Russia (bbabo.net), - The largest Russian retailers sent their proposals to the Federal Antimonopoly Service (FAS) to limit food prices. Thus, JSC Tander (Magnit and Dixy) and X5 Retail Group (Pyaterochka, Perekrestok and Chizhik) are ready to limit the maximum level of markups to 10%, and the Bristol retail chain to 10% 15%. According to experts, this level of margin is "absolutely minimal" and will not even cover the cost of selling these goods.
Back in 2021, the FAS held a series of meetings with the largest retail chains. Then the antimonopoly agency suggested that retailers work out responsible pricing mechanisms that would imply obligations to reduce prices for socially important food products. In particular, it was about limiting margins on individual items within each of the categories of such goods and ensuring their availability in stores. "Based on the results of the meetings, three retailers sent their proposals for commodity items to the service, for which each of them is ready to limit trade margins," the FAS press service said.
Specific products are determined by the networks themselves. X5 Retail Group noted that the restrictions will affect more than 20 socially significant goods, including borscht vegetables, pasta, bread and buckwheat.
"The list includes goods with a minimum purchase price, regardless of weight, grade and packaging. The amount of the markup will be determined by the market method - depending on supply and demand in the market: the minimum markup level is not limited, and its upper limit cannot exceed 10%" , - the company noted, emphasizing that the list of positions will be updated monthly, and the distribution network will cover the costs of promotion and other costs (rent, logistics, utility bills and staff salaries) at its own expense.
Magnit said that the margin limit would affect 200 commodity items from 25 categories that make up the basic food basket of the buyer - vermicelli, borscht vegetables, bread, milk, butter, buckwheat and others. According to the company's own estimates, the share of goods that will fall under the voluntary markup limitation may be 30-40% of the turnover of socially important goods in Magnit in monetary terms.
FAS weekly monitors the level of markups in retail chains. Special focus on those in a dominant position
According to the Chairman of the Presidium of the Association of Retail Companies (AKORT) Igor Karavaev, retail chains will cover all costs associated with the sale of goods. "The limited margin will not cover them. Thus, these goods will be sold without income or even at a loss," he told Rossiyskaya Gazeta. The representative of ACORT added that limiting the markup would help support the poor and curb price increases. At the same time, the most important condition was that the decision made does not violate the existing market mechanisms, the expert emphasized.
A 10% mark-up on socially important goods is "absolutely minimal," Mikhail Burmistrov, general director of INFOLine-Analytics, confirmed: "In fact, chains will not earn anything on this product." He recalled that the largest retailers last year also froze markups on a number of socially important goods. "Given the strong inflationary processes, the measure is expected. The largest retail chains, due to the scale of their business, optimization of supply chains, development of portfolios of their own brands, can afford to keep the markup. Plus, this creates additional opportunities for them in terms of customer traffic," he explained.
According to the expert, the policy of federal retailers will also affect prices in small retail chains. "The federal chain can hold a promotion for a week, the regional chain does not have such opportunities. As a result, in order to make a competitive price offer, the chain is forced to conduct an aggressive promotion for one or two positions for a short period. The buyer, coming for a specific product, forms a slightly more complete basket," Burmistrov explained.
Additional pressure on the terms of transactions for suppliers from networks should not be expected, the expert believes: we are talking about low-margin goods, the trade margin for which is already very low, and many food products are purchased on the basis of tender procedures or at exchange prices.Member of the General Council of the Association of Antimonopoly Experts, partner of BGP Litigation Irina Akimova believes that other chains may join the initiative of the Big Three retailers. At the same time, it is not worth waiting for the spread of such margins to all trade. "The fixation of the minimum markup, with a greater degree of probability, should not have a negative impact on the financial performance of large retailers, while for retailers occupying a niche of small or medium-sized businesses, such a policy can become disastrous and provoke financial losses," the expert notes.
Akimova also noted the role of the FAS in regulating prices, recalling the anti-cartel checks that the service launched in the summer due to massive consumer complaints. "It is unlikely that in the absence of close attention to retailers from the antimonopoly authority, retail chains would voluntarily initiate the process of fixing the markup, complicating relations with product suppliers. Based on the results of the audit of the cartel, no retailers were found by the antimonopoly authority, but it can be assumed that the initiative of retail chains also wore the nature of cooperation with authorities in order to avoid potential risks of violating antitrust laws and repeated inspections in the future," the analyst believes.
At the end of last year, the head of the FAS, Maxim Shaskolsky, reported that in August-December, trade margins for socially important goods fell on average from 22% to 14%. "Of course, part of the costs can be shifted to other goods, but these goods are still less in high demand, so it may be less noticeable to a large number of consumers," the head of the antimonopoly department noted. The FAS also noted that the service on a weekly basis analyzes retail margins in the largest federal and regional retail chains. Special attention is paid to networks that occupy a dominant position (market share - more than 35%) in a particular municipality.
According to the INFOLine agency, in 2020 X5 Retail Group ranked first in terms of its share in the food products market - 12.64%. The trading network Magnit (without Dixy) was in second place with a share of 8.66%. Mercury Retail Group (Bristol, Krasnoe i Beloye and until 2021 Dixy) closed the top three largest retailers - 6.6%.
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