Margin Freeze Helps Families Save Substantial Funds

The price-reducing measures introduced by the Hungarian government are proving effective, said an analyst interviewed by Világgazdaság. He stated that even a 1% decrease in prices leaves around 5 billion forints in the pockets of Hungarian families each month. If the profit margin cap were lifted, there would be nothing preventing retail chains from returning to the previous high margins, which had led to price increases.

The developments at the beginning of the year, as well as the functioning of the margin cap, have shown that retail chains applied margins of up to 40–50% on several basic food products compared to purchase prices, which were not justified by economic factors. These practices were primarily driven by profit motives, said Dániel Molnár, lead analyst at the Hungarian Economic Development Agency.

Molnár emphasized that if the profit margin cap were lifted, chains could revert to earlier practices, especially since there is insufficient competition among the largest players to maintain low prices. Therefore, he expects that

some form of regulation will remain in place even if the margin cap is removed, in order to ensure the government’s goal of keeping food inflation under 5%.

He highlighted that the monthly turnover of food and non-alcoholic beverages is around 500 billion forints (1,221 million euros), meaning a 1% price reduction translates to 5 billion forints (12,2 million euros) in household savings every month. He also noted that according to the latest government announcements, prices in the affected product categories have dropped by 18.6% since the introduction of the measure.

The 30 priority food items make up roughly one-fifth of the total food basket, meaning the overall impact of the price cuts could amount to a 3% reduction—accounting for price pass-throughs on other products. In monetary terms,

this could mean around 15 billion forints (36,6 million euros) in monthly savings for households due to the margin cap, which could total up to nearly 40 billion forints by the end of May.

When asked about the sustainability of the measure, Molnár said that—as seen with previous price caps—companies typically respond to price regulations by limiting supply. However, the margin cap includes a minimum stock requirement for affected products, which ensures steady supply. He added that although stores have introduced quantity limits on how much customers can buy at once, these are aimed at excluding resellers, and the limits still align with typical daily shopping needs.

He explained that the margin cap does not disrupt the food industry, since it does not affect procurement prices—though retail chains may experience pressure to reduce prices. At the same time, maintaining a 10% margin ensures that retailers do not incur losses on these products.

Retailers must compensate for the lost revenue through other means, such as cutting costs on other products or reducing expenditures like marketing.

The analyst noted that the improving income situation is helping boost retail turnover, which eases the burden. Molnár also highlighted that Hungarian households are extremely price-sensitive, often prioritizing price over quality, or the product’s origin.

As a result, price hikes can significantly dampen demand and make shoppers more cautious. On the other hand, consumers are more likely to remember price increases than they are to notice price decreases or slower price growth, which contributes to persistently low consumer confidence. Surveys generally reflect this characteristic of Hungarian households. He stressed that as income levels continue to improve and inflation slows, households will eventually feel the effects in their wallets leading to renewed momentum in consumption.

Via Világgazdaság; Featured picture: Pexels