Many have noticed that the national supermarket chains have begun to increase prices for some categories of goods. Primarily increased prices on goods shelf – cereals, pasta, canned vegetables and fruit, toilet paper.
Large retailers are trying to clarify the situation: high demand is pushing suppliers to raise prices, besides many of them in connection with the introduction of quarantine restrictions and the “currency swings” also changed the cost. In addition, the national quarantine coincided with the traditional seasonal increase of prices of some product groups, and the excitement only accelerated the rise in prices. Even worse is the situation in the segment of cereals: many of them Ukraine imports, and the countries-trading partners for the period of the pandemic has restricted exports to protect from a deficit market of its own.
But that’s retail network was the first target for the discontent of the consumers and even accusations from the authorities in higher prices. Although it is well known that large operators of the retail market in all economic weather, working with fixed overhead purchase price which covers their operating costs.
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A deficit or hype?
One of the first to clarify the situation on the market tried, General Director of the ATB, Boris Markov. According to him, the situation is extremely simple: the shortage of products on the market, but in the conditions closed in connection with the quarantine of the markets, the organized retail took on the whole “blow” sharply increased consumer demand.
“The main item is enough, and the situation of its availability improves. We finish filling the warehouses and the restocking of stores that are “washed” as a result of excessive demand last week. Assumptions and risks for the formation of the shortage of goods in Ukraine we do not see. Perhaps the “loss” of some groups because of the created hype, but for one or two days we are ready to cover the needs of the population in products and the products of social categories,” he described what is happening in General in the Ukrainian market and ATB , Boris Markov.
The mechanics of the hype is quite simple: the buyers are first “made” regiments of the largest and most accessible networking – the ATB is about 1100 outlets across the country. But under the speculative “carry-out” hit and other major operators – network Silpo, Fozzi group, Billa, EKO-Market, and other shops “walking distance”.
Because of the impact of demand for goods of daily consumption retailers have moved their warehouse and logistics capacity in enhanced mode. After all, even existing in any point of Ukraine goods to be delivered to distribution centers and then to stores. It was at this point the “operational reconfiguration” logistics chain retailers, which opposed the “take-away” shops in the first days of the quarantine, people have created the illusion of empty shelves. It was the second “shock” for retail network: unclear situation with quarantine restrictions, and poor communication on all levels of government on this issue has forced people to continue to stock up.
All this is happening against the background of broken markets and bazaars, which until the announcement of the quarantine was to satisfy a significant portion of consumer demand for food and goods of daily consumption.
“What we saw last time, this increased dramatically the demand for a large part of food products. When demand increases and supply increases disproportionate to the increase in demand always increases the price. Therefore, everything we see is a market mechanism handled the increase in prices”, – said Oleg Ustenko, Executive Director of the International Bleyzer Foundation and Advisor to the President of Ukraine. The expert added that the sharp increase in demand has simply not kept up production and logistics.
What happens to prices and products
Just need to share the reasons for what is happening in the market. For the price of some product groups there is a pronounced seasonality perennial objective, for other important exchange rate factor, for the third – market balance, taking into account the volumes of production, exports and imports.
“There are lots of unscrupulous dealers that are part of the scarce goods are taken abroad. As for the rising cost of imports, indeed, importers have started to lay in the cost of goods devaluation expectations”, – explained the realities of the market Ustenko.
Representatives of retailers shared their experience of cooperation with suppliers – it sheds light on what is happening. For example, has risen in price by more than a third of buckwheat in Ukraine for the needs of domestic consumers it is grown not much, so buckwheat is imported from Kazakhstan and Russia. Jumped the dollar exchange rate, and introduced the countries that supply temporary restrictions on exports of goods abroad in connection with pandemic give their “crisis emergence” in the form of price tags on shelves of Ukrainian stores.
According to the experts, blame the retail trade – is meaningless: “Retail is an intermediary between producers and consumers, – stressed Vitaly Shapran, one of the most authoritative Ukrainian economic analysts, member of the Board of the National Bank of Ukraine. Retail earns on the difference between the purchase and sale of goods, so to blame the mediator in the increase in prices is not very rational. The biggest influence on the prices of the food suppliers. Because they are under the market law of supply and demand. In Ukraine there is a market system in which prices are not set by the state and regulated by the market. And when citizens swept off the shelves of buckwheat, potatoes and other products in warehouses is not enough, then suppliers will immediately increase selling prices in retail networks.”
