Food prices have been watched with eagle eyes for months. After the energy prices had risen enormously as a result of the Russian war of aggression, customers soon had to dig deeper into their pockets. At the turn of the year, the consumer price reached its peak, meanwhile it is slowly going down. According to Statistics Austria, groceries rose less in March than in February. However, prices are still significantly higher than they were a year ago.
In the past few weeks, the “question of guilt” has come to the fore again. While one side locates a “price gouging” by companies, the other argues that the industry is only passing on the increased world market prices. Social Minister Johannes Rauch (Greens) invites retailers and experts to a summit to clarify how the high prices came about. Rauch said that food prices were above average. The Federal Competition Authority has been examining the industry since autumn.
passing on of costs until the end
However, the industry refers to ORF.at at its own expense. Raw material prices, personnel expenses, the energy situation, bottlenecks in primary products: “All of this has an impact on how manufacturers have to calculate their prices,” said Spar. The sales prices would be set “only according to the purchase prices”. Although there are strong negotiations with the suppliers, the prices not only have to be affordable, but also livable for producers, according to the group, which generated a sales increase of 4.7 percent last year.
The REWE Group also referred to the increased costs. “We cannot cushion everything, but we make sure that we only make price adjustments where there is actually high cost pressure,” emphasized the company to which Billa, Penny and ADEG belong. REWE was able to increase its turnover in the food sector by 4.6 percent last year, with the Penny discounter alone increasing it by 9.2 percent. Figures from Hofer and Lidl are not yet public, but the discounters emphasized the high costs they are faced with in terms of prices.
After Minister Rauch announced that he wanted to take a look at the prices, the trade association went on the offensive. The domestic food trade acts “inflation-dampening” and in 2022 generated an “inflation-adjusted sales decrease of 3.2 percent”. At the same time, the trade association referred to a current analysis by the industry-related Agenda Austria, according to which food prices have risen at a below-average rate in an EU comparison. International manufacturers of branded goods and the agricultural sector should therefore also be invited to the discussion.
Strained relationship between trade and industry
There has been a lot of thunder between producers and retailers in recent months. The trade accused the suppliers of price gouging, the industry saw itself slowed down because of the many own brands of the trade. Little has changed in the tense situation since then. Spar stated that they were still confronted with “strong price demands from the manufacturers”. The REWE Group referred to ongoing discussions. There is already agreement with some industrial partners, and there is optimism with the others. In the meantime, REWE is offering “very successful alternative products”.
The talks with retailers are “traditionally challenging”, but in these times they are “particularly difficult”, reports the food industry – with reference to the strong concentration in the retail sector and a “cost wave”. The costs for raw materials, energy, packaging and logistics would already account for 80 percent of the production costs of a food. For a long time you have carried the increases yourself. But recently, the purchase price that retailers have to pay no longer “covers the increased production costs as best as possible”. According to the industry, however, it is clear that the sales prices are determined by the trade.
Everyone also calculates with the increased raw material prices. According to an initial estimate by Statistics Austria, agriculture will achieve a significant increase in 2022. However, the Chamber of Agriculture warns that their own costs have also increased and that the farmers’ product prices have been “much too low for many years”. According to the chamber, the “short-term price increase” for agricultural raw materials should therefore also be assessed over a longer period of time. In addition, the farmer’s price often accounts for “much too little” of the consumer price.
No action planned
However, the search for the “culprit” or “culprits” is only one side of the debate. Political measures are again in the air to push prices down. A reduction in sales tax is aired at irregular intervals. Supporters see this as a noticeable relief for economically weak households, while critics see it as a measure that is not accurate. According to an analysis by the budget service, the financially weakest households in particular would benefit from the reduction in sales tax: the higher the income, the lower the relative relief.
However, the question is also raised as to whether a reduction will actually be passed on to consumers on a one-to-one basis. The union-affiliated Momentum Institute recently analyzed that companies’ drive for profit fuels inflation. The SPÖ in particular, but also the FPÖ, are therefore ventilating new government measures. However, nothing is likely to come of this any time soon. ÖVP Economics Minister Martin Kocher recently said that a functioning competition would “best” lead to prices “that are in the interests of consumers”.
High food prices
Grocery prices have been on a roller coaster ride in recent months. Social Affairs Minister Johannes Rauch (Greens) now wants to find out how these prices actually come about.
Vague announcements for the future
And what do the market participants themselves say? When can low prices be expected? While the prices of raw materials have been falling for a long time, other costs would remain at a high level, the Chamber of Agriculture emphasized. The price of wheat per ton has fallen well below 300 euros again. Shortly after the outbreak of the Ukraine war, the price was over 400 euros. There are similar developments with other products, which is a challenge from the point of view of the farmers, according to the interest group.
According to the food industry, these developments are not yet having a direct dampening effect on the price of the food produced. These were calculated with the prevailing costs at the time. In addition, there are also supply contracts “which had to be concluded during the price boom,” according to the industry. How things will continue in the future is difficult to predict. “Cost drivers will continue to be energy and fuel prices and the quantity and quality of available agricultural raw materials.”
Trading also remains on the cautious side with forecasts. Although there are slight signs of improvement. However, it is not possible to say when a significant drop in prices will occur. According to the argument, many factors cannot be planned or foreseen. If something changes in the conditions of the suppliers, this would be included in the calculation of the sales prices and passed on to the customers, according to the grocers.
