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Monday, March 20, 2023

the gap in increases between supermarkets and self-services grows

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Launched in early November, the program Fair Prices Its objective is to contain the rise of different basic necessities. Although it helped those articles of massive consume increase below general inflation, from its implementation the gap between the prices of the same products grew according to the different sales channels.

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For example, according to a report by the consulting firm Ecolatina, a difference of up to 10 pp is observed in the increase of some products between self-service or local shops and large supermarkets. This reality, added the study, has an impact on consumption and hits the low-income sectors.

Fair Prices came into force on November 11, 2022, when the prices of around 1,800 products were set for 120 days, through agreements with companies and marketers. In addition, a 4% monthly increase cap was applied to the rest of the mass consumption items sold in supermarket chains by these firms. From the beginning of February, the agreement was renewed and extended, with a new pattern of increases until June and the incorporation of new sectors.

When analyzing the effectiveness of the program and the distortions that are generated according to the sales channels, from Ecolatina they pointed out: “During the months since Fair Prices came into effect, the Consumer Price CPI (constructed based on the GBA Ecolatina CPI) slowed down: went from averaging 6.9% in September-October to 4.8% between November and February. In February it registered 4.7%, 1.6 pp below the average for the September-November quarter, prior to the agreement”.

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Meanwhile, from the signing they highlighted that “while in the modern channel (supermarkets, hypermarkets) a higher incidence of the program was observedin the traditional channel (stores, small local businesses) -not covered by the agreement and with less direct contact with the Government- the increase in prices of the products covered by Fair Prices was greater. This is not something new in this program, but it is a situation that has been repeated over the last ten years with price controls”.

The study highlighted that, since its entry into force, the difference between the increases of some products within the agreement “is not minor”: “For example, in the traditional channel, the water rose 10 pp above the modern channel; the noodles, 9 pp; milk, 7 pp; yogurts, 6 pp”.

“Furthermore, if you take only December and January, months where there were no updates to the prices that were frozen (in November and February they updated 4% and 9% respectively), the difference is even deeper,” they detailed from Ecolatina.

Impact on consumption

This gap in prices according to the different channels also had an impact on sales. For example, according to data from the consultancy Scentia, in 2022, while consumption in supermarkets rose 3.1% year-on-year, in independent supermarkets it rose just 0.8%.

But that difference deepened in recent months: in January, sales in large chains rose 7.8% year-on-year and in local stores fell 9.1%. In December, supermarkets had grown 3.2% and supermarkets contracted 4.7%.

This gap between the increases in mass consumption products included in Fair Prices that are sold in supermarkets and those that are obtained in local businesses or small self-service stores implies a more severe impact on the most vulnerable sectors.”, they detailed from Ecolatina, and added: “The poorest deciles of society not only spend a higher percentage of their income on mass consumption products, but also tend to use department stores less”.

By case, the basic food basket (CBA) surveyed by the Institute for Social, Economic and Citizen Policy Research (ISEPCI), in 900 local businesses in 20 districts of Greater Buenos Aires, climbed 13.9% in February. It was, they highlighted, the “highest monthly rise since the crisis at the beginning of the century”.

“This variation is the product of the conjunction of several factors that added to the inflationary inertia that has been increasing for more than a year. Meat, after going through 2022 with increases below the average for food as a whole (52% against a general increase of over 100%), began an abrupt rise in the last days of January that accelerated during the first fortnight February; fruits and vegetables seem to suffer the effects of the drought, producing a drop in supply and an incessant rise in prices; and warehouse products that in small and medium-sized nearby businesses still do not feel the effects of the Fair Prices program, valid only in large supermarket chains, which do not have outlets in popular neighborhoods,” he explained in this regard. Isaac Rudnik, director of ISEPCI.

Source: Ambito

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