In 18 Months Consumer Price Index for Groceries Went Up by 30%

30 june 2015

The Analytical Center hosted a round table on stabilization of prices in consumer markets in the import substitution context. The experts reviewed proposals for trade legislation amendments that the State Duma had passed in the first reading as well as amendments proposed by the Ministry for Trade and Industry of Russia.

Last year’s political decisions brought about a sharp increase in grocery prices in late 2014 –early 2015. Since the start of this year alone grocery prices have gone up by 11.3 % according to official data. At the same time retail sales shrank by 7.7 % in the first 5 months of 2015 on the same period of 2014. Experts believe that the need to maintain stable prices and stimulate development of domestic suppliers were the reasons behind the recent batch of amendments to trade regulations.

“For over a year now we have been testing a food security information system in the Russian Federation,” the Deputy Head of the Ministry for Agriculture’s Department for Regulation of the Agricultural Market, Food and Processing Industry Vladislav Tarasenko said. “The system generates reports for the government on the current situation in the market with special attention being paid to agricultural products. In addition, there is a mechanism for daily monitoring of prices.” Mr. Tarasenko considers that it is important to keep tabs on the entire agricultural production chain from what is grown in the fields to what gets processed, delivered to stores and ends up on the shelves in grocery stores.

As far as prices are concerned, the Ministry for Agriculture’s representative noted that there was a spike in prices in January 2015 but that now they have mostly stabilized. At the same time, Mr. Tarasenko noted that prices for different groups of products have been growing at different rates. “Retail and consumer prices have been growing fastest of all but with the prices paid by manufacturers the situation has not been quite as dramatic,” he pointed out. In his opinion, there is pressure being put on agricultural manufacturers to lower the prices. “We can see this kind of situation in dairy production: chain stores are putting pressure on manufactures to slash prices and smaller firms are finding that making milk is no longer worth its while,” Mr. Tarasenko noted. In his opinion, methods should be developed that would allow the government to have active influence on the situation through state programs.

The Head of the Department for Competition Policy of the Analytical Center Tatyana Radchenko said that in the past 18 months the consumer price index for groceries has gone up by 30 %. “All categories of groceries have seen double digit price increases. The most sizeable increases were seen in sugar, grains, vegetables, fruits, eggs and sunflower oil sectors. Prices for pasta and bread have not been growing quite as fast, but still we are talking double digit growth rates here as well,” the expert pointed out. Ms. Radchenko then went on to note that the biggest price increases were seen in December 2014 through February 2015. At the same time the expert does not see a close link between the increase in prices and the devaluation of the ruble. In her opinion, the bulk of the increase in prices is a result of the market players’ behavior.

The Deputy Head of the Department for the Development of Domestic Trade, Textiles and Consumer Market of Russia’s Ministry for Trade and Industry Nikita Kuznetsov stated that the law on trade in its original revision has failed to achieve its goals. “The issue requires an integrated solution. We cannot expect to achieve results by regulating just one segment,” he believes. According to Mr. Kuznetsov, the main problem is an imbalance between production and sales. In his opinion, efforts must focus on expanding distribution channels to ensure that all products that get produced reach the consumers. “At the same time we face a situation where small manufacturers cannot compete with chains, so they need alternative distribution channels. That means we need to develop both chain and non-chain retail formats,” Mr. Kuznetsov considers.