Rising prices will force consumers again to remember the need to save.
Prices for staple foods — from milk to meat — have increased since the beginning of July 7-10%. This is due to the failure of the state regulation of prices of commodities and increased cost of production. The rise in price of food has not deterred consumers, who are willing to spend more in supermarkets.
Food is getting more expensive. From 1 July to 10 August, prices for 14 of the 23 social groups, says the Association of suppliers of retail chains. For example, a carcass of chicken has risen by 14% to UAH 53, fat – 9%, up to UAH 49, beef 3%, to UAH 107,3, butter 2%, to 143,9 UAH, boiled sausage – by 3.5% to 69.3 UAH, cheese – on 2%, up to 94.4 UAH, and pork by 1.4% to 98.5 UAH per 1 kg. “the price of social bread stable,” adds the General Director of the Association of trade networks Alexey Doroshenko.
Why prices are rising?
Margins on staple goods were under the scrutiny of regulatory bodies for 20 years. Tested not only in wholesale but also retail price. The size of the margins established in each region by decision of the local Council, but the maximum size could not exceed 15%. For example, in the Kiev shops, it was about 10%. “Regular checks took a lot of time, and we had to cook a huge amount of documentation,” recalls co-owner of food chains “Cosmos” and “Tavria-V” Boris Muzalev.
Manufacturers and suppliers of food try to minimize the range of social groups of products. For example, instead of milk fat content of 2.5% in retail stores, a similar product, but with a fat content of 2.6%. This allowed us to avoid inspections. At the end of last year, the Ministry of economy began to experiment and abolished state regulation of prices for three months. And from July 1, this requirement was abolished. In an official statement, the economy Ministry said that the abolition of state regulation will eliminate the administrative pressure on business, will contribute to the development of competition and deregulation in pricing.
“The decision of the government will simplify the procedure of changing the prices depending on the price movement of the market that will enable manufacturers to respond faster to changing market conditions,” — said the press service of the Cabinet of Ministers.
What does the market?
Why is food going up rapidly? “The average margin in Kiev supermarkets is 20-25%, and many manufacturers and network “pull” earning the social groups of the product to the level of the mid-market,” – says the Director of a large food company, who requested anonymity.
The sellers take into account the level of solvency of the population. Alex Doroshenko says butter in the Kiev region is 163,2 UAH, while in Ternopil region – 124,4 UAH per kilogram. Co-owner of food supermarkets, “Cocktail” Igor Balenko recognizes that suppliers always send a notice about the upcoming price increase. “The cost of production has increased due to the increase in minimum wage, utilities and so on. Only now, the consumers feel all the changes that occurred in the beginning of the year,” he says.
Consumers are not afraid of rising prices. Sales in food stores in the first half increased by 10-15% compared to the same period in 2016. Borys Muzalev says that many of the Ukrainians, who last year gave preference to low-cost products, now pay attention to import. “There has been a revival,” he acknowledges. This is evidenced by research company GFK Ukraine. According to her, in July consumer confidence of Ukrainians was 58.5, which is only 0.8 PPT. less in comparison with June.
“The July decline in consumer confidence of Ukrainians in comparison with June is not significant, so we can talk about the stability index in the last three months. However, increased inflationary expectations”, as GfK Ukraine analysts comment.
To buy more expensive products to consumers, allows and income growth. In the first half 44% of employers increased salaries, says the research company HeadHunter. “23% of Ukrainian companies’ financial remuneration for their work increased for all employees without exception. Also the increase in wages received valuable experts and professionals who fulfilled the plans and showed good results, 11% and 10% of the companies respectively”, – is told in research.
But in the autumn the situation can change, and prices for food rise by another 10-15%. “Now calculate how much more expensive food products our company. The minimum size is 10%,” – said the Director of a large manufacturing company who requested anonymity. This will affect the purchasing power of the population, which spends on food at least half of their income.
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