Mandatory promotions are over: the industry received the news mixed

By: Trademagazin Date: 2024. 07. 01. 14:45

As of July 1, 2024, the government has abolished the mandatory promotion for grocery stores, which was introduced on June 1, 2023 in order to curb price increases. The rate of the measure was initially 10%, then it increased to 15% from August, and the range of products designated for mandatory promotion was significantly expanded. The Agricultural Sector asked experts in the sector about the expected effects of the decision.

Mandatory promotions were introduced to replace the food price cap, which was abolished on August 1, 2023. After the abolition of the official prices for food prices, the affected products came under the scope of the mandatory promotions, the rate of which was first set at 10% and then at 15%. In addition, they launched the online price monitoring system, which is still working.

According to agricultural economist György Raskó, when the price caps are introduced, a significant jump in inflation is expected in terms of food, since purchase prices have become 50-100% higher since October 2021. Once the price cap is removed, traders are no longer required to absorb these losses, which may result in price increases.

György Raskó said that since the introduction of mandatory promotions, a double effect has been observed: prices have fallen in stores subject to mandatory promotions, while prices have risen significantly in the others. The market was extremely disturbed by the measure, as it was difficult to determine the direction of inflation due to the regulations on various products and store chains.

According to the agricultural economist, the abolition of mandatory sales will not have a significant impact on domestic food prices and retail trade. Until now, the market has been independent of government regulations, and due to the weakness of purchasing power, traders have already announced bigger promotions than those prescribed by the government. Discount chains such as Lidl and Aldi achieved significant profits through real, larger promotions, while Hungarian-owned chains and independent stores lost market share.

The Agricultural Sector also asked György Raskó about the future of the price monitoring system operated by the Economic Competition Authority. According to the agricultural economist, the system will remain in place for political reasons, but its real impact will be minimal, as the population watches the weekly promotions of food chains.

György Raskó pointed out that the majority of domestic customers buy only as much as they can definitely consume, which significantly reduced food waste. Hungarian customers are constantly looking for the best prices and go shopping where they get the most value for their money.

Tamás Éder, the president of the Association of Responsible Food Producers (FÉSZ), welcomed the termination of the mandatory promotions, as he considered the measure to be foreign to the market, which distorted normal market operations and increased mistrust among market participants.

To sum up, it can be said that the abolition of the mandatory promotions received a mixed reception, but it is expected that the market participants will adapt to the changes and will continue the promotions in order to retain customers. The development of food prices will continue to depend on the relationship between supply and demand.