe.

The CPI increased by 5.7 percent from May 2021 to May 2022.

Consumer price index and inflation

  • The Consumer Price Index (CPI) describes the development in consumer prices for goods and services required by private households living in Norway.
  • The change in the consumer price index is a common measure of inflation.
  • Inflation is the sustained growth in the general price level. Inflation is the same as the decline in the value of money, i.e. you get less goods than before for a given amount of money. For example, the higher your inflation rate, the higher your savings.

  • Norges Bank’s target for annual growth in consumer prices over time is close to 2 percent.

  • Norges Bank’s most important tool to keep inflation stable is prime rate. Norway’s prime rate is the interest rate that banks receive on their deposits with the Bank of Norway up to a fixed amount.

  • The more stable inflation, the easier it is to make the right decisions about savings, loans, and interest rates, among other things.

  • High inflation makes dealing with money expensive because this money is constantly losing its real value. When inflation is high, it is usually variable. Changing inflation creates uncertainty as households and firms become uncertain about future income and expenditures.

  • Low and stable inflation contributes to the efficient distribution of resources in a market economy.

  • However, inflation should not be too low. This is partly due to the fact that the structure of the economy is developing and there may be nominal rigidities such that it is difficult to reduce prices and nominal wages.

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Source: Statistics Norway and Norges Bank

Christiansen explains that the increased prices we now see in Norwegian grocery stores are influenced, among other things, by the outcome of agricultural settlement.

At the same time, suppliers have reported price increases to us on several occasions and to an extent we have not seen before. Increased energy costs have consequences for transportation and other operations with us as well. He explains that this is the reason for the price changes we are seeing now.

It is clear that the significant increase in the prices of individual products, which you can see in the Nettavisen price test, may be due to the fact that there were offers and that the price was then “artificially low” at the time of purchase.

Do you ensure that prices have not risen more than is consistent with rising costs? So don’t increase your margins now.

– For competitive reasons, we are not allowed to comment on specific margin numbers, but general information shows Coop’s margins are much lower than most suppliers. Gjerrigknarken is well aware that a number of suppliers have very high market shares in many categories. We believe suppliers should also have a responsibility to protect consumers from high price increases, should the price of a number of goods and services go up too much, Christiansen says.

Price increase from supplier

Kristin Akvaj Arvin answers, however, that the kiwi can ensure that prices do not increase more than correspond to the increased costs.

Our profitability has not increased, on the contrary. We don’t increase our prices too much, she tells Netavizen.

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She says the main reason for the increase in July is higher prices from suppliers, and agricultural settlement is just one of several factors.

The entire value chain, whether manufacturers, suppliers, wholesalers, and chains, has experienced an increase in costs recently. This is partly due to increased costs related to raw materials, transportation, electricity and wages. She says the increase is not unique to Norway.

Arvin refers to the Nettavisen article from June, where we wrote that Prices in Sweden and Denmark are rising sharply.

We’ve never seen such big price increases from our suppliers before as we’ve had this month. The kiwi is a price pressure factor in the market and we promise that we will do what we can to keep the increase as low as possible, she says.

Like Christiansen, Arvin points out that the price difference for individual items in June and July may be due to some items being offered. At the same time, she believes that a shopping cart of about 30 items is too small a part of her selection to give a consequence of the evolution of the price.

With such a small selection, individual products can make a big impact. For example, cauliflower, where you now compare Norwegian broccoli to a cheaper foreign broccoli in June, she says.

– It will affect what the customer pays

Hege Rognlien, press contact for Rema 1000, says that many of the items in the Nettavisen price test are not directly related to the agricultural settlement, such as sunflower oil.

The goal of the Rema 1000 is to sell groceries at a cheaper price in Norway. We have followed up on suppliers to ensure that the price increases reported are real increases, such as increases in raw material prices or energy prices as a result of the war in Europe, she says, adding:

– The bulk of our cost is the cost of goods, so when suppliers raise the price to us, it will also affect what the customer pays.

She believes that the Nettavisen price test result is significantly influenced by the product range. Roggenlin says a small sample will quickly be able to give a skewed picture of the total.

– However, we continue to work efficiently to keep prices as low as possible, she says.