Sweden sees 'cause for concern' on retailer margins as food prices surge

Axfood AB

26/06/2023 07:00

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      EU countries watching food prices closely
    

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      Sweden competition authority says sector 'oligopolistic'
    

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      Says margins 'had better be' connected to costs
    

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      But difficult to isolate exact cause of inflation
    

  
    By Marie Mannes
       STOCKHOLM, June 26 (Reuters) - Sweden's competition
authority has expressed concern about margins being charged by
supermarkets and wholesalers as it probes possible profiteering
in a country that saw the largest food price increases in the
Nordics this year.
    Food inflation is a key driver of the cost-of-living crisis
in a number of European countries, forcing some to impose price
caps on certain food items to help struggling consumers. 
    France's biggest food companies have pledged to cut prices
on hundreds of products from next month after being threatened
with financial sanctions if they didn't. Hungary also imposed
caps but will phase them out from August.
    Sweden's competition authority on Tuesday will publish the
initial findings from an investigation into food prices and
competition requested by Sweden's finance ministry in March.
    "When we look at the margins on the retail and wholesale
side, we see some cause of concern in terms of how they're
developing," Martin Mandorff, head of market abuse at the
competition authority, told Reuters.
    "The way the margins are developing, it had better be
connected to increasing cost, otherwise we might be quite
worried," said Mandorff.
    Mandorff said it is difficult to isolate cost factors like
energy prices and the Ukraine war from the competitive
landscape.
    The agency is investigating the whole food supply chain from
producers, wholesalers to the retail sector and has collected
data from Sweden's main supermarkets on prices and margins.
    The agency will request further information from the chains
and will publish additional findings later in the year. 
    
    OLIGOPOLISTIC
    Sweden's grocery sector is dominated by three main players,
making it an "oligopolistic" situation, Mandorff said. 
    Premium food chain ICA had a 53% market share in 2022
according to the competition authority. Axfood  AXFO.ST  and
Coop occupied most of the remainder. German discounter Lidl
entered Sweden in 2018 but in 2022 only had a 5.7% market share.
    Mandorff said recent high prices had led to higher
competitive pressure, with previously niche discount stores now
taking more market share, including from the largest players. 
    Finance Minister Elisabeth Svantesson called in the three
major supermarket chains for discussions earlier in the year to
answer for the high prices after which the supermarkets
temporarily cut prices on some products. 
    "We think, as a government, that it is enormously important
to make sure there is good competition in different markets,"
Svantesson told parliament last week.
    The minister told Swedish public broadcaster SVT in March
that companies should not unjustifiably raise their prices but
that politicians should not contemplate price caps.
    Axfood said it welcomed the investigation from the agency.
    "We have a frequent and constructive dialogue with the
Swedish Competition Authority and look forward to the
conclusions of the investigation," the company said. 
    ICA said it consists of 13,000 stores that are owned by
independent retailers that compete with each other, with the
prices being set by individual stores. 
    It added that it had reduced prices on everyday products and
continued to work on making long-term price reductions. 
    Coop declined to comment. 

 (Reporting by Marie Mannes, writing by Marie Mannes and Helen
Reid; additional reporting by Simon Johnson and Greta Rosen
Fondahn; Editing by Conor Humphries)
 ((marie.mannes@thomsonreuters.com; +46 8 502 423 82;))