This is how store margins are changing now that the government has decided

By: Trademagazin Date: 2025. 03. 13. 12:27

The government announced that it would limit the margins on thirty basic foodstuffs, after the latest data from the Central Statistical Office (KSH) showed that food inflation in February was 7.1 percent on an annual basis. Prime Minister Viktor Orbán justified the measure by saying that retail chains were applying “unacceptable” margins on certain products. According to him, the margins on eggs were 40 percent, and on butter and sour cream more than 80 percent. But are the margins really that high? Based on data from the Institute of Agricultural Economics (AKI) and other sources, Telex looked at how retail chains’ margins on the most important foodstuffs have developed so far.

Which products have had the highest margins so far?

In addition to eggs, sour cream and butter, Minister of National Economy Márton Nagy mentioned several other foods:

Dairy products: he mentioned a margin of 70-80 percent for cow’s milk and yogurt, while the margin for UHT milk ranged between 60-80 percent.

Meat and meat products: the margin for chicken legs and French fries was around 20 percent, while for pork fat it was over 40 percent.

Private-brand products: a lower margin of under 10 percent was typically observed for these, while for branded products it was much higher.

However, these data raise questions on several points, since the margin of the products regularly referred to by the government is not available in the public databases of the Hungarian Food and Drug Administration. Thus, it is not clear on what sources the measure is based.

Experiences of previous official pricing

The current margin freeze is not without precedent. In the fall of 2021, the government introduced a price cap on several basic foodstuffs, such as granulated sugar, refined wheat flour, sunflower cooking oil, chicken breast and pork leg. According to AKI data, the margins for these products fluctuated significantly under the regulation:

Refined wheat flour (BL 55):

During the time of official pricing, private label flour was often sold with a negative margin.
In July 2023, after the price cap was lifted, the margin stabilized at around 10 percent.

However, the margin for manufacturer flour was set at 60-70 percent.

Cooking sunflower cooking oil:

During the price cap, it was sold with a negative margin of up to 160 forints per liter.
After the restrictions were lifted, the margin for private label cooking oil was 5-15 percent, while for branded products it was between 10-15 percent.

Meats:

The margin for chicken breast fillet was 25 percent before the official pricing, then turned negative under the regulation.
The situation was similar for pork legs: before the price freeze, the margin was 40-50 percent, but during the restriction it decreased to zero or negative. After the regulation was lifted, the margin for chicken breast stabilized at around 5 percent, and for pork legs at 10-15 percent.

UHT milk (2.8% fat content):

The margin for private label products reached 15-20 percent.
However, in the case of manufacturer-branded milk, a significant jump was observed, with the margin increasing to 60-80 percent.

What can we expect after the margin restriction?

According to the government, the margin restriction on 30 foods could result in a price reduction of up to 10 percent. According to Márton Nagy, this could bring about a 2 percent reduction in food inflation.

However, experts warn that retail chains may raise the prices of other products to offset their losses. This is exactly what happened during the price freeze: although the prices of restricted products stagnated or decreased, other, unregulated products became more expensive, which ultimately did not reduce inflation.

Experience also shows that when such a regulation is lifted, prices quickly rebound. After the elimination of official prices and mandatory promotions, margins for most affected products returned to the 10-15 percent level, or even rose to 60-70 percent in the case of manufacturer-branded products.