Can the retail and FMCG sectors cope with the salary competition in 2024?

This provides an opportunity to analyse the industry and put the trends of recent years in perspective. The 32 FMCG and 11 retail companies in the sample provide some clues.

What is in the plans? How will sales revenue develop in 2024?

By 2024 companies have reached a stage where they can only finance further salary increases by strengthening the efficiency of their operations. There are very different levels of efficiency in Hungary. Overall the country’s productivity is full of challenges by international standards, which means that further salary increases mayn’t be easy to implement. 45% of firms across all industries expect their sales to grow this year, 4 percentage points more than last year. However, nearly 4 in 10 firms said they expect sales to remain flat and 1 in 8 expect it to drop (5% don’t know what will happen). It is really good news that FMCG businesses are the most likely to forecast an increase in sales in 2024 (66%). Meanwhile in retail only 45% believe they will generate higher sales revenue this year. The problem is the following: if a significant proportion of firms don’t produce a sales growth, how will they raise salaries? Increasing efficiency, i.e. “let’s make less of the same product” could lead to redundancies.

Salary-wise companies’ potential doesn’t match worker expectations

The biggest challenge for firms now is managing the pay demands of new and existing colleagues, which isn’t surprising in light of the revenue expectations discussed above. 78% of companies are suffering from this problem – 7 percentage point rise vs. last year. 97% want to increase salaries, because they know that workers livelihoods are problematic and they can’t afford a big drop in real earnings. 56% of firms plan to raise wages between 6% and 10%, about 30% of companies plan a salary increase between 11% and 15%, and 4% plan to increase pay by more than 16%. The problem is that 56% of workers want a pay rise bigger than 16% and 36% would like to earn 11-15% more.

What pay raises are the different industries planning?

In two thirds of the HoReCa sector more than 30% of workers leave their job every year, according to a Randstad study. This is this reason why bar and restaurant owners plan to raise salaries by more than 11%. In logistics the nightmare of driver shortages is pushing companies into wage increases, typically over 11%. In FMCG two thirds of the firms surveyed plan with salary increases between 6% and 10%, with a third wanting to raise between 11% and 15%. In retail 3 out of 4 companies can give a pay raise between 6% and 10%, with a quarter going above 10%. These numbers indicate that there is no sign of great optimism about the outlook for business in 2024 for either the FMCG or the retail sector, which is understandable after the tumultuous inflationary, special tax and price cap bringing year of 2023. This doesn’t bode well for workers in the sector: they mayn’t be able to catch up with last year’s inflation in salaries this year. //