Raid against grocery suppliers in Sweden and Finland
In Sweden and Finland, the competition authorities have conducted a coordinated raid against several food suppliers. The companies are suspected of coordinating purchase and sale prices.
Not infrequently, the Norwegian grocery market is accused of lack of competition both on supply and retail side. We are not alone in Norway in that criticism.
The Swedish Competition Authority has made unannounced visits to several companies in central and northern Sweden that work with food. The visits have been approved by the Patent and Market Court for the authority to secure further evidence.
At the same time, the Finnish counterpart conducted inspections at some companies in the same industry. Both authorities have cooperated in their two investigations.
The Swedish Competition Authority writes that an investigation has been launched and that it now remains to be seen whether there are grounds for the suspicions that there have been violations of the Competition Act.
According to the Swedish Competition and Consumer Authority and KKV, which is, the inspections have been conducted against certain companies in the wild berry industry. In KKV's case, they are investigating whether the Finnish companies engaged in irregularities in the purchase and wholesale sale of wild berries in Finland. KKV (the Finnish equivalent of the Swedish Competition Authority) confirm that these inspections were done in collaboration with the unannounced visits that were conducted in Sweden.
There still is to be seen whether there are grounds for the suspicions that there have been violations of the Competition Act. The case is still pending.
Retailers also accused of too little competition in Sweden
It is not only the suppliers who face suspicion, the grocery chains are also accused of a lack of competition, among other things from the organization Sweden's Consumers.
Karin Brynell, CEO of Svensk Dagligvaruhandel, a lobby organization for retailers, responds to criticism from Jan Bertoft at Sveriges Konsumenter, a lobby organization for consumers. Below is an edited short version of Brynell's response to what she considers unfounded criticism.
In the past year, the grocery trade has been in the focus of both politicians and the public due to the rising food prices. Households' reduced purchasing power has led to a change in purchasing behaviours. Swedish consumers buy smaller, cheaper and fewer products. In this inflationary economy, Bertoft emphasizes, that one gets the impression that the industry is a victim of external circumstances. Yes, that is exactly the case!
Pandemic, bad harvests, higher energy prices, war in Ukraine, a Swedish currency that lost 20 percent in two years. These are by definition external circumstances that the industry must deal with.
From 3.7 to 1.7 percent margin
Last week, SCB, presented new profitability figures for the grocery chain, and during the first half of this year, the stores' average margin has gone from around 3.7 percent to around 1.7 percent. This is driven by increased costs in combination with significantly lower purchasing power.
Low margin comes from a low markup. The purchase cost is only part of the product calculation, on average 60 percent. The remaining 40 percent must cover the costs of personnel, premises, energy, security, wastage and more to finally land in the average profit margin of 1.75 percent at the store level.
According to Bertoft, the prices differ between different stores, and that is correct. It is an indication that pricing is free and that the market economy works. Consumer power – which is what Bertoft represents -–votes with their feet and goes to the store that they feel has the best offer. Some prioritize price, others selection, certain opening hours or they have chosen to go from organic to Swedish. The consumer decides in a market economy.
But there is resistance to market economics prevailing when it comes to food.
Why is it like that? I'm sure that Ikea has different margins on the Billy bookcase and the Lerhyttan kitchen. And maybe the margin on a ski jacket is higher than on gym shoes at Stadium. We don't know, but we don't call it secrecy but a business strategy, concludes Karin Brynell.
Sources: Fri Köpenskap, Swedish Competition and Consumer Authority, KKV, DN.se, Svensk Dagligvaruhandel