Nordic Food Markets - 3. The Consumer

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"Nordic Food Markets"

3. The Consumer

3.1 Introduction

Consumers' income, taste and shopping habits play an important role for the prices and the product range marketed by the supermarkets in a country. Differences in consumers' preferences and habits, as well as climate, urbanization and logistics will be reflected in the different price levels and the product portfolios between countries.

The Working Group has therefore looked closer into the consumer habits and the preferences, income levels, demography etc. in the Nordic countries.

Differences in traditions, buying habits and the pattern of settlement vary from one country to another make it more difficult to compare business conditions across the countries. The differences in consumer preferences can also influence further Nordic integration, especially as they only change very slowly.

Mobility has gradually increased following longer distances between home and work. Also, private cross border trade has increased, especially for such articles as beer and soft drinks. Moreover increasing spare time has been accompanied by consumers travelling more and more. This includes travelling abroad, acquiring foreign food habits and trying foreign products. Such travelling and acquaintances with other living patterns make it easier for retailers to stock and sell foreign products, which their customers already have experienced.

Nordic integration, however, does not mean that consumers in each of the Nordic countries shall buy exactly the same goods or eat the same food. Diversity and variation in the food assortment are important elements, so further integration must take account of the cultural differences but at the same time ensure, that technical elements, demand from authorities or competition restrictions do not built up barriers to integration.

3.2 Population conditions

3.2.1 Income and consumption rates

Income is an important factor in explaining differences and developing of consumption levels and patterns. Gross domestic product (GDP) can be considered as an indicator of the aggregated income level. In table 3.1, GDP per inhabitant in purchasing power standards has been compared for different countries.

Table 3.1. Gross domestic product in € per inhabitant in fixed prices (1995 prices and exchange rates)

Source: Eurostat

In 2003 GDP per capita was high in the Nordic countries compared to the European average. Moreover, income levels in the Nordic countries are close to each other and have grown more or less at the same rate during recent years. Finland has started from the lowest level, but is among the countries with the strongest relative growth during the last 10 years.

A higher income does not necessarily lead to a corresponding increase in food consumption. Consumers require more or less the same amount of food no matter how much money they earn. Rich people buy more expensive food, food of better quality and food which does not require a lot of time to prepare. However, food expenditure's share of total expenditure does not remain at the same level, when income starts to increase. Rather statistics show a small but steady decline in food expenditures share when income grows, cf. table 3.2.

Thus there is a clear tendency for the richest countries to spend a smaller share of total expenditures on food and more on travels, housing and amusements, although there is no fixed relationship. Over time there has been a change in the ratio between these factors and decrease in share used on food in all the European countries and the US. Food expenditure in the US is only 7.1 per cent of the total expenditure, while European countries on average use 12.8 per cent.

Table 3.2. Consumption of food and non alcoholic beverages (% of household expenditures) 1993-2003

Source: Eurostat
Note 1. According to SSB in Norway the food consumption rate for 2004 is 11-12%.
Note 2. Year 2002
Note 3. Year 2000
Note 4. Source: Statistic Iceland and the Icelandic Competition Authority

From this it appears that there are only small differences among the Nordic countries regarding to food expenditure rate. When nations have higher food expenditure than the average this may be interpreted either as an indication of higher prices for food, better quality or that they consume more expensive food (e.g. meat) than others – or a combination of the three.

High income makes it possible to use money on more and better food or on other non-food items, and even though higher income results in a decrease in the food expenditure's share as a percentage of total consumption the connection is clearly illustrated in figure
3.1. This shows the relation between change in income and change in food expenditure.

But also price level plays a role, c.f. the observations from chapter 2. This is illustrated when you look at Finland, who experienced a period of falling prices on food just when joining the EU in 1995 Finland stands out as a country with a low increase in food expenditure in this period compared to income growth. Sweden too has lower growth than other countries with a comparable development in income.

Figure 3.1. Change in disposable income and expenditures on food and beverages, 1993-2003

Source: Eurostat, SSB, Statistic Iceland.

The figures confirm the close relation between income³³ and food expenditure, but they also reveal that income is not the only factor. Among other things that may influence – beside income – can be mentioned age spread, size and composition of households, urbanisation, women's employment patterns, etc.

