The whole world knows Norway is expensive and that is one of the reasons why Norway is expensive.
Everyone talks about how expensive Norway is, even Norwegians. Just recently, the guys from Hostelworld posted an infographic on what you can buy in Europe for one dollar, which has created a bit of buzz in the media here because in Norway, you can buy nothing for one dollar. Last year our family went to a Western theme park in Sweden (yep, with cowboys and Mexicans) and they made jokes in their shows about charging only Norwegians extra because they can afford it. When I first arrived in Alta five years ago I got one photocopy from the post office and they charged me US$4.00! I asked why it was so expensive (because the library only charged US$1.50) and the retail assistant said “This is Norway.”
Yep, Norway is expensive because everyone expects it to be, even Norwegians, and I swear that this ideology is one of the creators of rising prices.
In August this year the Minister for Agriculture and Food in Norway, Sylvi Listhaug, invited the leading supermarket chains, Norgesgruppen, Rema 1000, Bunnpris and Coop, (ICA piked out), to a meeting to clarify why the food prices in Norway had increased 3.2% from June to July, ten times more than expected. Fruit had jumped up 5% and vegetables 4.4%. (Airplane fares rose 13.9%, while books, newspapers and stationery rose 6.3%.) The heads of groceries started pointing fingers at the vendors and the farmers.
Minister for Agriculture and Food in Norway, Sylvi Listhaug
Upon reading article after article on this topic I began to realize that a big price rise is expected in summer in Norway. Everything goes up because of inflation and the reason why there is such a cliff jump is because the following month most Norwegians get about a 3% wage rise. (Which is not as good as it sounds when you consider I, like many others, also got a 4% tax rise!) But food rising so high in one month, surpassing your wage inflation even before you get your first check, is a little deviant.
One of the contributing factors for such a price hike is that there are no real watchdogs in the Norwegian industry. (They say there are but they certainly aren’t doing their job when it comes to fair-trade.) There is no need for them as basically the industry is so ‘small’ that there is only a handful to watch. When I say ‘small’, I don’t mean the market is small, but that there aren’t many producers in each market. That is because the few producers have a monopoly. Norway did right in trying to protect the little guy way back when, but now the little guy has created cooperatives, big unions, big industry, that has taken over all the market. Things haven’t changed; the government is still protecting them, but now these are monopolizing companies, which influence tough import laws and make it difficult for startups.
A Conservative spokesperson, Gunnar A. Gundersen, believes the industry is characterized by strong market concentration and weak competition both on the supply side and retail side. I think this is the key issue for the whole industry. Companies such as Tine (dairy) started off as small farmer cooperatives to help develop the industry. Now it has turned into an industry dominator, for example, in the north of Norway Tine milk is the only milk available, and any startups are squished before they see the light of day. They are in partnership with the government making rules and regulations that they know new small businesses can’t afford to keep up. It’s about taking down the little guy. I’ve seen this done with bigger shops opening up next to small family businesses strangling them. Likewise with other industries – a startup newspaper in Harstad got throttled by the dominant conglomerate – small businesses in the end were too scared to do business with the newcomer for fear of being exiled from all other advertising opportunities. The Harstad newspaper played dirty. There seems to be no rules in protecting small and family businesses. Major shops like Kiwi are edging into the small shop area with little ‘super’ store concepts that don’t go over the square meter limit for Sunday trading. They are taking over the small business domain. Competition is not tolerated , import or local, and that means higher prices all round.
As it is today the Norwegian grocery market is dominated by four major brands: Norgesgruppen, Coop Norway, REMA 1000 and ICA Norway. Norgesgruppen has a market share of 39.3 percent, which includes Kiwi, Joker, Spar, Meny and Ultra. Coop has a market share of 22.7 percent, which includes Coop Mega, Coop Obs!, Coop Marked, Coop Extra, and more. They are ‘owned’ by consumer cooperatives in Norway. Rema 1000 has a market share of 23.1 per cent. ICA Norway, owned by the Swedes, has a market share of 11.1 percent, which includes ICA Supermarket, ICA Nær and Matkroken. Collectively that is 96% of the market dominated by only four brands!
