Government’s dangerous plan against international food chains
It could have severe consequences if the government decided to strengthen the country’s network of food stores according to János Lázár’s plans. Consumers, producers and processors of the agricultural sector can get harmed.
The retail trade of grocery items has to be dominated by Hungarian businesses, and the power of foreign chains needs to be broken – said Lázár on an agricultural conference organised by Portfolio. The government commissioner imagines doing this by creating a new business group or by giving extra capital to already existing ones. According to him, chains of foreign retail trade need to be pushed out of the country in favour of independency, national autonomy and the reorganization of agriculture. He plans to do that by, among other means, taking advantage of additional taxes and levies. During the first wave of the coronavirus, the government already took some steps. It charged additional taxes to boost its plan protecting the economy of the country.Â
After the law entered into force in May, according to calculations of 24.hu, considering one year, Tesco could pay around 13 billion forints; Spar could pay 11 billion and Lidl 9 billion, increasing the pre-calculated revenues from 36 to 47 billion forints coming from the ten biggest food chains.
Nepszava.hu writes that it is a big question whether there is or there will be a big Hungarian company or group of enterprises to take over the market share of these multinationals producing almost 2000 billion forints of commerce a year. It will only be possible if they can weaken these large chains and make them sell their Hungarian stores. Still, it can only be done by governmental help and regulations such as the additional taxes and the closing of grocery stores on Sundays. Experts, however, say that there are few chances for this to happen as all previous attempts to do so had failed, since these international chains think in regions and not in countries. Economist Dávid Ferenc says that there is only one chain in Hungary whose commerce could possibly compete with these big networks. Still, it is questionable if this company has sufficient resources to make a transaction of this size.
Defining the market value of dozens of hypermarkets is tricky since it is complicated to find a new use for their establishments of several thousands of square metres. Furthermore, maintaining them is costly, and there is probably no Hungarian business that can make use of several of these properties. Since the number of those interested in purchasing these establishments is limited, the buyer would be in a favourable position. This fact also talks against foreign businesses leaving the country as they are not very keen on getting rid of their properties with a deficit. This will be less important since online commerce is developing unstoppably and fits easier into the lifestyle of cities with its smaller shops of 500-1000m2. These properties can have several functions. Their value is higher if they are situated in a popular or useful area. Moreover, big properties that also have a green space can attract a large scale of buyers, increasing the power of the seller.
All these, however, are simple speculations until we know the details and the intentions of these multinational companies who have invested hundreds of billions of firings in the past decades to build up and develop their shops, technologies and logistics. It is safe to say that they will not give it over to anyone for free.
It would cost taxpayers a lot to nationalise these foreign chains.
The consequence of carrying out this plan would mean the abolition of competition that would result in an increase of prices, especially because Hungarian chains have a lower level of efficiency, logistical system, technology and a smaller circle of suppliers that results in higher product prices. Also, some Hungarian producers are not able to present the same quality or quantity of products than their foreign competitors.Â
If multinational chains had to leave the country, they would not only take their know-how, but their international circle of suppliers as well, and it is not sure if they would continue buying Hungarian products as they do now. Currently, the proportion of Hungarian products at these companies is around 70-80%, from which they ship to their network outside of the country as well. Moreover, they could take hundreds of thousands of employees with them to other countries where they would earn wages much higher than in Hungary.
Dávid says that Lázár’s plan is a terrible message to all investors and can make all the 80 strategic partners of the government question their policies.Â
Multinational companies influenced by the plan are awaiting details to comment on the issue.
Read alsoHungary debt management stable, says finance minister
Source: nepszava.hu
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4 Comments
If Hungarian retail CEOs would spend as much time understanding customers as they do with politicians, they would be more successful. Can you imagine we all had to shop in Coop or CBA stores? Lazar could put his money where is mouth is, spend all his savings and sell all his assets and start his own Hungarian retail chain. But he won’t do that. If Lidl or Aldi leaves, I will drive to Slovakia or Austria and shop there…
For goodness sake stop interfering,let business do their own expansions,we like our Auchan,Lidl,Aldi Tesco and CBA.The proposal is a non starter,its just state onterference.
This is the dumbest idea I have ever heard from government since moving to Hungary. The reason I shop at the foreign owned stores is they actually LISTEN when you ask them for something. The Hungarian stores don’t listen,. don’t care and still think they are in the communist era and don’t have to make their customers happy with fair prices, good quality and customer service. I have been after TESCO to offer home delivery in the Kaposvar area since moving to Hungary and they have recently responded with online ordering, Home delivery or curbside pick up. The way the Hungarian owned super markets act they would laugh you out of the store for asking for something beyond what they offer. If the Hungarian government drives out the foreign shops I am going to seriously regret moving here. I may even consider moving to Slovakia or the Czech Republic. If the Hungarian owned supermarket chains would step up their game they would NOT need the Hungarian Government to help them stay in business. THIS PROPOSAL WILL BE AN EPIC DISASTER IF ENACTED.
Our local Tesco does not do home delivery to my area. But you only discover this after placing an order. Customer friendliness does not seem to be important to them. They say we are more than 15km away, even though in truth we are 12km. The local village shop is owned by a local woman and she says she loses a lot of business to Tesco and Lidl, even though she offers ultra fresh produce directly from local farmers whereas Tesco and Lidl have cumbersome supply chains that basically mean nothing is as genuinely fresh as their marketing pretends. But the big chains are better at marketing and presenting things in such a way that you imagine it must be somehow better. They pay their people poorly and siphon all profits away, meaning these big stores have very little local benefit. If more people came back to the local shop they would be able to afford to expand their range and everybody would benefit.