3.2.2 Demography

People buy different kinds of food as they grow older. Young people buy more fast food and are keener on trying new products. However figures on age spread in the Nordic countries only differentiate a little from the rest of Europe and therefore age cannot be considered a significant element.

Next, the number of households in the Nordic countries shows a minor increase due to a change to more single households. The average household is smaller in Northern Europe but the differences are of minor importance.

A third factor which may influence shopping pattern and habits is the proportion of people working. All over Europe there has been a significant change in the proportion of women working, but still Nordic women have a significant higher employment rate than the European average with Iceland in top with nearly 80 per cent. This leads to a higher total income and may affect shopping patterns, for example through an increasing demand for easier food solutions as fast food etc.

Also location of the families influences shopping patterns. The distance to shopping opportunities affects consumer's choice and the competition. Therefore, it may influence competition conditions that the population density (capita pr. km²) is significantly higher in Central and Southern Europe than in the North, cf table 3.3. This implies that the consumers may have longer transportation distances to their favourite supermarkets.

Table 3.3. Population density and urbanisation, 2002

Source: World Bank statistics.

However, except from in Finland, a high percentage of the Nordic people live concentrated in urban environments very much the same way as they do in countries like France and Germany. As the shops are generally situated where their costumers are, either in the cities or close to the main roads leading to and from the cities, it seems fair to conclude, that differences in the settlement pattern do not contribute significantly to explain the high prices and the limited supply.

3.2.3 Shopping habits and choice of grocery store

Shopping habits change over time and shopping habits in the Nordic countries have in many ways changed in the same way due to the similar development in living conditions.

A general trend is that consumers do not plan their shopping as much as earlier but act more on impulse. It is estimated that 75 per cent of total purchases in the Nordic food shops are decided after the arrival to the shop³⁴.

Location, price, products assortment, quality and service are usually the most important elements when the consumers decide where to shop. The shopping pattern is essential local, as a great majority of consumers travel no more than 10 minutes in car to the supermarket in urban areas. But shopping is more and more divided into the daily shopping and weekend shopping. In the last situation, time and price are not as important as assortment and service.

A large amount of consumers – in Denmark more than 90 per cent - read the weekly promotional brochures and get inspiration from these to decide where to shop³⁵.

There is focus on price, which makes discount shops the daily choice, but at the same time consumers are seeking diversity in their shopping. Focus on price and quality at the same time have made consumers more value-orientated. Value for money is not necessarily equivalent to the lowest price but express a demand for best product to lowest possible price.

Scandinavian consumers have a very high frequency of visits to groceries compared with other Europeans³⁶. There are some differences among Nordic consumers related to accessibility. The buying culture in Denmark is characterized by a high accessibility to shops due to the large number of shops, which result in smaller purchases each time. Consumers in Sweden, Norway and Finland have longer distances, which results in a greater average purchase. 45 per cent of the Danish consumers visit a grocery store more than 4 times a week, while the Swedes are the least frequent shoppers, cf. table 3.4.

Table 3.4. Number of visits to grocery stores per week 2004

Source: ACNielsen Nordic Market Monitor 2004

3.3 Consumer's habits, traditions and preferences

Consumption of various kinds of food shows very large differences between the Nordic countries. Since 1990 the consumption of meat has increased considerably in all countries. Meat is expensive food and the increased consumption is probably a result of the growth in income. Denmark is the country among the Nordic countries with the highest meat consumption. There is tradition for eating meat in Denmark due to a large and well developed agricultural sector. Each Dane eats 114 kg meat per year, cf. figure 3.2.

Figure 3.2. Consumption of meat in the Nordic countries 1990-2002

Source: FAO Statistic 2005

In the same way, there are large variations in the consumption of fish, bread, milk and beer, cf. fig 3.3. National consumption preferences seem to some extent to follow the national productions pattern. E.g. consumption of fish is high in Norway and Iceland. As to consumption of beer, it is worthy of note that there are quite heavy taxes on beer in Norway plus restrictions on sale of beer in supermarkets in Sweden, Norway, Finland and Iceland. This probably influences the consumption in these countries.

