AZTN: The Rise in Food Prices Most Influenced by the Import Component

Responsibility for the rise in food prices and consumer goods in Croatia cannot be unequivocally attributed to any single participant in the supply chain, but the import component has been a more significant generator of price increases than domestic production, as shown by the AZTN’s research for the period from January 2022 to July 2024.

The Croatian Competition Agency (AZTN) conducted a sectoral study of the relationships and business conditions between traders and suppliers in the vertical supply chain of food, beverages, and household hygiene products in the Republic of Croatia.

The aim of the research was, among other things, to determine the facts and circumstances related to financial and commercial business conditions, pricing methods, contracting models, and other elements of business cooperation between traders and suppliers for a better understanding of market mechanisms in the vertical supply chain of food.

The research was conducted in the context of rising retail prices of food and other consumer goods observed in the market during 2022 and 2023, with the research itself covering the period from January 2022 to July 2024.

Data and statements were collected through questionnaires sent by AZTN to entrepreneurs, and the study included 49 traders and 23 suppliers. Of the total number of suppliers, 16 are producers, and seven are distributors. In terms of product categories, the research covered eight categories of goods: meat and meat products, poultry and eggs, bakery products (bread, pastries), milk and dairy products, fresh fruits and vegetables, non-alcoholic beverages and water, confectionery products (cookies, chocolates, candies, etc.), and basic food products (flour, sugar, rice, noodles, edible oils, etc.).

The results of the research showed that during the observed period, suppliers, especially distributors, changed their price lists significantly more often than producers. This dynamic of changes in wholesale prices was also reflected in the changes and increases in retail prices by traders.

From January 2022 to July 2024, food prices in Croatia increased by 26.1 percent.

This was particularly pronounced in the context of inflation. Thus, according to Eurostat data, from January 2022 to July 2024, food prices in Croatia increased by 26.1 percent, while the EU average was 24.3 percent. Producer prices in Croatia increased by 18.5 percent, while in the EU, they rose by 21.3 percent.

The import price index for Croatia was 26.3 percent, indicating that the import component was a more significant generator of price increases than domestic production, AZTN noted.

As noted by the regulatory agency, suppliers independently set wholesale prices, with prices defined in price lists that are most often changed with prior notice of 15 to 60 days, most commonly 30 days. Although the price list is generally an integral part of the contract between suppliers and traders, supplier price lists changed multiple times a year, especially among distributors working with principals outside Croatia.

Traders generally make decisions about retail prices independently and do not involve suppliers in making decisions about retail prices. However, suppliers can propose promotional prices. Most traders indicated that they independently determine their trading margins based on market conditions, targeted profitability, and competitive prices.

Smaller traders pointed to a weaker position and “pressures.”

In this context, most traders rated their negotiating position as equal, but smaller regional traders pointed to a weaker position and “pressures” regarding procurement conditions. Additionally, some traders highlighted the practice of potential “tied selling” by suppliers, i.e., conditioning the purchase of multiple products simultaneously, which will be further investigated, AZTN stated.

On the other hand, most suppliers rated their position as satisfactory, but some pointed to unfavorable conditions, especially regarding perishable products, such as eggs.

When it comes to trading margins, traders most often determine them independently of the type of supplier, but for private label products, margins are often higher. Meanwhile, food products record lower margins compared to non-food goods, while most traders do not differentiate suppliers based on their location (within Croatia or outside Croatia) when determining margins, as shown by the AZTN research.

The research observed a strong dynamic of wholesale prices in 2022 and 2023, particularly for products such as sunflower oil, eggs, bakery products, milk, and detergents.

No prohibited agreements among market participants were identified.

Distributors recorded more frequent changes and a greater number of price lists than producers. While producers primarily cite rising raw material and energy prices as reasons for price increases, distributors generally cite changes in procurement prices from producers and/or their suppliers to them as distributors, AZTN stated.

In conclusion, the agency emphasized that the research did not identify structural problems in market competition in terms of prohibited agreements among market participants.

They noted that the rise in retail prices is primarily caused by the increase in input costs and procurement prices, especially among distributors who, according to the data, adjusted their price lists more frequently. Although traders in some cases indicated that they absorbed part of the costs themselves, most traders adjusted retail prices to rising input prices.

– Ultimately, it is not possible to unequivocally attribute responsibility for the rise in prices to any single participant in the supply chain. However, available data indicate that the import component and prices from international supply chains play a significant role in the overall rise in food prices and consumer goods in Croatia, as highlighted in the announcement on the AZTN website.