Nordic Food Markets - 1. Introduction
Face - Contents - Bottom - Previous/Next "Nordic Food Markets" 1. IntroductionThe Nordic food markets have undergone significant changes during recent years. Enterprises have grown, specialised and merged – both at the manufacturing level and at the retail stage. New players have entered the market and a number of new products and brands have been introduced. Lately, international discount chains have entered the Nordic food markets, at times provoking dramatic counter-measures by already established retailers. Retail chains have integrated vertically, taking over activities formerly performed by wholesalers and have formed buyer groups across borders to increase purchasing power. Producers experience that retailers have become stronger, seriously affecting vertical relationships. Are these developments only to the benefit of consumers? Not necessarily so. Whereas large corporate structures may be better able to enhance productivity, they also hold a strong position on the market. As profit-maximisers, consumers' share of the benefits depends on the existence of sound competition on the market. In any case and despite the changes, Nordic food prices appear to remain higher than in comparable European countries. Moreover, complaints are often raised about the variety and diversity of the food products available to consumers. To a certain extent, international differences in prices, quality and choice are natural and affected by factors such as climate, transport costs, wages, national preferences, retail structure and regulation. However, as the integration process of markets continues, these factors are expected to play a smaller role. Hence, we would expect to find Nordic and European food prices and product variety to converge over time. Is this the case? Whereas there are a number of sources for comparing food prices, there are virtually no studies on the differences of consumers' choice in the stores. In addition, food price comparisons between countries are intrinsically hard to interpret given the differences in taste and preferences, costs, exchange rates and retail structure. Some time ago the Nordic Competition Authorities identified a number of problems distorting competition in the food markets. The markets are fairly concentrated, entry barriers are substantial, markets are local meaning that consumers have few alternatives within reasonable distance, producers only distribution channels to the market are the retail chains, and so on. In the light of these developments, the Nordic Competition Authorities have performed a joint study with the purpose of identifying, analysing and proposing solutions to competition problems on Nordic food markets. Better competition will reduce food prices and widen the range of products available to consumers. In addition, it may stimulate the development of better products in the future. The study involved an examination of available evidence on consumer food prices and supply in the Nordic food markets in comparison with other European countries. Differences in demographic factors, as well as store structure and national preferences are examined. The regulatory framework is scrutinised, among other things the rules that affect opening hours, access to premises, food safety standards, deposit systems and so on. Further, the structure of the food industry is described, with the focus on the changing relations to retailers, including payments for preferential exposure and other marketing contributions. The report does not consider agricultural, fishery or regional policy areas. The results of the report are based on published sources, interviews with the players in the market, consultancy studies and in-house analyses. Parties which have provided substantial input have been invited to comment on draft versions of the report. The recommendations are developed with a Nordic perspective. Since the structural as well as the regulatory environment in the Nordic countries exhibit fundamental differences in some respects, it may be warranted to adjust the recommendations further in order to accommodate specific national conditions. The report is outlined as follows. Food price level and supply differences are presented in chapter 2. The chapter is based on published material as well as two new consultancy studies on promotional pricing and product choice. Chapter 3 describes the Nordic consumer with a European perspective. The following three chapters describe the competitive process in retailing (chapter 4), for the shelves (chapter 5) and in the food industry (chapter 6). Conclusions and recommendations are found in the beginning of the report. Version 1.0 December 2005 • © Danish Competition Authority. |