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Russia's FAS Set To Monitor Prices Of 'Socially Significant' Food Products

By Steve Wynne-Jones
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Russia's FAS Set To Monitor Prices Of 'Socially Significant' Food Products

Russia's Federal Antimonopoly Service (FAS) is to monitor the prices of 24 'socially significant' food products, including meat, fish, milk, eggs, cereals, tea and bread items, as part of an initiative to prevent unjustified price increases in the marketplace.

The measure follows a dispute between the FAS and a number of leading retail chains, including Magnit, X5 Retail Group and Lenta, on the back of customer complaints about increasing food prices.

Regular Reporting

While the dispute is close to being resolved, according to local media reports, food chains will be required to report food prices on a regular basis – the first such report is expected on 1 September – while also ensuring that any price mark-ups are fair.

Subsequent reports are expected on a quarterly basis going forward.

Should the FAS discover the presence of an anti-competitive pricing agreement among Russia's retail chains, this could result in a fine of up to 15% of their annual turnover.

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'Mildly Positive' Result For Retailers

Commenting on the measures, analysts Artur Galimov and Leonid Sinyutin of Sova Capital said that the news is "mildly positive" for the industry, as the retailers in question have thus far managed to escape any fines, and that the FAS is opting to monitor price markups rather than implement outright price regulation.

"We also note that the price monitoring should most likely relate to entry-price SKUs in the specified food categories, which have very low mark-ups," they noted. "At the same time, retail chains should be able to keep generating stronger margins on higher-price products in these categories, in our view.

"However, we admit that potential state interference in market pricing could lead to an undersupply in certain entry-price food products and therefore further inflationary pressures and/or a switch to more expensive alternatives."

Margins Protected

The analysts added that while the Russian government is increasing its focus on food prices, this should not result in a "significant impact" on retailer pricing or margins.

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"We would also expect the elevated administrative attention to subside, as there are more signs that food inflation is slowing down," they said. "We believe that monthly food inflation already reached its peak in June at 7.9% year-on-year before dropping to 7.4% year-on-year in July."

Russian retailers have made a strong start to the year – X5 Retail Group recently reported a double-digit increase in second-quarter revenue, while Magnit saw revenue rise 7.7% in the first half.

© 2021 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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