Sugar is now almost 10% cheaper, as are the pork chops, while the vegetable oil price is 9% lower, according to the ZF index. The price war fought by international chains is showing in shelf prices.
“The price drop can be explained by the high competition in retail, while the dwindling purchasing power is putting pressure on prices. Unlike the previous years when retailers would raise food and non-food prices for the [Christmas] holidays, now I even saw cuts in some cases,” says Dragos Cabat, economic analyst and co-owner of advisory firm Financial View.
“As in most developed markets, retailers tried to generate high sales volumes in Romania, too, even though that entailed price cuts.”
Consumer spending rose 0.5% last year compared with 2012, after an increase of 6.7% in December, which turned the stagnation of the first eleven months into slight growth.
Annual inflation rate stood at 1.55% in 2013 and analysts expect it to reach 3% or 4% this year. Moreover, Romania’s central bank deputy governor in charge of monetary policy, Cristian Popa, has recently said there is no risk of deflation in Romania.
Alexandru Vlad, the Romanian executive who runs the local operations of cash&carry chain Selgros, too, believes price drops came as a result of increasingly fierce competition on the market. At a time when consumers are more and more careful about how they spend their money and prices weigh heavier in their purchasing decision than they used to, prices have become the main instrument retailers use to attract customers.
The average market basket value has constantly declined in the past few years, with consumer preference shifting towards cheaper products and especially private label products.
Vegetable oil, pork, chicken and sugar prices went down, while Coca-Cola and Borsec mineral water prices remained relatively constant. The vegetable oil price decline may be because of the bumper sunflower crop in Romania in 2013, which put the country on the top spot in the world among sunflower producers.
On the other hand, apples and potatoes rose by 50% and 70% in price. The same happened to flour and pasta, but the representatives of Baneasa, the producer of the flour and pasta included in ZF’s index, did not return ZF’s calls for comment on the 27% to 33% price increase.
Whereas prices did go down since the fall, the 15 products in the market basket are more expensive than in the previous years. The ZF basket now (February 2014) costs 101 lei (almost EUR23), 23.4% more than in February 2010, for instance. Data also show a rise in price compared with the same month of 2011 and 2012.
(English version by Loredana Fratila-Cristescu)