Prices for vegetables in recent days revealed a stunning trend: carrots and onions have soared in half, the potato has risen halfway, the growth rate of prices for other components of “borsch set” is approximately between these parameters. In conversations “off the record” representatives of the retail chains are the main reasons. Seasonality – stocks of the old crop is over, and the infrastructure for storing vegetables – a traditional weak spot. Simply put, vegetables to the present time simply rotted in storage, and warm winter only accelerated this process. Those suppliers who are able to keep their stocks are now actually “twisting arms” shopping-NetWorker, placing them in front of a tough choice: either the product will hit the network for any money, or the shelves will remain empty. Adding to its reserves under such conditions, large chain supermarkets and come under fire from critics buyers and government leaders-populists, who indulge the narrow-minded notion that the market prices form a network of supermarkets, not the suppliers-manufacturers.
Fruit – the high demand for them began immediately after the vegetables, when in the midst of coronavirus panic, the doctors reminded people about the need to consume vitamins to strengthen the immune system the face of the mutated flu. Virtually all of the fruit group on the Ukrainian market is imported. Protective measures on sales to foreign markets of producing countries, complicated in connection with the global pandemic of international logistics, and jumped in the Ukraine, the dollar is the main factors that push the price of fruit upwards.
Shapran said that the state should look for those markets that have not imposed restrictions on exports, and to intervene in the market pricing of commodity interventions: “to Import those products, which the country lacks. In addition, the State reserves must be reserves of food. And the state can bring down market prices, increasing at the expense of the state Reserve offer scarce goods” – suggests the expert.
A number of products, such as peas, millet and other, which in normal times are items of traditional exports, after the devaluation of the hryvnia manufacturers are also increasingly trafficked abroad – “exchange rate swings” made a very profitable export. But experts warn that the Ukrainian authorities in addition to monitoring the price tags in supermarkets should pay attention to the balance of the market for many commodity positions and take control of exports – it will help to protect the Ukrainian domestic market from shortages and price distortions.
Trap of simple solutions
The authorities have already begun to recognize impending problems in the food market. But instead of trying to correct market imbalances, trying to put pressure on retail prices which is only the mirror of this market.
So, the mayor Vitaly Klitschko has openly called for the Antimonopoly Committee to intervene in the situation, and a rise in prices accused the retail network. The government intends to conduct price audit of socially significant groups of goods.
“Blame the trade network, the growth of prices is incorrect. Provides solely retail service sales of goods, traditionally setting their margin. Price forms provider! The decision of the Cabinet on the conduct price audit of socially significant groups of goods in the first place will hit the producers. To check the prices in retail chains is the simplest thing people can come up with socialist thinking. The Cabinet of Ministers plays in the regulation of the market. Moreover these games are dangerous because they play not through compensatory mechanisms, and administrative violence. And this, in my opinion, can lead to the disappearance from the shelves of certain commodity groups,” – commented on the attempts of the state to intervene in the situation by the political expert Vladimir Tsybulko.
“How did this situation to keep under control? I will remind that earlier in Ukraine there was Dereferenceable, which had the authority of monitoring of prices for socially important food products. But it was liquidated along with the Exterminators. Therefore, the introduction of the state discipline of the prices once again on the agenda”, – reminded Vadim Karasev, Director of the Institute of global strategies that the Ukraine through the efforts of several generations of liberal reformers became pandemic and the price crisis destroyed public infrastructure monitoring and prevention of external shocks and challenges.
“If the government attempts to create a disadvantage for producers conditions to produce the goods, then, of course, the producers not to release them at a loss. Stop importing fruits and vegetables – this will be simply unprofitable, – Karasyov predicts the consequences of the attempts of the state to put pressure on manufacturers. – The government can frighten the producers, but the intimidation is very scary. If the government wants to return to the Soviet economy of shortage – can be scary business. And if you want to help people in a difficult period, to regulate the market is very thin, no damage to producers in coordination of each step with the market, creating not only constraints but also incentives.”
Boris Markov, CEO of ATB, says that organized retail network, as its network, works with standard margins on the goods which remain the same under any economic or market situation. But retail can not resist the pressure of manufacturers and suppliers who inflate prices and try to take advantage of the speculative market.
The head of the ATB rejected accusations that the network unreasonably to increase prices, and warned that similar processes of revision of the price tags on the shelves will begin in the entire network of organised retail, if the suppliers and producers will not pay attention of the state regulatory and Supervisory authorities.
“Such processes take place and other operators of the market, and, as practice shows, in even larger sizes, but only with a lag of a few days. To a greater extent on the unstable price situation is influenced by the fact that the majority of suppliers of goods social categories have now changed the pricing of their products. And in each group different. In such circumstances, we in most cases make a decision in favor of the buyer: we consider it necessary first to ensure the product availability on the shelf. Especially if it concerns the socially important products”, – said the head of ATB on the current market situation.