Margin not sugar – Gazeta Kommersant № 54 (7255) from 30.03.2022

Retailers, including O’Kay, Auchan and Atak, have decided to abandon a voluntary 5% cap on the trade margin on sugar. The measure lasted only a month and had to restrain product prices. But in the crisis, this led to the opposite effect: Russians are buying cheap sugar in a hurry, which has led to a shortage of it in stores. According to experts, as a result of the network may refuse to limit markups on basic vegetables, dairy products and bakery products.

Kommersant received a letter sent by the Federal Antimonopoly Service (FAS) to the Ministry of Industry and Trade on March 28. The service reports that the O’Kay, Auchan and Atak networks have refused to limit the trade margin on sugar to 5%. Kommersant’s request was not answered in these networks. The FAS and the Ministry of Industry and Trade confirmed the information. The FAS added that retailers have made such a decision “to expand the supply of goods and eliminate local deficits.” The Ministry of Industry and Trade, in turn, believes that the waiver of voluntary obligations “may have signs of violation of antitrust law.”

In addition to O’Kay, Auchan and Atak have also voluntarily agreed to limit the markup to 5% on the X5 Group (Five and Crossroads), Dixie and Magnet. In addition to sugar, a number of bakery products, potatoes, beets, cabbage, onions, carrots, milk, kefir, butter and cottage cheese were restricted. This measure was supposed to stabilize prices, as earlier this year the Ministry of Agriculture expected a sharp rise in value. Magnit stated that they continue to fulfill their previously accepted obligations. X5 and Dixie did not respond to Kommersant’s request.

Price containment has led to speculative buying of the same sugar across the country, reminds Infoline-Analytics CEO Mikhail Burmistrov. As a result, the networks began to have problems with the availability of goods on the shelves, they have to buy it at unregulated wholesale prices and limit the holiday in one hand. According to the Ministry of Agriculture, sugar producers for the week, from 16 to 23 March, increased its cost by 13.2% to 60.33 rubles. for 1 kg. The waiver of the minimum markup will help restore the balance of supply and demand, said Mr. Burmistrov.

A source from Kommersant, one of the major retailers, explains that the FAS’s notifications from O’Kay, Auchan and Atak about the lifting of sugar markup restrictions are due to the risks of being accused of unfair competition if they do not have goods on the shelves.

Earlier, the FAS opened an administrative case against the Pyaterochka and Magnit chains after customers complained about the lack of sugar in stores if it was available in warehouses.

According to Kommersant market participants surveyed, retailers will also refuse to limit margins by 5% on vegetables and dairy products. So far, open-field vegetable producers have not received such information from the networks, says Tatiana Gubina, chief of staff of the Union of Potato and Vegetable Market Participants. Meanwhile, retailers have already faced a shortage of open-air vegetables and a sharp rise in purchase prices for cabbage by 56%, carrots by 47% and beets by 62% (see Kommersant, March 29).

Rustam Aidiev, executive director of the National Baking Union, suggests that chains may waive the minimum markup on some bakery items. According to him, bread, like sugar, is a socially important commodity, and the restriction itself was unprofitable or unprofitable for the networks.

The Ministry of Agriculture considers it necessary to maintain minimum trade margins on socially important food products, including sugar, at least until the beginning of the new agricultural season. But there are alternative ways to curb prices, including food interventions, quotas on duty-free imports of cane white sugar and raw sugar, said Dmitry Vostrikov, executive director of Rusprodsoyuz (uniting major food producers). These measures will introduce less distortion into business processes than external or recommended price caps, he concludes.

Alexey Polukhin

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