In all Nordic countries consumers mainly prefer products from their own domestic suppliers. Sometimes local producers, such as the local brewery or abattoir, are the preferred choice. In other cases consumers are accustomed to certain types of food almost exclusively produced within a certain country or region. Such habits of taste takes a long time to change even though consumers to some extent are getting more international in their choice of food and more interested in foreign food. Also cross border trade of food are considerable. Still cross border trade of beer and soft drinks mostly are motivated by tax conditions. These differences are also reflected in differences in the range of food products in the separate countries. Rema 1000 and Netto can be mentioned as an example; they are represented in more than one Nordic country but both have adjusted their range of food to the local taste.

Figure 3.3. Consumption in Nordic and other countries, 2002

Source: FAO Stat 2005, Danish Dairy Board, Danish Brewery Board, Statistic Iceland

Consumers also have a tendency to remain loyal to well-known brands and products, and once customers in one country have become accustomed to a certain type of food, there are several examples where they largely stick to that type. Sales of cheese clearly show that there exist different preferences throughout the Nordic countries, and these are, in comparison with other European countries, difficult to change. The cheese eaten by Swedes is distinctly harder than the variety favoured by Danes, and Norwegians prefer their own whey cheese and goat cheese. Unlike in the Nordic countries where cheese is eaten for breakfast, cheese is mainly eaten as a last course in Southern Europe. Another example is sales of bread. Traditionally, Danes buy a lot of dark bread, whereas Swedes prefer sweet-sour bolted rye bread, crisp bread or crisp rolls.

Also the individual product varies with taste preferences. The type of ketchup preferred in Denmark is sweeter than in other countries, whereas less and less sugar is added to a product such as yoghurt in the more northerly countries. In France and Germany yoghurt is sweeter than in the Nordic countries where yoghurt is eaten for breakfast, whereas further south, yoghurt is eaten for a dessert.

Demands of freshness are a factor too. If consumers prefer that the products are fresh, transport across long distances is a limited option. In Denmark this is the case with milk, for example. Milk is marketed according to whether it has been drawn from the cow within the past 24 hours. Freshness and domestic preferences are also essential to the demand for fruit and vegetables as domestic products in season can be sold at higher prices than imports.

Also eating-habits differ. Cold breakfast is common in all Nordic countries, the preferred food being bread, yoghurt and coffee. However, Swedes eat more yoghurt and they use crisp bread, whereas Danes eat roles. Danes and Norwegians traditionally take a cold meal at lunch, while the Swedes and the Finns more often take a hot meal both at lunch time and at dinner. Danes have a lot of open sandwiches (which influences bread consumption). Lunch in Sweden and Finland are often served in a staffed restaurant or at an ordinary restaurant. Eating coupons is common as part of the wage. Moreover, coffee-breaks during the day including a small meal is quite normal in Sweden too.

The differences between the countries are even greater as far as our drinking habits are concerned. Many Finns drink milk at their main meal (30 per cent), in Sweden and Denmark the corresponding numbers are around 17 per cent, while only 14 per cent of the British drink milk. There are also major differences concerning alcoholic beverages. In Denmark more than 20 per cent drinks beer or wine to dinner, in Sweden, Norway and Finland this figure does not exceed five per cent and in Sweden it is low-alcoholic beer. To a large extent, the Norwegians drink juice and cordial³⁷ to dinner (17 per cent). The corresponding figure in Sweden is 10 per cent, in Denmark (13 per cent), followed by Finland (10 per cent).

As to eating habits most Danes prefer to eat dinner at home (83 per cent) followed by Norway (79 per cent). In Sweden and Finland every fifth inhabitant does not eat dinner at all. Home cooked meals are most popular in all countries. 70-80 per cent of the population eat a home-made dinner. Finns are a little more fond of take-away meals than the rest of the Nordic population. On the average 7 per cent enjoy a take-away meal. This is close to the situation in UK where some 10 per cent eat take-away meals for dinner³⁸.

