Daily Goods, Politics | 80% of the ground beef is the stores’ own brand

On Friday, the consultation deadline expired for more than 100 actors who have been asked to provide input in cases of unfair price discrimination in the food sector.

The proposal contains new rules for suppliers’ negotiations with grocery stores – by the way, it will no longer be possible to negotiate prices that cannot be objectively substantiated.

The farm team: – Poorer selection

– When chains can no longer negotiate different prices with branded suppliers, we fear they will instead use their own brands (EMV) to distinguish themselves from each other. It will give less selection and more power to grocery chains at the expense of suppliers that are partly owned by the farmer himself, Bjørn Gimming, head of the Norwegian Farmers’ Association, tells Nettavisen.

Own brands (EMV) are brands owned by the chains themselves. In Norgesgruppen stores you will find them under brands such as; First price, Eldorado and Jacobs. At Rema 1000 and Oda, such as Prima, Kolonihaven and Nordfjord. And in Coop they go under Smak, Xtra and Änglamark, among others.

NielsenIQ maintains EMV statistics of total turnover for Norgesgruppen, Coop, Rema and Bunnpris. According to 2021 data, 17.6 percent of the total turnover was EMV, amounting to NOK 208.1 billion.

But for ground beef and stuffing, the EMV adds up to a whopping 78.5%. This worries the leader of the Farmers Association. He points out that name-brand ground beef is hard to find in many grocery stores.

– More power to the chains

Gimming in Bondelaget believes the proposed austerity measures have the wrong target.

– Firstly, we believe that this regulatory proposal is a derailment in the debate, where some chains have managed to bring attention back to suppliers. This is despite the fact that committee after committee has determined that power has shifted from suppliers to chains, he says.

He believes other measures are far better, such as better labeling and tracking of EMV and explaining price differences on EMV compared to other products.

– When chains can no longer negotiate different prices with brand suppliers, we fear they will instead use EMV to differentiate themselves from each other. It will give scarcer selection and more power to grocery chains at the expense of suppliers that are partly owned by the farmer himself, Gimming says and elaborates:

– Chains can cross-subsidize their products and do not have to spend capital to pay for placement and distribution on shelves.

So it quickly becomes more difficult for consumers to see who produced the product and where it came from, which the farmer would like to showcase, believes the leader of the Farmers Association.

– Both the government and Storting want to regulate EMV, but this proposal could undermine future measures by allowing more use of EMV. We also fear that the measure could lead to more imports, as it could become a way for chains to differentiate themselves from one another with different products, he says.

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– Don’t recognize us

There is no question that EMV is heavily represented in the refrigerated counters of grocery stores.

In the Coop chain, several brands have been replaced with Coop Smak or the budget brand Xtra. Here Prior products have been replaced with Den Fools Hane meat.

– Coop is the chain with the largest share of Norwegian raw materials in meat, dairy products, fruit and vegetables. We are also the chain with the largest share of Gilde og Tine products and do not recognize claims that our brands are displacing brands. Extra has 1,800 more items than other discount stores. We are concerned that customers themselves should be able to choose what they put in their shopping cart and therefore have a mix of our brands and those in the industry, he says.

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Legal Expert: Actors will abuse the regulation against each other

It is not only suppliers who are skeptical of the proposed restriction in the food market. Professor Erling Hjelmeng from the private law department at the University of Oslo is also critical of the proposal.

As for claims that austerity measures will lead to more own brands in stores, he also believes this could have a negative effect on grocery store customers.

– It will be more difficult for consumers to compare prices because both packaging and quality will be different, and therefore it can be difficult to make an overall assessment, says the professor.

Random samples taken by Nettavisen show, for example, that the cheaper ground beef in discount chains has a different quality. Some have salt and water in the cheapest option, while others don’t.

He says more EMV doesn’t automatically translate into lower prices, as chains’ own brands aren’t limited to just cheap products. Jacobs hos Meny, Spar and Kiwi is an example of a separate brand within the quality category.

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– Can cause significant harm to consumers

However, Hjelmeng is very concerned that the new proposal suggests that the rules of the regulation can obviously be used strategically by both suppliers and grocery chains in negotiations.

– If you design a regulation that gets it wrong and limits incentives to trade, you will cause significant harm to consumers, in the form of higher prices, he says, and explains:

– You can push the regulations in front of you to generally request a discount and claim that if I don’t get it, it will be unfair discrimination, she says.

Hjelmeng points out that suppliers will be able to refer to regulations to refuse to give discounts, while smaller chains will be able to refer to regulations to request further discounts.

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It is not clear what is unfair

Both Hjelmeng and other sources Nettavisen spoke to point out that it is unclear and confusing what is meant by factual and non-factual justification under various conditions of purchase.

– Whether something is unfair or unfair in an industry with such obvious conflicts of interest, the answer depends on who you ask. Therefore, I think this needs to be defined more closely. Here you have to have a blacklist of what’s not right and a whitelist of what’s right, she says.

Hjelmeng also points out that it is unclear who will be affected by the proposed regulations, as the proposal is currently being conceived.

– How should the actors know what kind of leeway they now have in the negotiations?

– It is not very clear why the regulation repeats many of the same ambiguities that are already present in §11 of the competition law. Among other things, you have to define a relevant market, which is difficult. If simplification is not achieved, there is no point in introducing the notified regulation, he says.

Rema 1000: – Better conditions will result in cheaper food

For years, Rema 1000 has stressed that its competitor, Norgesgruppen, which is behind Kiwi and Meny among others, gets better purchasing conditions from its suppliers. The Norwegian competition authority previously revealed that Norgesgruppen had up to 15% better buying terms with its suppliers. However, the latest report from the Norwegian competition authority shows that the differences are narrowing and smaller than before.

– Giving pure loyalty discounts, because the chain is important and large, is illegal when you are the dominant supplier, Tor Erik Aag, commercial director of Oda, told Nettavisen earlier.

Aag said they wanted the unexplained performances to stop. And he said, among other things, that better terms meant that Norgesgruppen favored the dominant suppliers over the smaller ones. The Norgesgruppen scoffed at the statement and asked Oda to report them if they thought anything illegal had happened.

Reitan Retail, owner of Rema, welcomes the new regulations. In the autumn, they sent politicians a proposal to improve the planned austerity measures.

This is how Kårstein Eidem Løvaas, an authority contact at Reitan Retail, responds to Hjelmeng’s claim that regulations can be used as a means of lobbying in negotiations.

– He is right that if the definitions in the regulations are not good enough, discussions will open later. That’s why we’ve recorded definitions on this for the ministry, he says.

– Concentration of power with suppliers

– How do you comment on Gimming’s move if it can be described as a derailment to shift attention from chains to suppliers?

– Over the past 15-20 years, we have seen that concentration in both the supply chain and ring is only increasing. When we’ve been driving down the wrong road for over 15 years, this isn’t a derailment, but we flip the switch and we’re on the right road, he says.

Løvaas promises that if they get better terms from the suppliers, they will stock the goods in the Rema 1000 stores. He then announces that the proposal will lead to higher prices for the consumer.

Both Reitan Retail and Coop point out that the use of EMV is the direct reason why they have worse purchasing conditions than Norgesgruppen. Eidem Løvaas predicts Gimming’s opposite in the Farmers’ League. He believes that if nothing is done about unreasonable price differentiation on the side of the dominant supplier, EMV will become bigger.