State-mandated sales are coming to Hungarian supermarkets, but is there a gimmick?
On 1 June, state-mandated promotions will kick off in many Hungary supermarkets. The Hungarian government is citing the measure as a weapon in the fight against inflation, but will it really ease the burden on shoppers?
What does mandatory promotion mean?
The Hungarian government has previously tried to curb inflation through price caps, which are still in place for a number of staple foodstuffs. On top of this comes the new compulsory measure, which requires the price of a product within twenty specific product categories to be marked down by ten percent for a week. An important stipulation is that the devaluation must be compared to the lowest price applied in the previous month.
The government has defined twenty product categories:
- Poultry meat
- Pork, beef and other meat products
- Fish, canned fish
- Meat products
- Milk, cream and substitutes
- Yoghurt and other fermented goods
- Other dairy products
- Cheese
- Butter, margarine and preparations thereof
- Other fats and oils (vegetable and animal)
- Bread
- Pastry
- Dried pasta, rice and other cereals
- Flour, sugar, preserved flour and meal
- Fresh vegetables
- Fresh fruit
- Fruit and vegetable juice
- Prepared dishes, spices, condiments
- Coffee, tea
- Mineral waters and soft drinks.
What changes will be brought to Hungarian supermarkets?
Many people reckon that shops have always given special offers to customers, so nothing will change. According to a hvg.hu article, there will be no big differences compared to what we have seen so far. Government agencies will regularly monitor whether products are really labeled with discounted prices on supermarket shelves.
You may see the price of a previously discounted product drop even further, or you may see unprecedented discounts of up to 50-60 percent in some popular chains.
The regulation does not apply to all shops though. It is defined as applying to retailers whose main activity is “mixed retail trade in foodstuffs” and whose turnover exceeded HUF 1 billion (EUR 2,690,298.77) net in 2021.
Concessions were granted to small shops, which do not have to promote a particular product category if they have sold fewer than five products of that category on the day the regulation was launched.
The promotion runs from Thursday to Wednesday each week, and the regulation is in force until 30 September.
From the categories, the trader picks which product will be discounted. A product can be discounted for a maximum of two weeks. The government also requires that discounted products must be available at the time of opening.
Variable effect
Traders may have a problem if the margin is less than 10 percent for a product category as a whole.
Experts say the regulation will have no impact on inflation. If inflation drops, it is more likely to be attributed to other factors (favourable weather, falling energy prices, cheaper feed).
The new regulation in Hungary makes it also mandatory to inform shoppers by displaying visible banners of the discounts at the entrance of Hungarian supermarkets.
I guess a number of consultants had to write some rather clever alogarithms to comply with the latest and greatest from our Politicians. The experts all appears to agree the measures will change anything for the better – but hey, politics is not about hard data and facts, is it?
Competition and absence of obstructive regulation is what gives you lower prices. The Orban government has worked relentlessly to force a number of retailers out of business to have them sell their businesses to Fidesz connected oligarchs who dominate a sector and have the ability to raise prices in the absence of competition. They are working now to force foreign grocery chains out of Hungary. “We need to increase the share of domestic ownership in the construction materials sector and food retailing,” said Minister of Economic Development Márton Nagy. State mandated sales are a clear indication of failure to provide the business environment that fosters competition and lower prices. What the Orban government is working towards is a Hungarian economy thoroughly controlled by a collection of Fidesz aligned oligarchs.
https://www.politico.eu/article/viktor-orban-squeeze-foreign-supermarket-out-hungary/
Many governments to gain notoriety have tried this before. Products disappeared from the shelves. Because all products are linked to a production chain. If corn raises the price, the chicken producer also needs to raise its price.