Great differences in eating habits occur especially at the main festivals. At Christmas a majority of the Danes eat roasted pork or roasted duck, Swedes eat Christmas ham (special salted pork) and Norwegians enjoy rack of lamb ribs, breast of pork or cured cod “lutefish” specially prepared for several days and very much an acquired taste.

Thus, the eating habits are very national, but probably not more national than you see all over Europe.

3.4 Common trends

Although there are differences in the consumption patterns in the Nordic countries owing to traditions and habits, there are many general tendencies which are common as well, even though they may not have the same impact everywhere.

International fashion, trends and reactions to animal deceases have an impact on consumption in most countries. Diet-conscious consumers demand new low-calorie products and products with lower levels of fats, sugar and salt. Other major drivers for food innovation are convenience and ethics.

As consumers have become more wealthy, their demand for adequate variety, quantity and safety has increased, including aesthetic attributes to concerns about how food is made, and the impact that food production techniques have on the environment and on animal welfare.

Consumers are willing to pay for more variety when they make their choice of food products. A recent survey in Denmark about the demand for milk products showed that consumers are interested in high quality and a broad range of different products also when they are planning their shopping of standard products such as liquid milk.³⁹

The increasing focus on “soft values” has lead to demand for ensuring consumers access to information about these values among this ethical labelling (environment, animal-wel-fare, human rights etc.) as well as labels with information on additives such as contents of sugar, salt etc.

Through objective labelling it is possible to provide consumers correct information on how the food has been produced according to stated production methods. At the same like it is necessary with an efficient control system to ensure that consumers get value for money. Most products with special labels are more expensive than conventional product.

Different standards on “soft values” and control systems can, however, create problems for cross-border travel.

Some international labelling is already well known in several countries. Examples are the Nordic Swan, introduced by the Nordic Council of Ministers in 1989, and the EU Flower – both labels guarantee a high environmental standard. Another example is Max Havelaar – the fair trade label.

Most initiatives to promote soft values, however, have been national.

An area where labels have importance is organic food. The overriding ideological objectives for organic agriculture are to create a sustainable production which, according to Codex Alimentarius⁴⁰, shall promote and enhance the health of the agro-ecosystem, including biodiversity, the biological cycles and the biological activity of the soil⁴¹.

EU has its own logo to be put on organic products if they live up to the specified standard - though there is a transitional period until August 2005 where conventional feed may be used within a set limit. However, national and private organic logos may still be used. This means that consumers may come across a number of different national and private organic labels not known outside the particular country but with high national marketing value. In Denmark the Ø label is used, in Finland Luomu, in Norway Debio and in Sweden KRAV.

Food safety is another important issue for consumers. Food safety has implied lasting changes in consumers' perceptions and purchasing patterns and governments' regulation. There are analogous issues about labelling etc here.

EU/EEA has a set of some common rules e.g. on control, inspections and labelling for each part of the entire food chain. Some countries have implemented further initiatives to ensure food safety. For instance, Danish legislation has established a systematic supervision of all food enterprises (supermarkets, bakeries, restaurants, etc.) ending up with “Smiley” labels, which is made public to customers at the entrance, giving information about the hygienic condition. A similar model is under discussion in Sweden.

Organic food consumption

The growing interest in animal welfare and food made without the use of fertilizers, pesticides and animal medicines has gained a foothold all over the western world, though not to the same extent in all countries. This interest has especially had an impact on consumption of organic food products.

Organic foods are distinguished from non-organic foods by the methods used in their production and processing. The sector has been regulated by EU since 1991, but EU regulation covering animal management first came into power from 2000. Organic rules prohibit use of synthetic fertilizers, pesticides, growth regulators, livestock feed additives and require long-term soil management, emphasis on animal welfare and extensive record keeping and planning. Certain activities such as use of genetically modified stock and food irradiation are prohibited.

Consumption of organic food is to some degree related to socio-demographic factors. Most studies characterize organic consumers as affluent, well-educated and with high purchasing power. They are concerned about health and product quality. The propensity to purchase organic food is higher in urban areas than in rural areas, particularly in and around metropolitan areas.

Reasons for purchasing organics are similar across countries. In Europe and the US, taste, freshness and quality rank among the top reasons for organic purchases. Most regular consumers favour locally grown organic products, when available, in an effort to support local farmers and ensure freshness.

