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Ministry of Agriculture proposes that regions have the ability to fix the mark-up for socially important SKUs

 
13.07.2015

According to Kommersant, the Ministry of Agriculture has proposed an initiative that would allow the regions to fix the mark-up for socially important SKUs.

There is little clarity on how such an initiative would be implemented and in any case we think it would only have a limited impact on retailers' top lines. In early 2015, food retail chains voluntarily froze prices for selected socially important goods in order to relieve pressure on consumption during the period of accelerating inflation. Were one SKU from each category to be chosen for a similar programme, the impact on the consolidated top line would be around 1%, we estimate.

Following the period of high food inflation and slide in real consumption, the share of food spending in the consolidated budgets spiked to 55%. As a result, this initiative might find some resonance among the population, but we think it would be complicated to implement, jeopardising overall competition and assortment availability.

Maria Kolbina, Nikolay Kovalev
VTB Capital analysts

Tags:
food retail

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