(Nettavisen): – If we look at the inflation trend in neighboring countries, imported inflation is decreasing, while the Norwegian krone has strengthened. And here are some parts of the explanation for the price reduction that Extra is implementing, writes Håvard Jensen, director of the Extra chain, in a message to Nettavisen.
Price growth both in Norway and abroad has been skyrocketing in recent years, both due to the war in Ukraine, the coronavirus pandemic and other reasons. Nettavisen already mentioned earlier that pasta and cooking oil are products whose prices will increase in the winter of 2022, among other things due to the war in Ukraine.
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New direction
But now the arrows point in the opposite direction. The government believes, among other things, that price growth will be just 3.8% in 2024, down from 6.0% in 2023. The same picture is seen globally. According to the UN’s monthly food price report, the price of cereals and vegetable oils fell dramatically across the world during the year.
It also means that products purchased from Extra and other grocery chains will be cheaper. Extra’s manager says that the lower purchase prices are passed on to customers in the form of price reductions.
The prices of more than 150 items are reduced by up to 49%. This includes goods such as:
o Maisolje: -49%
o Spaghetti: – 38%
o Farris: -28%
o Mackerel skewered with tomato: -23%
o Lano shower soap: -20%
o Tortilla Chips: -19%
However, some assets are only cut by 1 or 2%. See the full overview here:
Pristak of the river
Extra declares at the same time that the price cap will be scrapped. A year and a half ago Extra launched so-called price caps on popular items. This means that the prices of the selected goods should remain the same or be lower. It is intended as a guarantee for customers and has also been practiced by Kiwi and Rema, but the system has also been criticized as a marketing ploy.
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– There will still be uncertainty about price trends in the future, but the underlying cost trend means that the price cap will not be as relevant to consumers as it was in the autumn of 2022. When was the price cap established , customers felt it was an important and correct measure. This effect has largely disappeared and customers are more interested in campaigns and offers, Jensen writes.
We are therefore going in the exact opposite direction to that of Rema, who announced shortly before the new year that he wanted to set a maximum price ceiling of 1,000 items, according to E24.
Currency and macroeconomic expert Dane Cekov of Nordea Markets believes that Extra’s initiative is very positive. According to him, such price reductions will in themselves contribute to renewed price increases in society.
– Food prices make up about 13% of the consumer price index, so it has something to say when big food chains cut prices or start a price war. What we usually see is that when one of the chains does this, the others follow suit, so I think Kiwi and Rema are going for price cuts, says Cekov.
Interest rate cut
Together, the three low-price chains Kiwi, Rema and Extra hold over 70% of the food market and dominate in total.
– The price cuts are good news for Norwegian families, for price growth and for Norges Bank, and can help achieve an interest rate cut as early as 2024, says Chekov.
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It has already initially estimated lower price growth later in the year, but believes it will take more time to affect other parts of goods trade.
– If you look at chains like Elkjøp and XXL, they order goods well in advance, so lower prices abroad will have no effect on prices in stores in Norway for many months. There’s something else about food prices, she says.
2024-01-02 09:35:35
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