In regards to the situation in the food sector and growing retail prices, Latvian Competition Council (KP) has concluded the second part of of its study of prices in the eggs, fish, dairy, meat, cereal and bakery goods market.
Problems were found in the price transfer from one stage to the next for certain bread and grain products (rye bread, white bread, wheat flour, spaghetti pasta and buckwheat) at the production and marketing stages – price changes were delayed or disproportionate, BNN was told by KP.
At the same time, KP concluded in its report that on the local retail trade level Latvian goods are periodically applied with a bigger markup than foreign goods.
KP invites retailers to pay attention and not violate the fair trade practices set out in the Prohibition of Unfair Trading Practices Law.
Pricing for Latvian and non-Latvian goods
KP found that in the bread and grains products group, retailers use a different pricing policy for Latvian goods than for non-Latvian goods.
For example, the average price markup for Latvian wheat flour is larger than the markup for flour produced in other countries. Latvian buckwheat had a larger average price markup than buckwheat produced in other countries as well. Between February and November 2022 Latvian-made rye bread, on the other hand, was priced lower than rye bread made in other countries. After December 2022, however, Latvian rye bread was priced higher than non-Latvian rye bread in the retail sector.
For certain bread and cereal products, on the other hand, Latvian products had lower prices in the retail sector than non-Latvian ones. White bread made in Latvia was 21% cheaper than white bread made outside of Latvia. A similar situation was observed for Latvian-made spaghetti pasta on the retail level.
Prices of retailers’ self-brand and independent manufacturers goods
KP found that goods in the bread and grain product group, i.e. wheat flour, buckwheat, spaghetti pasta and bread, if produced by the manufacturer at the request of the retailer as a private label product of the network, are subject to a lower purchase price.
Often suppliers produce both private brand goods and independent brand goods that have identical ingredients. Production costs for such goods are identical, but their procurement prices differ significantly. All the production, packaging and other costs surface during the production phase. The retail stage covers actual sale and costs related to that.
KP also found that the price markup that appears in the retail stage keeps growing. Thus, fair trading practices of retailers and respect for good faith and integrity in transactions are becoming increasingly important, given that this link in the supply chain is becoming more and more influential.
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