Significant differences in income between various grocery products

A survey done by the Norwegian Competition Authority shows a significant difference in income between various grocery products. It also shows that grocery chains had lower margins for private labels (PL) than for the branded products in the selection.

The Norwegian Competition Authority has collected data from the three major grocery chains and several suppliers, covering a wide range of products in stores. The survey period is from 2020 to the first half of 2023. Based on these figures, the authority has calculated for each six month period:

• Gross and contribution margins for suppliers
• Gross margin for grocery chains (retail and wholesale combined)

By mapping gross margins, one can see what percentage over purchase cost suppliers or grocery chains charge. This percentage covers the cost of producing, transporting, and selling the products.

– The results show that there was a significant difference in income on various products in grocery stores. For example, grocery chains earned more from selling chocolate and snacks than from selling meat, says Beate Milford Berrefjord, Director of the Food, Trade, and Health Department at the Norwegian Competition Authority.

According to the survey, there was a large variation in the grocery chains’ gross margins across different product categories and across different suppliers’ product ranges. For example, the grocery chains’ gross margin on chocolate and snacks was over 40 percent during the period for both PL and branded products, while it was close to zero for the sale of meat (PL).

The survey also shows that there was a large variation in suppliers’ margins during the period, and that 70-95 percent of operating costs were related to cost of goods.

The Norwegian Competition Authority has also compared the development of branded and private label products during the period and finds that the grocery chains’ overall gross margin for own brand was 12 percentage points lower than for the selection of branded products surveyed. Part of the reason for this difference is that a selection of branded products was surveyed, while most own brand products were surveyed. There are product categories where own brand products have very low margins that were not surveyed for branded products.

– The survey does not provide a basis for saying whether grocery chains cross-subsidize between branded and own brand products in different product categories, says Kathrine Tvedt Lavik, Senior Advisor at the Food, Trade, and Health Department at the Norwegian Competition Authority.

Part 2 of the full report is available here (Norwegian only).