Only in autumn can we start getting used to more stable prices

Do you enjoy walks in the hills or mountains? I don’t mean planning or complex ascents, but hiking tours to Sljeme, Ivanščica, or Kozjak. A pleasant walk of two to three hours that thoroughly warms you up. My dear and I love the hiking trail from Šestine (Šestinski lagvić) to the Grafičar lodge. Just under an hour and a half of climbing. After that, lunch and a cold beer (ideally outside in the sun). Idyllic. The first three kilometers to Kraljičin zdenca are not too demanding, but it becomes a bit more challenging afterward. After about four kilometers, a longer ascent begins, followed by another ascent, and finally, the steepest ascent. If we are tired and the trail is muddy, you can hardly wait to reach Grafičar. For a break. And the aforementioned beer. Or lemonade (to be honest, much more often beer). The point? I will make a connection, please wait.

It has been more than a year and a half since inflation raised its ugly head. At the end of 2021, it accelerated after the market opened due to the weakening of the coronavirus pandemic, and it significantly sped up at the beginning of the Russian aggression against Ukraine. After galloping throughout 2022, the icing on the cake was the replacement of the kuna with the euro, and the story was completed with the last round of negotiations between suppliers and retailers, during which many suppliers raised prices in March. We also know that prices do not drop in summer; they only rise. Ascent, ascent, then another ascent, and finally – the final ascent.

I sincerely hope that it is finally time for – a beer! Or lemonade. A break in any case.

It is expensive, and we are all exposed to it. I still remember the shock from three months ago. A beautiful sunny spring day (there haven’t been many this year, so it’s easy to remember), my dear and I sit on the sunny terrace of a neighborhood café after a walk, ordering two (craft) beers. We enjoy for half an hour and ask for the bill. Shock and disbelief! 10 euros! Two beers, in my neighborhood, 10 euros! How much is it in Dubrovnik, I wonder? In stores, it is not so drastic, but the price increases are certainly visible and felt.

Savings Plan

In the first four months of this year, we are paying 17 percent more for consumer goods than last year. Which isn’t so terrible.

But that is the case because we have been adapting. Saving. How? Start with yourself. The most common forms of savings are generally the same or similar over the years. The easiest way is to buy only the essentials and reduce ‘luxury’ – this form is highlighted as the most common by two-thirds of respondents in NIQ’s Shopper Trends study for Croatia this year.

However, the biggest increase is in the second most popular form of saving – active searching for better prices and promotions – this was indicated by 60 percent of respondents, with an increase of 8 percentage points (pp) compared to 2022. There is an increase in ‘generally buying less,’ which was highlighted by 50 percent of respondents, with an increase of 7 pp, and a similar indicator is ‘switching to cheaper products and brands’ (also +7 pp). At the end of the list is the purchase of large (‘family’) packages, indicated by a third of respondents, with an increase of 3 pp compared to last year. In addition to the above, there is an increase in actively comparing prices of favorite items with private label products, as well as using promotional coupons and similar promotional tools.

It is interesting to compare the Croatian savings plan trend with those in the neighborhood. The expressed reactions and the ‘saving’ plan here are shown in higher percentages and with a greater increase than in Slovenia, BiH, or Serbia, despite the fact that prices there have risen by a similar or greater percentage.

Frequently Asked Questions

I will try to paint the current picture of the Croatian market through several common questions I encounter.

• What is the ‘inflation’ of consumer goods (how much higher are prices on average)?

A total of 14 percent on an annual basis, and 17 percent since the beginning of the year, with a very similar growth percentage in food and non-food.

• Have private label products increased in price to the same extent as branded products?

They have not. Private label products are 1 percent more expensive on an annual basis, while ‘branded’ products are 19 percent more expensive. However, since the beginning of this year, the price increase of private label products has accelerated to 14 percent, while brands remain at +19 percent compared to the first four months of last year.

However, there is a significant difference between food and non-food.

In food, private label prices have risen significantly more than brands – 20 percent since the beginning of the year (compared to +14 percent for brands), while in non-food, it is the opposite – private labels are 11 percent more expensive this year, while brands are 25 percent more expensive compared to last year.

Why is this so in food? Because there is enough room for such pricing policy. Namely, while the overall average price difference between brands and private label products last year was 45 percent, this year it has decreased to 38 percent – the price difference is still large enough.

• Have quantities fallen due to such a price increase?

Overall – no. On an annual basis (from May 2022 to April 2023), consumption is 2 percent higher overall, although since the beginning of this year, the growth is only 0.6 percent.

Food generates growth: +2.5 percent in quantity on an annual basis, or +1.7 percent since the beginning of this year, while non-food is “in the plus” by 0.5 percent on an annual basis and 1 percent at this year’s level.

• What has increased the most in price this year?