World wide markets for organic food are expanding, with annual growth rates of 15 to 30 per cent in Europe, the US and Japan for the last 5 years, but there are no official foreign trade statistic, which makes it possible to give a comprehensive picture of international trade in organic food products. According to estimates by International Trade centre UNCTAD/WTO the world retail market for organic food and beverages increased from US dollars 10 billion in 1997 to US dollars 17.5 billion in 2000. However, some markets e.g. Germany and the Netherlands have grown slowly (probably by less than 10 per cent), while others e.g. Denmark and Switzerland, at least until recently, have grown much more rapidly (up to 40 per cent annually or more in some years)⁴².

World wide estimates (by country) for 2000 are given in table 3.5. Though total sales figures are impressive, organic sales as “ per cent of total sales” are still quite small (1-6 per cent).

The highest organic market shares are estimated for Denmark, Sweden, Austria and Switzerland, and it seems as if organic food keeps the highest market share in countries with small populations.

Table 3.5. The International Market for Organic Products – estimates for 2000 (ITC 2001)

Source: http://www.intracen.org/
Note 1. Source: Nordisk Ministerråd. Development in the Nordic Baltic Market for Organic Food.
Note 2. Source: Raadsnyt Landbrugsraadet: Økologi I Nordisk dagligvarehandel 4. juni 2004

There is substantial variation in market shares across product categories. Cereals and baked goods, fresh products, especially vegetables and dairy products, hold the largest organic market shares.

An important factor in the development of organic markets seems to be the fact that the retail sector in some Nordic countries uses organic products in an increasingly aggressive and targeted marketing and promotion. A similar effect is likely to result from the fact that major food manufacturers are developing organic food lines. In addition there are scale advantages, which means a tendency to reduced price premiums for organic food when this is produced and marketed in a larger scale.

Thus, investigations has documented that consumer price premiums are lowest in countries with large organic market shares and a high percentage of distribution through supermarkets. The combination of market size and supermarket involvement is thought to reduce distribution costs and exert downward pressure on consumer price premiums. Due to their large customer base, supermarkets can generate turnover more quickly, thus saving money and maintaining product appearance and quality.

Consumer price observations in 14 groceries in Europe have documented price premiums for organic food averaging +35 per cent in Denmark, +43 per cent in Austria, +53 per cent in France, +54 per cent in the UK and +67 per cent in Germany.

3.5 Conclusions

Four main conclusions can be drawn regarding the attributes of the Nordic food consumer.

First, there are significant differences in what we eat, where we do our shopping, how often we visit the shops and what we consider important for our choice of grocery store. Hence, the Nordic countries do not by themselves represent a homogenous kind of food demand.

Second, in spite of these dissimilarities, the Nordic consumers are relatively similar in terms of demographic characteristics. Compared with other major European countries, the income levels, age distributions, household sizes, localisation patterns, etc. are close to each other and seem not in any significant way to explain the differences.

Third, although the interest and demand for exotic and foreign food stuffs has grown, most Nordic consumers are fairly traditional in their choices. National dishes still dominate the kitchen table for dinner.

Fourth, along with a slowly rising interest for foreign food, other aspects are becoming more important. There are tendencies that, at least for certain groups of consumers, demand for quality grows stronger. Also, ethical values have spurred an increase in the consumption of organic products and food processing that fulfils certain solidarity objectives.

Fodnoter

33 Disposable income is in current prices.

34 Source: Retail Institute of Scandinavia: Skandinavisk dagligvarehandel 2003-2008.

35 Source: Jyllandsposten, 11. October 2005.

36 Source: ACNielsen

37 Sweet non-alcoholic drink made from fruit juice

38 Source: http://www.tetrapak.com/ (major similarities at the dinner table 2003).

39 Source: Royal Veterinary University, Denmark – Milk test 2005.

40 Codex Alimentarius is an independent commission under FAO and WHO, created to develop food standards and guidelines.

41 Source: Nordic Council: Ethical Labelling of Food - 2004

42 Source: Organic Agriculture Worldwide 2002.

Version 1.0 December 2005 • © Danish Competition Authority.
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