Norwegian grocery chains are efficient
Some quarters claim that competition in the grocery retail sector in Norway is too weak. There is no basis for such conclusions, according to the master students Adrian Jacobsen & Douglas Jansson at NHH. On the contrary, there is much evidence that Norwegian grocery retailers are the most efficient in Scandinavia.
This was some of what emerged during NHH's annual conference FOOD conference in Oslo on Monday 13 March. The well-attended conference in Oslo drew a broad picture of the grocery industry in uneasy times. We will return to several aspects of the conference later. Today, however, we concentrate on the thesis of the master students Adrian Jacobsen and Douglas Jansson.
Mature and consolidated markets
Structurally, there is not that great a difference between the Scandinavian countries of Norway, Sweden and Denmark. All markets are characterized by three or four dominant players at the retail level. Gross margin is comparable and varies from approximately 20 per cent to 28 per cent. That's roughly what we see is the "going rate" internationally as well.
Operating margin or EBIT varies from 3 to 5 per cent for private players, but somewhat lower for Coop, according to Jacobsen and Jansson.
A very interesting finding from Jacobsen and Jansson is that labour productivity has the best development in Norway in recent years. Starting from the year 2011, Norway is best in class. This may be related to several things, but perhaps two variables in particular: 1) Norwegian labour is very expensive, so it is important to develop staff productivity. 2) Norway has a very high proportion of soft discount, it has most probably pulled in the same direction. When you compete on price productivity is key!
In their master's thesis, Jacobsen and Jansson conclude:
• The price trend gives no indication that the competitive situation has weakened in Norway in the last decade
• Gross Margin is in line with other players in Scandinavia.
• Strongest productivity growth in Norwegian grocery compared to Denmark and Sweden.
• Jacobsen and Jansson find no reason to claim that margins or inefficiencies in the grocery retail sector contribute to high Norwegian food prices
The undersigned did not observe Industry Minister Jan Christian Vestre in the audience. Of course that is not surprising (he is a very busy man), but even though he should maybe take a "reality check" together with Jacobsen and Jansson? There are many indications that the competition in Norwegian grocery at the retail level is much tougher than Vestre plays to believe.