In the first four months, the highest average price increase is for – sugar – as much as 59 percent! That is an average of 1.35 euros per kilogram compared to 0.85 euros last year. Next are eggs, which are 50 percent more expensive, frozen vegetables 38 percent, popcorn 34 percent, cream and cat food 32 percent, kitchen paper towels and sausages 30 percent, ketchup and dog food 28 percent, cookies, packaged cakes, and desserts, frozen ready meals, as well as pancetta and bacon 27 percent, fruit spreads and compotes, pasta, chips, chocolate bars, cheese spreads, fabric softeners 26 percent, and toilet paper, automatic and manual dishwashing detergents, dairy desserts, salty sticks and pretzels, and canned ready meals 25 percent. The list of categories that have increased by over 20 percent is quite long – it includes fresh meat, meat products (salami), cheeses, yogurts, ice creams, canned and pickled vegetables and tomato products, bread, toast, candies, waffles, spices and food additives, frozen fish and seafood, extruded snacks (‘flips’), powdered desserts and baking aids, air fresheners, hair conditioners, hair styling products, mouthwash, toilet bowl cleaners… not to mention further.

• Has anything become cheaper?

You should know that it has. Although symbolically, oils and glass cleaning agents are on average 3 percent cheaper than last year, depilatory products are on average 2 percent cheaper, and prices have not increased for baby drinks, condoms, or moist toilet paper.

To add, prices have increased by up to 10 percent for strong alcoholic beverages (9 percent), butters and margarines (8 percent), nuts (6 percent), dry baby food (5 percent), and flour (3 percent), but also for a larger number of non-food categories, such as baby diapers (9 percent), hygiene pads and tampons (8 percent), baby skin care products and baby wipes (6 percent), as well as cleaning agents and razors (5 percent).

Food Traffic Light

The data below refer to the estimate of retail market sales in Croatia (including discounters and drugstores, but excluding pharmacies and specialized stores, and without hospitality) for about 150 categories, for the period May 2022 – April 2023, as well as from the beginning of the year for the period January 2023 – April 2023, for food and non-food. Some significant (high-turnover) categories, such as cigarettes (because they would overly influence the overall picture) and fresh fruits and vegetables, are not included, only those that NIQ regularly monitors through the retail panel.

The current state is therefore similar for food as well as for non-food – double-digit annual price growth, further intensified through the first four months of this year, accompanied by modest quantity growth, further slowed down this year.

Food (about one hundred categories in the total ‘basket’) grows 17 percent on an annual basis, and 18 percent since the beginning of the year. Annual quantities grow by 2.5 percent, and since the beginning of the year nearly 1.7 percent. Prices have increased by 16.2 percent since the beginning of the year.

Private label products (PLP) have grown in value more than brands on an annual basis (20 percent PLP, and 16 percent brands), but in 2023, brands generate higher growth – 19 percent compared to 17 percent PLP. The quantity consumption of PLP on an annual basis in food increased by 3.5 percent, and brands by 2 percent, but in the four months of 2023, due to the aforementioned higher price growth of PLP, brands accelerated growth to 3.8 percent, while PLP fell by 2.9 percent.

I usually write about comparisons of what has grown more than average, but in conditions of double-digit price growth, the real news is categories with declining sales. Are there any? Well, there are. For example, oil. Oil has fallen by 20 percent since the beginning of the year. Why? The yo-yo effect. Because its sales skyrocketed last year at this time – due to announced possible shortages and with the start of the war in Ukraine, oil sales grew by 40 percent.

This year’s decline of 20 percent still means about 20 percent higher sales than in 2021. But, quantities have fallen by 19 percent, so the quantity sold this year is 10 percent lower than the mentioned 2021. It should be emphasized that the vast majority of that ‘return to normal values’ has been reflected in private labels, which recorded nearly half the realization compared to last year, while brands fell to a significantly lesser extent and regained their market shares from last year.

Flour has fallen by 7 percent. The same reason as oil? No. Consumption has fallen by as much as 10 percent, so moderate price growth (+3 percent) did not cover the difference. Similar to flour, the price increase did not cover the quantity decline in sales of sardines and honey.

Alcoholic beverages have a slightly different trend than food. Beer has had lower sales growth than average since the beginning of the year (+12 percent), but with only 0.7 percent higher quantities since the beginning of the year, and wine has a nearly identical trend. Higher sales come from higher average prices, with stable consumption. Strong alcoholic beverages grow in line with the average (+17 percent), but also with stable quantity growth (+7 percent) and an average lower price increase (+9 percent). In any case, inflation does not prevent us from consuming our favorite home leisure for adults.

An increase in average prices of over 20 percent this year has been recorded in 46 categories, of which three show a decline in quantity sales, and in 13, both consumption and sales are increasing, although mostly in small percentages (exceptions are, with consumption growth of over 5 percent, packaged bread and toast, salty sticks and pretzels, and isotonic drinks).

Non-Food Traffic Light

Non-food (about fifty categories in the total ‘basket’) has grown 14 percent in the last year, and 17 percent since the beginning of the year. Annual quantities are 2 percent higher, and since the beginning of the year, they are the same as last year. Prices have increased by 17 percent since the beginning of the year.

