Price not always the most important thing for the consumer

The Competition Authority was tasked by the Government with analysing competition in the food supply chain, as well as the importance of the consumer in the development of production and retail.

“Increased imports have led to a wider range of products at lower prices. When consumers instead choose Swedish food, it is good for Swedish food production,” confirms Rikard Jermsten, Director General of the Swedish Competition Authority.

Digitalisation and the increased use of various labels improves the ability of consumers to inform themselves about the quality, origin, content and prices of products. This strengthens consumer trust in foodstuffs and their ability to make conscious, sustainable choices. Price competition is also strengthened, not least by e-commerce, as it becomes easier for consumers to make direct price comparisons.

The market concentration in the grocery retail market remains high. Consumers have been given more stores to choose from, but competition for attractive store locations is tough. An increase in the availability of stores, and improved conditions for new and smaller stakeholders to open up stores, may have a positive effect on competition.

“Store locations in attractive areas are still decisive competitive factors. The improvement in competition that has taken place is linked to municipalities allowing in more new stakeholders during the early 2000s,” confirms Director General Rikard Jermsten.

How the Swedish food industry continues to develop is also important to the growth of agriculture, given that much of the agricultural input undergo further processing in Sweden. A strong food industry most go hand in hand with robust primary production. It is however difficult for primary production and food companies to compete with foreign producers with a lower cost structure.

Public-sector procurement often has a strong focus on price, this despite the fact that tenders can, and should, cover a variety of different quality and sustainability requirements. Sustainability requirements in public procurement of foodstuffs can provide Swedish producers with better conditions to compete with imported produce, although this is often associated with a higher cost for public-sector buyers. There may also be a need for more work on encouraging small, local producers to tender.

“Unless more resources are committed and costs for buying raw produce are allowed to increase, in all likelihood we will not see any major changes in sustainability requirements for public-sector food procurement, nor in the number of small suppliers tendering,” says Rikard Jermsten.

Read the report, 2018:4 (in Swedish with a summary in English)