The measures include a 30% cut in supplier promotions with a corresponding reduction in shelf price, a cap on the gross profit margin of industries that produce and distribute baby milk at 7%, and the imposition of a cap on the issuance of credit tariffs up to 3% for fresh food.
Fixed prices
In addition, the three-month “lock” on offers and discounts on products that have been repriced since January 10, when the new measures were announced, has also been in place, with industries en masse withdrawing previously announced price increases. “The measure of banning promotions for a period of three months has led several companies to look again at the issue of price increases and every day more and more companies take back the price increases they have announced. It is a measure that is expected to pay off and keep prices stable on the shelf, given that Greek consumers are used to shopping for products that are on sale,” he says to “ET”. of Sunday’s top executive of the organized food retail trade.
Moreover, according to the director of the Consumer Goods Retail Research Institute (IELKA), Lefty Kyose, more than half of the products in Greece – until last year at least – were sold under some form of promotion. “On average, the discount that consumers receive from offers represents about 12%-13% of their spending,” he underlines.
For example, rice of a well-known company that is sold on the shelves of supermarkets at a price of 2.45 euros and the supplier had sent in January a new price list with a 4% increase raising its price to 2.55 euros, after the ban on offers he revoked the increase, keeping the price of the product constant.
Accordingly, packaged gouda cheese in slices (pack of 340 grams), which costs 5.10 euros and the supplier had notified supermarkets of a 6% increase to 5.4 euros, after the announcement of the measure took back the increase.
It is noted that the ban on offers applies to a range of consumer goods, which includes 60 product categories, such as food (rice, milk, pasta, meat, cold cuts, legumes, cheese, olive oil, etc.), detergents, cleaners, stationery and personal hygiene items.
The 44 food categories
However, the measure excludes 44 categories of food that are close to their expiration date of 3 to 30 days. This means that suppliers can make bold discounts, even if there has been a previous appreciation, when they are nearing maturity. A basic condition is that these products carry special markings on the shelf.
For example, spaghetti sold on the shelf at a price of 1.18 euros, 20 days before it expires consumers can buy it even with a 30% discount at 82 minutes. Or yogurt of one kilo, which now costs 4.65 euros, 3 days before the expiration date will be available even at the price of 2.65 euros.
Stock disposal at a lower price is allowed up to 1 day before the expiry date for baked goods, fresh meats and fresh milk, 3 days before for yoghurts, desserts and breads and 5 days before for eggs and cold meats . 10 days before the expiry date rice and cheeses can be sold on sale and 20 days pasta and pulses.
At 15% the average reduction from the “cutter” in the offers
example
SHAMPOO (1+1 gift)
Initial price until the end of February: €7
Initial price with a 30% “cutter”: €5.90
Final price with offer: €2.9 – €3.5
LAUNDRY DETERGENT (50% off)
Initial price until the end of February: €10
New initial price with a 30% “cutter”: €8
New final price with 50% discount: €4
On the supply front, suppliers of detergents (clothing and dishes), cleaners, personal care products (shampoo, shower gel, toothpaste), baby diapers and menstrual products, which have been making bold promotions throughout the year, have been forced to scale back , according to the measure, at a rate of 30% with a corresponding reduction on the shelf. According to supermarket representatives, the price lists they have sent include reductions of up to 40%, while the average reduction is 15%.
As he explains to “ET” Sunday’s senior executive of a large supermarket chain, a shampoo sold under the “1+1 gift” promotion scheme at the price of 7 euros, the discount of 3.5 euros provided by the supplier would be reduced by 30%, that is, by about 1 ,1 euro. Thus, the price will automatically drop to 5.9 euros and above this reduced price he will be able to make an offer. “We estimate that the final price with the discount will not only drop to 3.5 euros, but may even reach 2.9 euros. This is because consumers have been trained to shop with offers. If the industry does not drop its price, households will choose another company’s products available at a price of 3.5 euros or less. So, it is the only way for the suppliers to make discounts on the already reduced prices”, underlines the same source.
In fact, the reduced initial prices are already reflected in almost 2,000 codes.
“Until now, the pricing architecture was based on the high prices and big offers model. The new pricing architecture is based on lower prices. However, it will take some time to see how consumers will evaluate it and accordingly companies will adjust their promotional policy”, he notes to “ET”. of Sunday, representative of the Supermarket Association of Greece.
However, it is almost certain that suppliers will continue with the same intensity with their offers in order to maintain their market shares, which means that the final prices for households will also be lower. For example, detergent which today has an initial price of 10 euros and is permanently sold on offer at the price of 5 euros, from March 1st is available at the price of 8 euros. If industries continue to sell the product at a 50% discount, consumers will buy it at 4 euros, which is 1 euro cheaper than before.
Even 20% more cheap baby milk
example
INFANT MILK (0-6 MONTHS)
Price until the end of February: €25.98
Price from March 1st (10% discount): €24.28
INFANT MILK (6-12 MONTHS)
Price until the end of February: €21.73
Price from March 1st (20% reduction): €17.38
As far as baby milk is concerned, after the investigation by the Competition Commission which showed that in Greece it is sold up to 213% more expensive than in other countries, with the imposition of a ceiling on the gross profit margin at 7%, its price seems to be falling on average by 10%, while in some cases the reduction even reaches 20%.
For example, 800 grams of infant milk (0-6 months) that until the end of February was on the shelves at a price of 26.98 euros, consumers now buy it at 24.28 euros. Accordingly, 2nd infant milk (6-12 months) which cost 21.73 euros (800 grams), is now sold at the price of 17.38 euros. According to development ministry circles, until now baby milk was being marketed at up to three times the profit margin of the government’s 7% ceiling, which is why its price was so high. “With the new limit on the profit margin, the gap will be closed and its price will be closer to the European average”, he emphasizes to “ET”. of Sunday, a high-ranking executive of a large supermarket chain.
However, for their part, the representatives of the dairy industries appear annoyed by this decision, noting to “ET” of Sunday that “any ceiling on the profit of any product is arbitrary in a free market and refers to other times and regimes. Nevertheless, representatives of the industry admit that baby milk is expensive, but they attribute the high prices to its special composition, to the increased transport costs, given that it is produced exclusively in foreign countries, as well as to the strict safety systems required.
De-escalation in fruits and vegetables and meat
With fruit and vegetable products and meat sold on the shelves at up to four times higher than the prices they leave the field, the development ministry’s measure, which forces suppliers to sell their products at retail at net prices and restricts credit invoices at a rate of up to 3%, aims to de-escalate prices.
“One of the tricks used until now was the discount or the so-called refunds to the original producers or suppliers, in order to reduce the price thus through a return. Thus, limiting them to a quantitative limit of 3% is a sanitizing measure”, he says to “ET”. of Sunday representative of the National Union of Agricultural Cooperatives (ETHEAS).
For example, tomatoes are sold by producers at 80 to 90 cents per kilo, at wholesale they reach 1.20 euros and consumers buy them from 1.87 to 2.30 euros per kilo. Accordingly, starkin apples leave the field at 50 to 60 cents per kilo, at wholesale they reach 1.10 euros and at retail they are available from 1.44 to 1.85 euros per kilo, with the scissors opening up to 270% .
According to market representatives, the fact that the prices agreed by suppliers and retailers for fruit and vegetables and meat should be shown on invoices, including any discounts or refunds, will force supermarkets to drop prices so as not to exceed the profit margin which were showing in 2021. However, it remains to be seen in the coming days how these will shape up on the shelf.
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