Here, too, private label products (PLP) have grown in value more than brands on an annual basis (21 percent PLP, and 13 percent brands), but unlike food, they have continued to grow at a higher rate in 2023 (20 percent PLP, and 16 percent brands).

Negative sales were recorded only for glass cleaning agents (-7 percent compared to the beginning of last year). However, negative quantities were recorded in a significantly larger category. A quantity decline of over 10 percent was recorded for toilet bowl fresheners, soaps, and mouthwashes. Paper towels fell exactly 10 percent, but with a price increase of 30 percent, they recorded sales growth of over 20 percent. A quantity decline between 5 and 10 percent (with a price increase of 17 to 26 percent) has been recorded since the beginning of the year for fabric softeners, hand dishwashing detergents, shaving products, toilet bowl cleaners, and bath products, while a decline of up to 5 percent has been recorded for laundry detergents, hygiene pads and tampons, baby diapers, automatic dishwashing detergents, body care products, and baby wipes.

In non-food, quantity ‘minuses’ are more common. Malicious people might conclude that people are washing their hands, clothes, and toilets less. And in doing so, they might wonder what kind of atmosphere society exudes due to inflation? The truth is, however, more prosaic – for two reasons – it is easier to spend less and less frequently on household or personal care products, and there are also more frequent new forms of products or packaging that give the customer a smaller quantity (e.g., the same number of washes with a smaller weight, higher concentration of some agent or cream, etc.).

A significant quantity growth is achieved by the category that has an increasing penetration – moist toilet paper – 25 percent since the beginning of the year, 17 percent on an annual basis, with minimal price growth. Over 10 percent higher quantities are recorded for facial skin care products, insecticides and repellents, but also condoms (perhaps preventing future costs?). Over 5 percent is also the quantity growth of deodorants, razors, and shaving products, depilatory products, and hair styling products. Interestingly, in many categories, the generators of quantity growth are brands or grow at a similar rate as private label products.

The price growth of the vast majority of categories has been uninterrupted for more than a year and a half. Although it is expected to slow down, the end will only begin to be seen after the summer. Customers are currently keeping pace. A good part of the categories is not falling, or only slightly, and those that record a greater decline in consumption (spending) are usually categories that have increased significantly more than average and where consumption can be reduced or postponed.

Customers save in various ways – by combining a reduced basket, hunting for discounts and promotions (where discount coupons and loyalty programs with immediate, i.e., direct rewards are increasingly chosen), opting for family packaging or purchasing smaller packages (smaller purchase amounts), all garnished with a search for quality cheaper alternatives. As a result, private label products are growing. Brands are, however, gradually catching up with private label products through a combination of offers and promotions.

Example of Toilet Paper

An interesting example of toilet paper. If you haven’t noticed that toilet paper has significantly increased in price, it means you have an elephantine (un)sensitivity to prices. Or someone else is buying it for you. In that case, believe me, it has significantly increased. Some items by over 50 percent. However, the entire category has increased slightly above 25 percent. How is that? Since I cannot conduct a survey to see the results, ask yourself – have you tried any other paper in the last year (for example, a slightly rougher texture or thinner sheet)? Have you targeted promotions with large packages? Perhaps you have been buying the smallest possible package (if you are alone)? Have you gone to stores with lower prices? If you have, you have somewhat mitigated the price increase of your previously favorite items.

Sales figures through cash registers indicate that packages of 10 rolls (the most common) have grown as much as their prices have, while quantities have slightly fallen. Therefore, large packages (16+), especially private label products, have grown by over 150 percent, not only due to a more favorable price ‘per roll’ (on average 10 percent lower than classic packages) but also because the price of such packages has only increased by 12 percent. On the other hand, although this segment is marginal and their unit price is significantly higher, sales of small packages (up to 6 pieces) have also increased by over 100 percent. All of this has been well detected by discounters, who last year achieved a growth of their brands of over 300 percent (at the expense of brands, of course), especially in large packages.

So, even though your favorite type of toilet paper has increased by over 50 percent, if you are like me or most Croatian customers, by completing your purchase with larger packages of private label products, ‘targeting’ promotions, and choosing stores with lower average prices, you have amortized the price increase by half. With almost the same quantities. Something like that.

No Turnaround

The season is ahead of us, according to the first indicators, successful. It will not bring a turnaround in price growth, perhaps just a slowdown. Only in autumn can we start getting used to more stable prices and those annual ‘indexations with small percentages. Quantities will continue to be under pressure, especially categories that are not essential or have increased excessively. However, considering the good economy (strange for us, but we are a good, growing economy), the lowest unemployment ever, and still some created reserves, we can look forward with some optimism. With somewhat rougher toilet paper, more private label products on the table, and beer on sale, we will get through the summer and the upcoming autumn. By analogy with the beginning of the text – just one last ascent. Then a break? Hopefully. Next year, I hope for a better, calmer environment where planning will be easier. Even experts are not too negative with forecasts for the upcoming period. If our main concern is the fear of artificial intelligence, it means we have survived the worst.