Unfair trading methods exists, but are not serious
There are unfair trading methods in the Swedish food market, but there is no clear evidence that they occur to such an extent that it seriously distorts competition in the food market, concludes the Swedish Competition Authority in its new report "Competition in the Food Chain".
One problem in this context is that there are currently no Swedish definitions or any regulation of what constitutes unfair trading methods. The investigation also finds, without making it a problem, that the concentration in the Swedish grocery trade is high: The three largest players account for about 86 percent of the market.
The report come up with two concrete proposals (only); that the County Administrative Board or other appropriate authority is assigned to increase the municipalities' awareness and use of anti-competitive grounds in planning and allocation of land for residential and commercial premises.
Retail locations in attractive areas are still a crucial competitive factor. There has been an improvement in competition caused by the fact that the municipalities released land for several new players in the early 2000's, this according to the Competition Authority's Director General Rikard Jermsten.
Secondly, Public procurement of food should be provided with more resources to better meet the ambitions and targets for increased food production, increased organic and near-producer share, the report states.
"If more resources are not added and costs for purchasing raw materials are allowed to increase, there will probably not be any major changes in public procurement of food with sustainability requirements," says Rikard Jermsten.
230 billion
Swedish consumers purchase food and beverages worth approximately SEK 230 billion annually. Mobile, active, and engaged consumers making well-informed choices, forcing companies to keep developing their operations and offers, enhances competition in the food supply chain.
Consumer preferences for different food products varies and are influenced by different trends. There is an increased interest in where the food is produced, organic products, and products free of certain ingredients.
It has become increasingly common that the grocery chains and the food industry market such product qualities using standardized industry labels.
Labels are important – so is price
Labelling can facilitate consumers in making conscious and sustainable choices. As a whole, the consumers ability to compare products or prices online and to find out more about food product specifics have improved due to digitalization. This probably enhances the overall trust in food products.
There are conditions for decreased market concentration in the grocery retail industry. Consumers have widely varying preferences and do not always make purchases based solely on price. This is apparent for instance in that discount chains have small market shares in relation to the three largest actors. On the other hand there are signs suggesting that competition is improved.
ICA Sweden is the largest actor in the grocery retail market with more than 50 percent of the market. However, recent development has shown strong growth among discount chains in terms of turnover, which indicates that there are conditions applicable to gain market shares by developing the consumer offer.
Private label is growing – no problem
About one fifth of a Swedish consumer’s income is spent on food, which in a European perspective is not very high. Food prices have increased at a slightly slower rate since Sweden joined the European Union, which is largely due to increased trade. This has opened for a greater variety of products at lower cost or higher quality.
About 50 percent of the food consumed in Sweden today is imported. Grocery retail sales of private label products are growing. Investing in private labels has become a strategically important tool, to create loyalty with the chain and offer alternatives to suppliers’ brands with focus on value for money.
Lack of trust is a challenge
The grocery retail chains’ increase of private labels has contributed to competition in many product categories but can also create new business and growth opportunities for food companies.
Through close collaboration with retail chains, there is a potential for development of new products and efficient value chains, where suppliers and retail chains jointly gain market shares in some product categories. An obstacle to efficient collaborations may be that there sometimes seems to be a lack of trust between parties in the food supply chain.
It is difficult to estimate how the growth of private labels affects the growth and profitability of Swedish food productions industry. Increased competition may overall decrease sector profitability but can also have a positive impact on company profitability. For example, companies may use spare capacity to produce private label products. It is not possible to draw any conclusions on private labels impact in the long term concerning the range of goods or the degree of product development and innovation.
In sum, it is the overall assessment of the Swedish Competition Authority that competition in the food supply chain is well functioning and that consumers have sufficient tools at hand, making active, well-informed choices.