Professor Ivar Gaasland at the Department of Economics at the University of Bergen believes that the only political choice may be to make cuts in tariffs and import protection. He said there needs to be a strategy to undermine the customs and import protection and produce cooperatives. Marketing Competition Director Christine B. Meyer points out that the concern goes beyond import protection, which makes it difficult to buy cheap foreign goods, import tariffs also leads to few suppliers and this in turn makes it difficult for new brands to establish themselves in Norway.
Because it is so difficult to import to Norway, farmers virtually have no competition on certain goods. And when the word ‘farmers’ is used, they mean huge cooperatives that farmers have to be a part of to prevent themselves from getting squished out of the market. The Head of Merchandising at BI, Odd Gisholt, believes the price rise was due to import restrictions and the control of ‘farmers’. “I believe that the government should alleviate some of this protection against farmers. It is clear that if it is difficult for others to establish themselves on the Norwegian market, it creates less diversity and higher prices”, he said.
Christian Anton Smedshaug from Agri Analyse said that there have been no major changes in international commodity prices. There has only been a slight increase of some vegetables due to drought, but for the major products of grain and milk there has been no significant price changes. So there has been a lot of finger pointing – ICA blaming the meat companies, the meat companies blaming the supermarket for ‘turning up’ their prices, the Agricultural agreement, import taxes, cocoa supplies – all pointed at, except one direction… Sellers, farmers and manufacturers know they can charge so much because Norwegians will pay for it. Norwegian sellers know this better than anyone.
So because there are no active watchdogs, Minister Listhaug herself has begun a hunt to track down where all the price hikes have come from. It is an arduous task because it crosses many industries, many hands, but she is beginning to reveal an important picture. Just one of her discoveries that proves supermarkets have a large responsibility for the price rise, Listhaug found that eggs had increased 7.5% and it emerged through investigation that suppliers only account for 4% of this increase – supermarkets hiked the rest. The Minister stated that there is insufficient competition in the market (products and supermarkets) and better competition will make goods cheaper for Norwegian consumers. (Today there is basically only one major egg supplier and all farmers around the country must transport their eggs to that factory to be redistributed. )
On Listhaug’s price hike hunt she also discovered that importers, food chains and manufacturers basically hike up the price when they sell to Norway. (I see this a lot with various products – the exact same SAS flight, with the same route and days (basically on the same plane!), bought from Australia is significantly lower than if bought from Norway.) The Minister drew a price comparison of a range of duty free goods between Norwegian and Swedish imports, and the price rise in Norway could only be explained through the margins of the importers, food chains and manufacturers, therefore suggesting that all have hiked prices because their products were going to Norway. She also compare relative prices with other countries including the UK. It turns out Norwegians consumers have the most expensive non-alcoholic drink, milk, bread, cheese and fruit in Europe. A shopping basket costing NOK1040 in Britian will cost a Norwegian NOK1860.
There will likely come a point when Norway will just not care enough about this issue anymore and give in to paying more, because, well, ‘this is Norway’. Now you may be thinking that Norwegians are suckers and they deserve to pay more if they can’t be bothered to fight it, but not fighting is a cultural habit, and putting up with the way things are still doesn’t make the-way-things-are right. It will start to effect tourism, population growth through immigration, and create an economic bubble, frustrating industry and international business. Not all Norwegians are wealthy, practically every average family has to have two incomes to live an average Norwegian life, and many can’t earn enough to buy a house in the bigger cities. Living in a ‘rich’ country certainly doesn’t mean the people are rich. The State may be considered ‘rich’ by the governments of the world but a lot of average Norwegian families struggle with living a modern live, just like other average families in other countries. The price rise theoretically means that each family will have to pay an extra NOK1792 a year in food alone (about $300), which is more than ten times the increase in the Norwegian consumer price index. But, in actuality, they will be paying a lot more. Where we live in the north, yoghurt has gone up 50%, cheese has gone up 20%, small meats like ham has gone up 30%, bread, butter, meat, eggs have all gone up at least 10-30%, and that stuff matters when you add it all up each week. Plus there is the supermarket math geniuses we have to deal with e.v.e.r.y day, no joke: