Food Prices Fall as Margin Freeze Comes into Effect

The margin freeze, regulating the retail margin at 10 percent for 30 basic food categories, came into effect on Monday, Róbert Zsigó, Parliamentary State Secretary of the Ministry of Culture and Innovation, told M1 on Monday.

“In accordance with the regulation that came into force on Monday, the selling price of the products concerned can be up to 10 percent higher than the purchase price. For those products where the profit of retailers has been less than 10 percent, prices cannot increase compared to January,” he explained. Róbert Zsigó said the measure was necessary because food prices started to rise again in January, mainly for basic products.

Giving examples, he said that

retail chains had applied a 129 percent mark-up on their purchase prices for sour cream, 70-80 percent for yoghurts, and 38 percent for eggs, which was excessive and unjustified.

The margin freeze, extended to businesses with an annual turnover of at least one billion forints a year, will remain in place until the end of May, but the government will maintain the measure after that if necessary, he noted.

He underlined that retailers who do not comply with the rules could face severe penalties. The margin freeze could be extended to all food products if retailers try to make up for lost profits on other products, he said, referring to the government’s earlier announcement.

He also spoke about the measure on Kossuth Radio’s “Good Morning, Hungary!” program, explaining that the Hungarian government was not alone in taking a measure to tackle food inflation.

Other European countries, such as Croatia, Greece, Romania, and North Macedonia have introduced similar measures.

Világgazdaság checked the Árfigyelő database (Hungarian price monitoring system) to see if the government’s expectations were borne out by prices after the measure was introduced. Dairy products, in particular, have recently seen prices soar drastically. The website points out that although there is no sign of a significant fall in milk prices, there has been a sharp fall in the price of sour cream. Last week, for instance, the Nádudvari sour cream with 12 percent fat content (0.33 kilogram) cost 759 forints (1.90 euros) at Tesco, SPAR, and Auchan,

but on Monday morning it was only 359 forints (0.90 euros / 1 euro=398 forints) at Tesco, 388 forints at SPAR, and 562 forints at Auchan.

The average price had fallen by almost half by Monday.

A similar trend can be observed for margarine: the 450-gram Vénusz Classic with 55 percent fat content at SPAR was 769 forints a few days ago, but now it is 453 forints. This is more than 300 forints less than last week’s price.

Among the more expensive, higher quality products, the portal highlights Lurpak Danish butter. The price started at 1,769 forints at the end of the week, but on Monday it was 1,029 forints in SPAR and 1,139 forints at Tesco, now currently around 600 forints cheaper.

As for eggs, there has been a minimal drop in price, starting at 69 forints instead of the previous starting price of 75 forints,

and in several places, such as Aldi, the 10-piece Goldland M-size pack costs the same as before, 899 forints.

Meats also have lower prices, but there is not much difference.

Overall, pork has become 50-100 forints cheaper, while most retail chains are selling chicken breasts for almost the same price as a few days ago, suggesting that the margin was already below 10 percent in most stores.

Flour has also been included in the range affected by the margin cap. However, Világgazdaság points out that private label products are sold by retail chains with margins below 10 percent by default. Most chains have own-brand flour products, thus the margin regulation affects branded products. SPAR, for instance, was offering “Nagyi titka” wheat flour in one-kilo packs for 399 forints a few days ago, but on Monday it cost 251 forints. Just as Gyermelyi wheat strudel flour has also seen a regular price drop at the chain, from 460 to 249 forints.

It is clear that edible oil has become very expensive, which has not even been helped by the margin regulation: it is still 700 forints a liter, almost without exception. A few days ago, Vénusz sunflower oil was 939 forints at Tesco, on Monday morning it was 905 forints, and at SPAR it fell by 49 forints. In general, edible oils have become 40-50 forints cheaper.

Via MTI, Világgazdaság; Featured image: MTI/Balogh Zoltán