Grocery, Personal Finance | Now the food is becoming more expensive: – Unusually high price increases

The online newspaper: – We have received unusually high price increases from suppliers this time, says Stein Rømmerud, Executive Vice President of Norgesgruppen.

Norgesgruppen owns retail chains such as Kiwi, Meny and Spar.

Commodity prices rose sharply after the Ukraine war became a fact. At the same time, petrol and diesel prices have skyrocketed, and are expected to drop NOK 30 per liter, writes Nettavisen.

The reason for the price increase is the restrictions introduced in the export of crude oil from Russia to Europe. This leads to increased transport costs for food suppliers. At the same time, electricity prices have become much higher.

All these price increases make it more expensive to produce and deliver food, and suppliers such as Orkla, Nortura, Tine and Mills must therefore charge higher prices to the grocery chains. As a rule, increased prices for the chains result in higher prices in stores. At the same time, food prices are also affected by the agricultural settlement.

Suppliers have two price windows every year where they can increase the prices of the chains, and that is February 1st and July 1st. It has long been announced that food prices will increase on 1 July.

– For competitive reasons, we can not go out with exact figures on price increases to the customers or the price requirements from the suppliers. But it varies a lot from supplier to supplier and from product group to product group, says Rømmerud.

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Up to five percent increase

Christian Anton Smedshaug, general manager of Agri Analyze, believes we will see a total price increase for food and non-alcoholic beverages of between five and ten percent throughout 2022 – probably closer to ten than five percent, he told Nettavisen earlier this summer.

However, the price increase from 1 July will be somewhat lower.

– I think we will see a price increase of an average of four to five percent, but with great variation, he says to Nettavisen on Friday morning.

However, he believes that meat will increase more in price, and points out that Nortura in May went out and announced a sharp price increase for meat and eggs from 1 July.

Smedshaug points out that the prices of the input factors for producers in general in Europe and agriculture in general have increased between 25 and 40 per cent. It will have to affect the prices of the end product, he believes. Input factors are, for example, packaging and energy costs, or raw material prices.

– Do you think the chains will take the full price increase from the suppliers out to the customers?

– Now there is an acceptance that there will be a significant price increase. So yes, you have to reckon with that. But at the same time, those who manage to have lower prices now can get a competitive advantage, so here there will probably be individual assessments from the chains, he says.

Will increase by between 13 and 17 percent

Nortura is one of Norway’s largest food suppliers and has Gilde and Prior in its portfolio.

Already at the end of May, they went out and notified consumers of price increases on a number of products from 1 July.

The nation then wrote that the wholesale prices of several types of meat will increase by between 13 and 17 percent in the course of a year. This is the price grocery stores pay to producers.

For example, the average wholesale price of cattle increases by four kroner per kilo, while for lambs the increase is five kroner per kilo.

To Nettavisen, communications manager Mari Hagerup has no further comments regarding the price increase, but emphasizes that it is the chains that determine the final price consumers relate to.

Nor can Nortura say anything about the dialogues between the company and the grocery players for the sake of competition.

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– Need to adjust prices

The supplier Tine also holds the cards close to her chest, but says that the company is affected by the macroeconomic conditions in the world.

– In line with most others, we see that our costs have increased dramatically recently, especially in transport and energy. The consequences of the war in Ukraine affect the entire market, says the press contact Ingrid Wilberg Arnesen to Nettavisen.

– As a result of these extraordinary conditions, we, like others, have had to adjust our prices somewhat, she adds.

Tine cannot go into detail about the contractual relationship between them and their customers, but emphasizes, like Nortura, that it is not Tine who determines the prices Norwegian customers receive in the stores.

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– Will affect customers

Like Norgesgruppen, neither Rema 1000 nor Coop Norge can comment on the price increases to customers, and refers, among other things, to the Competition Act.

– We do not yet know how much the prices will increase on average, but we want to keep prices as low as possible, says press contact Hege Rognlien in Rema 1000 to Nettavisen.

She points out that they have done what they can to ensure that the price increases from suppliers are real, based on increased energy prices and other cost increases due to the war in Ukraine.

– Do you want to take out the entire price increase from the suppliers to the customers?

– Cost of goods is the biggest expense for us. A price increase from the suppliers will affect the customers, she says.

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Must have challenged the suppliers

Harald Kristiansen, communications manager at Coop Norge, points out, however, that the price warnings they have received from suppliers vary in different categories.

– We work systematically to analyze the price increases we have received from suppliers, and always challenge those we believe have given us a higher price increase than there is good reason for, says Kristiansen.

Both Kristiansen and Rømmerud in Norgesgruppen say that it has been important for them to ensure that the suppliers do not take advantage of the extraordinary situation we are in to increase their margins.

– If someone has tried to increase their margins, we do not accept it. We have had tough negotiations. We will not increase our profitability now, says Rømmerud.

– Coop is owned by two million co-owners, and all our customers must be confident that we do what we can to keep prices low. There is tough competition in the grocery industry, says Kristiansen.

Will not respond to price increases

In May, CFO Harald Ullevoldsæter of Orkla went out and warned that they will have to increase prices significantly towards their customers, which are the grocery chains. Ullevoldsæter believes that the chains will be able to push their price increases onto consumers.

When Nettavisen contacts Orkla on Friday morning, we will not know anything about the price increases they give the grocery chains from 1 July.

– We are prevented from talking about this due to the Competition Act, says Håkon Mageli, kWednesday Director of Communications and Corporate Affairs at Orkla, to Nettavisen.

Nor can he say anything about how much commodity prices make up for the increased costs they have.

– The only thing I can say is that this is the biggest change in input factors we have ever had, he says.

Nor can Mills comment on the price increases of the grocery chains.

– What we can say is that we are in a period of unusually high prices for raw materials and packaging. This has an undesirable effect on our prices, and we work hard to limit the effects of this. It is mainly these cost changes that affect our price increase to the grocery chains, says Kjersti Johannessen, information manager at Mills, to Nettavisen.

– How much our price increases again affect the price on store shelves is determined solely by the grocery chains. It is the chains that decide how they want to price each item in their stores, she points out.

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