– I do not think it’s right.
One of the newest grocery chains in Norway, Iceland, has long planned to launch new stores and expand in Norway, but the search for the best premises is difficult.
Most recently in 2019, Iceland told Finansavisen that they planned to have seven to ten stores by the end of 2019, compared to five at the time.
Now in 2021, the company still has only five stores in Norway, and five will become four by the end of the month, as the store in Larvik will be closed.
CEO of Iceland Norway, Geir Olav Opheim, says it has been difficult to find new premises, and blames his competitors.
– We have encountered several cases where there is a vacant room that has been empty for a long period where Coop or Norgesgruppen has prevented it from being rented out to another grocery player. This is because clauses have been negotiated in the lease agreements between a grocery player and owners of shopping centers or larger properties that ensure the exclusive right to run a grocery store, Opheim tells Nettavisen.
The result will then be that the premises are empty rather than having an open shop in competition with the existing grocery players, according to the Iceland manager.
– I do not think it is right that larger players should be allowed to refuse that new players can establish themselves in vacant premises. That’s the least they could let us do, he points out.
At the same time, Iceland sees a better opportunity than it has for several years.
– This is because we see that several other retailers are moving their business from a physical store to an online store and then more premises become vacant. We therefore hope that there will be better access to good retail premises in the time ahead. When it comes to groceries, sales will probably to a large extent still be through physical stores, he says.
Delayed by one year due to the corona
The company is not only affected by sharp elbows from competitors, the corona also put an end to the expansion last year.
They also choose to close down the store in Larvik.
– Our product range is starting to become so large that we need larger premises. In addition, the store in Larvik was not ideally located. In May this year, we opened a new warehouse in Larvik. We are planning a delivery point for our online store connected to the warehouse, says Opheim to Nettavisen.
Iceland will continue to launch more stores in Norway, but the search for the perfect location is, as mentioned, difficult. The last time they planned to expand, the corona also put a stop to the plans.
– We spent more time raising capital than we had planned. We were delayed by one year due to the corona. March 2020 was not the time to raise new capital and expand.
Now they have raised around 30 million from both new and old investors. This enabled the company to accelerate growth.
– Now we are working on the plan from 2019. We will launch 2-10 new stores every year in the future.
Opheim explains that they have had a controlled growth. Since joining Norway in 2020, the company has doubled its revenues every year.
– If we double every year, this will eventually be very good, he says in a joking way.
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Iceland also has part of its product range at the supplier Oda and in the Europris stores.
A little over a week ago, they launched new frozen dishes in collaboration with TGI Fridays.
– It is a fun product series with 15 new products to begin with. Among other things, we will sell TGI Fridays’ chicken wings, mozzarella sticks, spare ribs and more cakes. I have great faith in these products.
– This is an industry where people get rich
Grocery expert Erik Fagerlid believes we should cheer on everyone who dares to challenge and establish themselves.
– The Norwegian grocery market needs more competition and new players. I have been cheering on Iceland all the time, says Fagerlid to Nettavisen.
Fagerlid points out that several of the richest in Norway have earned their money from the grocery trade, and with very little competition. Odd Reitan is Norway’s second richest man and started Rema 1000. Right behind in third place is Johan Johannson who owns Norgesgruppen.
– On the list of Norway’s 10 richest, more are engaged in the grocery trade. This is an industry where people get rich. Then you as an investor think that it may be possible to enter the market and make money. Despite this, no one enters the Norwegian grocery trade.
– Several foreign players have withdrawn from the Norwegian market. It is completely unnatural and shows that the competitive dynamics are difficult. The authorities are looking at how to change this. The Norwegian consumer deserves more resilient competition, he adds.
He believes Iceland has a solid concept.
– They have a strong brand, good products and they are driven by marketing. Then comes the difficult. We Norwegian consumers have a very established shopping pattern.
In the big cities we have grocery stores on almost every corner. Fagerlid points out that we have as many grocery stores in Norway as they have in England, despite the fact that they have a population of over 54 million.
– Then it does not matter much about where we go shopping. We find many of the same items and the same prices. What Iceland must achieve is to make us shop fewer times per week than the more than four store visits per week an average Norwegian has today, Fagerlid points out.
He believes that their competitive advantage may be that they have a product range that is different from what we are used to.
– When it is very similar with the other chains, consumers may feel bored and want to try new products.
Fagerlid thinks the collaboration with TGI Fridays can be exciting.
– They are dependent on customers finding something in the store that you do not get elsewhere. At the same time, the low-price chains are more than good enough for the average Norwegian family. They meet the needs. If I have been to Kiwi or Coop, I do not go to Iceland as well.
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– The established groceries will not see Iceland succeed
He also points to location as incredibly important for success in Norway.
– We shop on the way home from work, kindergarten and training. We are very reluctant to change our geographical pattern.
Here, the situation is also quite twisted for new players. There is a lot of competition for the same locations.
– The established groceries will not see Iceland succeed. They have financial muscle and can easily set up a store in an attractive location to take the location and prevent competition. This despite the fact that they already have another store that is close by and they will probably make little money on the new store.
It is not yet possible to regulate whether a chain can set up a new store near one of its already established stores.
– That case is a bit fixed with the authorities.
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E-commerce has also taken over the Norwegian consumer’s everyday life to the full during the pandemic, but Fagerlid believes it has not left its mark on the grocery trade.
– Oda has done great, but they are not close to earning as much as the grocery giants. They may be earning around what a couple of stores in a chain earn. Oda has not managed to irritate the big ones yet.
He believes e-commerce will take a more dominant position in the years to come.
– We do not need new stores, but we do need change. Oda is a change, Morning Delivery is a change and Iceland can be a change.
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– Of course rift about the best shop premises
Stein Rømmerud, Executive Vice President for Communications and Public Relations at NorgesGruppen, says that they always welcome new competitors.
– Competition sharpens the players and benefits customers, he says in an e-mail to Nettavisen.
Rømmerud explains that there is of course a rift about the best shop premises,
– It has always been so.
NorgesGruppen does not open stores that are not profitable and they generally do not make exclusive agreements.
– But if we have made large investments in developing an area for commercial operation, it may happen that we want to be the only grocery player there until the investment has yielded a return.
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