Retailers in Slovakia cap food prices
In Slovakia, 7 retail chains and 8 individual business entities, have agreed to cap the prices of in total 400 Slovak food products in the coming three months. The agreement came into effect on March 20. The Anti-Inflation Guarantee is welcomed by the Minister of Agriculture and is inspired by the French example. What are the details of the agreement and what is the criticism? We also asked a local source to make a quick retail tour to see firsthand if the measure is in place.
Inflation in Slovakia
The year-on-year inflation in Slovakia was 15,4% in February. Rising energy prices, housing and food prices have the biggest impact on overall inflation, and these items make up half of household expenses. Food prices in Slovakia have been continuously rising for the third year. In February they were 28,6% higher year-on-year. It is also the basic products that have become significantly more expensive in recent years. The biggest impact was the increase in the prices of meat by more than 18% and milk and cheese by more than 20%. Another basic product that is a big driver in the inflation is the egg. SME Index reported that a year ago, a pack of 10 medium sized eggs were sold for an average of € 1,73, while the current price is almost double. This price increase is much higher than the EU average.
Anti-Inflation Guarantee
What does the agreement on capping of food prices mean? "The anti-inflation guarantee means that each chain will select 30-100 types of food for which they will guarantee the same price for a period of three months. There are 400 unique items in total. Food will be laid out at a counter marked with a shopping cart logo in a circle on a blue background, which will be the same in every chain," Minister of Agriculture Samuel Vlčan explained the philosophy of the measure.
The participating retailers in the agreement for the Anti-Inflation Guarantee - Billa, Coop Jednota, Kaufland, Labaš, Lidl, Terno, Tesco chains and the eight individual business entities including CBA, have each published a statement and price list of the food products that are capped and are available via de website of the Slovak Ministry of Agriculture.
We noticed a different list published by each of the reatilers. In some cases it includes beer and wine as well, while sometimes also the more basic products are included such as potatoes and apples. These basic products do not appear however very often on the list. More often the products include what some might consider the less basic products such as pizza's and mayonais. Most of the retailers are covering one brand of a specific food product for which the prices have been capped for the coming three months. For example, Kaufland boasts of more than 100 products with capped prices in its press release. The different flavours of yoghurt from one brand are listed with retailer Kaufland with a maximum price € 0,57 for 145 gram, a decrease of 17% in price according to the retailer. In fact, nine different flavours of yoghurt from the same brand appear several times on the list, the Index Magazine also noticed. Another example is Tesco who published a list of approx 60 products, including three types of yoghurt from their private label brand (max € 0,41 for 135 gram) but also bananas (1 kg €1,69).
The latest initiative is not something completely new. In March 2022, the Ministry of Agriculture and retail chains signed a declaration on price stability. It guaranteed the stable price, or better said, a stable margin of 13 basic food products : stewed ham, pork, butchered chicken, pork sausages, plain white roll, fruit yogurt, bread (wheat-rye), fresh butter, chicken breast, cutlets ; edam cheese brick 45% ts, chicken eggs size M (cage breeding), loin of pork, shelf-stable semi-fat milk, semi-coarse wheat flour. According to the Ministry, the analyzes showed that retailers comply with the signed Declaration in March 2022 and approach the pricing of basic foodstuffs in such a way that they do not increase their margins.
Examples of lists from retailers
Criticism
The initiative of the Anti-Inflation Guarantee has also received criticism from opposition parties. Among others the question has been raised whether the agreement which includes price fixing is allowed under the Competition Act. According to the Anti Monopoly Office it is too early to tell whether capping food prices restricts competition. The office however noted that the current food-price capping in Slovakia concerns the retail market, which is a highly transparent market in which a great volume of information is available among the market participants about the prices and properties of the goods offered by competitors. Market participants regularly monitor the prices of their main competitors and adapt their own pricing policy accordingly. Such behaviour by businesses gives rise to 'follow the leader', which is not prohibited from the point of view of the Competition Act (source TASR).
A member of the Slovak parliament noted he suspects a fraud on consumers in which the Ministry of Agriculture is also actively doing the marketing for the retailers. According to the MP, some capped products were already on sale before the agreements. Another suspected that the prices of the products might have been risen first, in order to add the discount.
The Ministry of Agriculture posted a statement in which it rejects the ' politicization' of the Anti-Inflation Guarantee. "It is truly astonishing how inappropriately the activity of suppressing food inflation is turned into a political battle, forgetting the end user of these benefits, which is the consumer. I refuse to participate in this distasteful charade, which is aimed exclusively at extorting political capital, while none of the critics has come up with any more effective and realistically feasible solution," states Minister Vlčan .
Retail check
Since the Agricultural Team of the Embassy of the Netherlands is based in Warsaw (Poland) from where we are also covering Slovakia and the Czech Republic, we sometimes need the help of our local sources to check the situation on the ground. In this case, we asked a local source to make a quick inspection of some selected retailers and look for the logo. It was reported that the logo's were indeed present on the shelves with the specific food products but were not very visible due to all the other flags, logo's etc that are also around. The published lists of the retailers were convenient in order to identify them. In addition, the Anti-Inflation Guarantee in itself didn't seem very known among the Slovaks. However, since food prices has risen on a year-to-year basis in February 2023 with 28,6%, it was welcomed.
Thank you for this check on the ground!
