– Can’t make as much money if the competition is tough – E24

The grocery chains tend to show low margins when the criticism rains down. That figure says very little, the Norwegian Competition Authority believes. They have found “super profit”.

On Tuesday morning, the Norwegian Competition Authority released a report on profits in the grocery industry.

The conclusion: The profitability for several of the actors is significantly higher than what one would expect.

– We think it is interesting that we find such high returns in such large parts of the grocery market, says Magnus Friis Reitan of the Competition Authority to E24.

– Says little

When grocery chains are criticized for increasing food prices, they usually point to low margins. This means that they are left with a relatively small share of all the money they receive.

– Looking only at the margins says little about the competition, says Friis Reitan (no relation to Rema-Reitan).

The figure becomes more relevant if you factor in how much the company has needed to invest, he says.

– Say that you only have a sales counter and that you do almost no work beyond buying goods in and selling them on. Then you can’t expect to have a high margin, but you can still earn very well in relation to what you need to invest.

The Norwegian Competition Authority has therefore chosen to focus on the return on the funds tied up in operations. That is, how much you get back for investments in shops, trucks, warehouses and so on.

This figure is consistently higher than one would expect, according to the inspectorate.

Super profit

They have compared the companies’ returns with what they calculate will be the industry’s return requirements.

This requirement is based on the fact that a company must expect to earn more from its own operations than it would by putting the money in a share portfolio with equivalent risk.

If you earn more than the return requirement, the term “super profit” is often used. A market with tougher competition makes it difficult to take out super profits.

For this report, the Norwegian Competition Authority has studied both suppliers suppliersCompanies that produce and sell food, drink and other groceries to the retail chains. Examples of large suppliers are Tine, Nortura, Orkla, Ringnes and Mills. , wholesalers wholesalers A company that resells goods without processing them. The grocery chains each own their own wholesaler. They buy in large quantities, collect them in a central warehouse, and send them out to the individual stores. and retailers retailersThe retail section that sells to the consumer. The Norwegian Competition Authority has analyzed Norgesgruppen, Rema owner Reitan and Coop. They account for most of all sales within the traditional grocery market. .

Among the sample’s suppliers, the inspectorate writes that most have a return that is “significantly higher than the estimated return requirement”. In other words: A significant proportion of the operating result is super profit.

The same applies to some of the actors among the grocery chains, writes the inspectorate.

– This supports our concern that the competition in the grocery industry is not good. You cannot make that much money, beyond normal returns, if you are disciplined by fierce competition, says Friis Reitan.

The wholesalers, who are owned by the grocery chains, have little super profit, according to the authority.

Friis Reitan says that they cannot participate in individual companies. Among other things, because the analysis is based on figures that are not public.

Take over the baton

The report produced by the Norwegian Competition Authority is the first of two that deals with profitability in the grocery industry.

The next one will be about different products. The task has been given to them by the government.

Finding out “where the money goes” is on the ten-point plan for grocery measures that Cecilie Myrseth has now taken over from Jan Christian Vestre (both Labor Party).

To E24, she says that she intends to follow up on her predecessor’s work.

– I am worried about the competition in the industry. There are few and very large players. This is something Vestre worked a lot on, and it is a baton I intend to take over.

She will have to come back to how the report is to be followed up after thoroughly familiarizing herself with it, says Myrseth.

At the same time, the Ministry of Trade and Industry is working on some unfinished matters from the ten-point plan. The first is a so-called market investigation tool, which gives the Norwegian Competition Authority more power.

The second is a proposal to prohibit certain forms of price discrimination.

Myrseth says that the first-mentioned measure is closest in time. The ministry aims to present a proposal before the summer.