Not only butter. There may be a price war in stores. What else will be cheaper?

February 12, 2023, 12:27 | Business Insider

| Grzegorz Kowalczyk

Inflation remains high and still hurts, but the prices of some foodstuffs will fall. Butter, which is the subject of the “price war” of retail chains, has already become noticeably cheaper on store shelves, and experts indicate that price reductions of other food products will be felt at any moment. In conversations with Business Insider Polska, they indicate which ones can get cheaper the fastest.

• Although until recently butter cost PLN 10 per cube, now the prices are dropping to as low as PLN 3
• According to experts, prices of other products may follow in the footsteps of butter. At the buying-in, their prices have been falling for a long time or remain at astonishingly high levels
• However, retail chains will decide what we will see on store shelves. They have a hidden purpose in lowering the price of butter, which experts can easily see
• In the case of this product, hypermarkets have decided to go to a price war. In which products will we be able to observe similar competition? The general director of the Federation of Food Producers has his predictions
• More such information can be found on the Onet.pl home page

Butter may be the first sign of noticeable reductions in the prices of some food products. Just last year, its price was growing before our eyes. Now stores are outdoing each other in promotions for this product – you can buy a cube for as little as PLN 3.

And according to agri-food market analysts, soon there may be more products whose prices will behave similarly.

Not only butter

— Butter is quite a specific product because it is homogeneous. Regardless of the manufacturer, its composition, grammage or packaging are very similar. This makes prices easy to compare with each other. And since his purchases are quite frequent, customers can easily notice significant discounts. The fact is, however, that butter is subject to the same trends as all other dairy products – says Jakub Olipra, senior economist at Credit Agricole dealing with the agri-food market.

As he explains, the decrease in the prices of dairy products will be more and more visible in stores – not only milk itself, but also yoghurts and cheeses. – All dairy products will be cheaper. However, the drop in prices of some of them may be less visible, because prices of yogurts and cheeses they are more difficult to compare with each other, and the final prices are also influenced by more factors than the milk itself, he reserves.

What made dairy cheaper even as other food categories continue to rise? – On the global market, supply has increased and consumption has decreased. These changes are most noticeable in China. It is the largest importer of many dairy products. As a result, more milk appeared on the market, which resulted in a decrease in prices – indicates Jakub Olipra. Imports of dairy products fell last year, according to data from the Chinese customs administration by 17.1 percent It was no different in the case of powdered milk – here the decrease was 15.4%.

Retail chains go to war

Experts agree that the reduction in butter prices is not only the effect of the functioning of the market itself. This is also the result of the policy of retail chains, which want to win over customers with large price reductions. – Markets willingly lowered prices, because promotions for butter encourage people to come shopping in a given chain. And it is known that when someone comes to the market, they will most likely not buy only butter, which is what the stores themselves count on by launching promotions – says Olipra.

Butter prices may be proof that the competition of retail chains is becoming more and more fierce.

“The competition for customers is intensifying, especially as they become more frugal. It is worth noting that butter promotions are usually structured in such a way that they encourage you to buy more. This may indicate that stores have noticed a decrease in turnover, because customers buy less. Now they want to rebuild them, so they decided on a “price war”, which we see in the case of butter – says Andrzej Gantner, vice-president of the board and general director of the Polish Federation of Food Producers (PFPŻ).

What besides butter and dairy? There are more products

Can this competition also extend to other products? Possibly. – When we look at global food commodity prices, we see that there has been a collapse in grain prices, mainly due to Russia’s approval of one of the largest export quotas in history. In theory, this should translate into the price of flour. So maybe it will is another product for which stores will want to make similar promotions – evaluates the director of the PFSA.

However, the fall in grain prices does not have to translate directly into a decrease in bread prices. – Flour is currently one of the most expensive products on an annual basis. In the following months, the growth rate of its price will decrease, but in the case of bakeries, the cost of energy is also very strongly affected by the costs – says Jakub Olipra.

Another product that may be cheaper is sugar. – Just like flour, it can be the subject of noticeable promotions of retail chains – says Andrzej Gantner.

Especially since it still remains quite expensive. — We can see, for example, that after the summer turmoil and the mass buying of sugar from stores, its prices are still relatively high, and the profitability of sugar factories has improved significantly in recent quarters. However, it should be remembered that food producers are very reluctant and slowly lowering prices, even if you can see that a given raw material is getting cheaper at purchases. This is an opportunity for them to increase the profitability of their business, notes Olipra.

The rest of the article under the video:

Will deflation replace inflation? It is not possible

Reluctance to lower prices on the part of producers and retailers, as well as the still existing cost pressure, mean that while individual products may become cheaper, as a rule, only the rate at which food prices increase should slow down.

— Falling prices of agricultural raw materials in the world create room for lowering food prices in Poland. However, there will be no deflation, in most cases it will only be possible to talk about a decline in price dynamics. And in some products you can still expect increases. It’s about, among others for eggs and poultry or pork. Suppliers of these products have serious problems caused by avian influenza or ASF. Nevertheless, in December inflation in the food category may amount to approx. 5 percent. – points out Jakub Olipra.

– Only the second half of the year should be a moment of stabilization, unless there are rapid increases in costs, and perhaps even a decrease in the prices of more products, instead of individual promotions. However, it is worth noting that the fierce price competition caused by falling demand may not be able to withstand some micro and small companieswhose unit production costs are relatively high due to the small scale – sums up Andrzej Gantner.

Grzegorz Kowalczyk, journalist at Business Insider Poland